‘D2C approach lets MSMEs reach consumers directly, get direct feedback unlike traditional export market’

• By Nath Parameshwaran

Technology for MSMEs: Across the globe, the Covid-19 pandemic has been described as ‘unprecedented’. The world is in agreement that the crisis at hand requires utmost attention, government support, public-private partnerships to enable businesses to navigate through the storm.  The Indian economy has recorded its steepest contraction over the April-June quarter of the current fiscal year, stalling activity, investments, consumption, therefore resulting in job and income losses. One of the vital sections of the business community is our micro, small and medium enterprises (MSMEs) who are facing the brunt of this crisis. As we know, the MSME sector is the engine of growth, supporting millions of direct and indirect jobs, contributing to around 40 per cent of India’s exports, earning valuable foreign exchange for the country. The recent NITI Aayog export preparedness index 2020 also highlights the importance of exports, MSME and role of the Central Government and states in growing exports and supporting this sector.

The government has made strenuous efforts to put the economy back on the growth track with a special focus on MSMEs. In May, Finance Minister Nirmala Sitharaman announced a Rs 3.7 lakh crore stimulus package, enabling MSMEs to seek emergency credit from banks and RBI aggressively rolled out various measures to ease liquidity and access to credit for the sector. While these efforts will enable MSMEs to survive through the crisis, the real key to long term sustainable growth of the sector which contributes close to 30 per cent towards our GDP is through digitalization, finding new opportunities to grow internationally and increasing their consumer base.

Take the business to the global consumer

The pandemic has resulted in a significant shift in the way consumers purchase goods and services.  The fear of transmission is prompting consumers to move away from brick & mortar and adopt online shopping. Traditionally, most MSMEs in India have business models which were unable to cater to the evolving needs of consumers.  On the other hand, studies have shown that MSMEs that have gone digital-to-consumer (D2C) have seen their businesses grow by 30 per cent.

A digital-first culture must be embedded into a business’s DNA to keep ahead of the changing times. This will also enable them to serve customers who prioritize safety over everything else. The next step in the revival of our economy must be to propel MSMEs to sell across borders. Many other economies are showing green shoots of recovery. Here lies an opportunity to take an early lead for our local businesses to leverage demand from global consumers.  During the peak of the pandemic, there has been a tremendous uptick in B2C exports by several MSMEs which is a positive sign and must be leveraged further.

So how does international demand link back to digital presence? According to the International Chamber of Commerce, MSMEs that use online platforms are five times more likely to export than those who do not. Research also indicates that companies which are connected to global value chains and international consumer communities are more productive and are more likely to succeed. Now, MSMEs through digital adoption can take their stores to global consumers. A D2C approach allows MSMEs to reach the consumer directly, realise better value for the products/services, build their own brand and get direct feedback which is hard in a traditional export market.

Also read: 4 out of 5 small businesses hope survival despite Covid spread; see consumer spending back in 3 months

Here are three ways MSMEs can enhance their global presence while elevating India’s growth.

Know your customer and market

Every market has different customer segments. Research is critical for businesses to understand the markets they supply to. It enables them to personalize and optimally drive sales.

A couple of examples to highlight the opportunity:

1. We have seen the evolution of a new demographic which we call the Silver Tech generation. These are people in the age bracket 50-70 years who are using digital maybe for the first time.
2. For instance, demand from the US, the UK and Singapore for verticals such as software, education, fashion, pet supplies, etc. are increasing. Keeping abreast of market developments and insights and ensuring the right products reach the right market can be beneficial for MSMEs. Another example of profound marketing would be targeting users in their time of need. For example, festivals like Christmas, Thanksgiving, Singles Day, Boxing Day are a few holidays that record the highest sale in international markets and see an influx of demand for goods from Indian merchants. Stocking up and investing in extra inventory around these days will ensure demand is met with sufficient supply.

Omnichannel experience and mobile-first approach

Mobile phones have become an extension of a human being’s persona. In fact, in 2019, the global smartphone penetration rate reached 41.5 per cent with 3.2 billion smartphone users worldwide. The mobile internet has allowed consumers to access a global shelf of goods and services. With their mobile phones, customers are shopping for goods and services across multiple channels (social media, email, website, marketplaces etc.). They also demand frictionless shopping and payment experiences. Imagine the missed opportunity by not optimizing for mobile commerce & payments presence. It has become increasingly important to offer customers a seamless and integrated purchase journey. A business must ingrain an omnichannel strategy within their business model and be available across all possible consumer touchpoints – email, social media, calls, website, etc.

Digital trust through digital payments

With an increasing number of scams and frauds, customers are wary of purchasing from unknown sellers. It can be quite a scary task to trust sellers with personal and financial details, leading to cart abandonment. Many digital payment players take on the arduous task of verifying sellers, continuous risk monitoring for bad buyers/seller behaviour, adequate buyers/seller protection policies which then creates a trusted platform for both buyers and sellers. Hence for Indian MSMEs selecting a payment partner trusted by global consumers with a global footprint and best in class risk management and fraud protection is vital.

The second big challenge for MSMEs is being paid on time and many a time this delay poses survival challenges. It is a well-known fact that for a small business, cash flow is even more important than profits. MSMEs have to look for payment partners who gives them fast access to their funds and help in payouts as well ensuring that they can pay their employees and suppliers in time.

It has been made clear that without digital solutions, sustaining and thriving will be rather challenging. The efforts made by the government and regulator to support MSMEs, focus on digital transformation and specific initiatives over the years to boost e-commerce led D2C exports must be lauded.

In conclusion, it is said, “don’t let crisis go waste”. I firmly believe we can use this as an opportunity to build and strengthen a digital-first, global competitive Indian MSME community. With the government, regulators, MSME community, fintech and e-commerce industry all working together, we can build a D2C new export economy led by millions of nimble micro enterprises, startups and freelancers exporting Made in India goods and services to a global consumer base. The opportunity is here, and it is for us to convert this crisis into a tailwind and create a virtuous cycle contributing to India’s growth story, economic prosperity and raising the standard of living of millions of people in this vital sector.

Nath Parameshwaran is the Director, Corporate Affairs at PayPal India. Views expressed are the author’s own.