Rise of MSMEs: Challenging E-commerce Dominance by Large Brands

Despite the significant presence of Micro, Small, and Medium Enterprises (MSMEs) in the Indian e-commerce landscape, dominance is held by established and expansive enterprises. This scenario, as highlighted by Redseer, underscores the coexistence of around 1.5-2 million MSMEs functioning as manufacturers, wholesalers, retailers, and distributors on e-commerce platforms. Nevertheless, their contribution to the overall Gross Merchandise Value (GMV) is dwarfed by that of larger brands.

All About the MSMEs Rise

Within the e-commerce ecosystem, approximately 5-10% is constituted by major brands and corporations, yet they account for a staggering 75-80% of the GMV. In contrast, medium-sized entities, constituting 15-25% of the sellers, only contribute 10-18% of the GMV, even though they operate as both manufacturers and distributors. The majority of sellers, comprising 70-75%, fall under the small-scale category and contribute merely 5-10% of the GMV.

However, the growth trajectory of MSMEs is anticipated to surpass the industry’s average Compound Annual Growth Rate (CAGR) of 25%. They are projected to outpace industry growth, collectively propelling eTailing sales to reach $50 billion by FY27.

Redseer points out that MSMEs are strategically embracing digital channels to tap into enhanced revenues, refined customer insights, and cost reductions. E-commerce platforms are also adapting their strategies to foster MSME growth by providing benefits such as reduced commissions, broader customer bases, cost-effective logistics, simplified onboarding, robust marketing tools, and intuitive seller dashboards.

Redseer’s survey of around 250 non-grocery sellers revealed that within the first year of operating on e-commerce platforms, online revenue constituted around a third of their total sales. By the third year, this proportion surged beyond 50% of the overall sales.

In specific categories like fashion, beauty, and personal care, MSME sellers experienced improved net profits after venturing into online sales. The survey uncovered that around 96% of MSMEs within these categories reported an upswing in net profits post their adoption of online sales channels. More than 55% of sellers in these categories, with an annual turnover exceeding ₹1 crore, indicated a net profit increase exceeding 15%.

This shift towards e-commerce not only reflects the adaptability of MSMEs but also underscores the evolving landscape of Indian online retail, where both established brands and smaller entities coalesce to shape the sector’s trajectory.