Small businesses move online in a desperate bid to survive

E-commerce platforms like Shopify have helped small businesses move online (Photo: Roberto Cortese/Unsplash)

When the Covid-19 pandemic hit India last year, the country’s economy was enormously impacted. There was a massive drop in Gross Domestic Product (GDP) of 24.4 pc from April to June 2020, making this year the worst in India’s history in terms of economic contraction, with income inequality on the rise after three decades (inequality has been rising consistently and even faster since 2014). Indian economy is heavily dependent on small-business owners, defined by any business not exceeding an investment of INR 1 million, and is also the second-largest field for employment after agriculture, with more than 60 million small businesses across India.

The SMEs were hit the hardest due to the lockdowns and pandemic, with thousands of them closing down and millions laying off workers or putting them on forced leave without salaries.

However, a few SMEs that were quick to adopt the digital world, especially those who had done it well before the pandemic gripped the globe, have not just survived the unprecedented economic crisis, but actually thrived it. The path for small businesses to embrace the digital world has been paved for the past several years.

For example, when it was launched in 2016, Reliance Jio hit the market with cheap internet plans across India, instantaneously broadening digital access, notably in rural settings and small towns, allowing small businesses in such areas to achieve a wider reach.

Over the years, social media platforms such as Instagram and Facebook have become popular marketplaces for luxury or non-essential items in particular. A 2019 study by YouGov showed that these two apps together influence nearly 80 pc of Gen-Z and Millennials’ festive shopping.

MyBageecha is a small business in Ahmedabad that sells a variety of gardening products and services. Reaching out to passionate plant-lovers through Instagram, and in collaboration with leading Bollywood actress Kareena Kapoor, they have managed to build a following of 120,000 followers and expand their products to home accessories and jewellery, accrediting a staggering 300 pc growth in sales.

Another example is Story@Home, a Vadodara-based home furnishing and décor online shop that has come online during the pandemic, increasing sales by 140 pc, compared to pre-pandemic levels. Earlier, limited to the cities where they were located, now these companies have been able to reach clients all over the country due to social media reach.

New Delhi resident Mansi Arya started her small business, Cerro Casa, a pet boarding facility, in January 2021.

“It is like a kennel service, where I take care of pets when owners go on holiday. It started off pretty well in the beginning because looking at trends, we all know that so many people started getting pets because of lockdown. I started getting quite a few clients when I started but when the second wave hit, business was really down since travelling just stopped again and it became really difficult for me to get clients. The pandemic had a very big role to play in how my business works, because I am not selling a product people will use sitting at home; this is a service used only when people are going somewhere and they need to leave their loved ones with me,” Arya tells Media India Group.

However, as restrictions eased again, Arya started getting her profits back up through advertising on social media. She also reached out to contacts and several Instagram influencers and popular pages to promote her service. This is an extremely effective method of targeting clientele because Instagram influencers often have upwards of 10,000 and 100,000 followers, and it is much more cost effective as SME owners do not have the funds to pay big celebrities to promote their products. In fact, even bigger, established brands such as cosmetics giant Maybelline have advertised through social media influencers rather than relying the typical Bollywood bigwig after seeing the potential for audience reach, as they can seem more relatable than the latter and therefore become more likely to buy the product.

“In online businesses and especially right now, word-of-mouth is very important, because people cannot check out product and services in person and meet clients door to door; customers are also often a little sceptical of leaving their loved ones with a stranger. So reviews, ratings and comments are the only way they can trust me, and that happens through social media and online engagement,” she says.

While Facebook Marketplace and Instagram are some of the most widely-used apps for online businesses to showcase their products, sites like YouTube have also helped, with some SME owners taking advantage of YouTube Studio software and conducting livestreams to promote their products.

E-commerce platforms help accelerate SME growth

During the continuous periods of lockdown, as people shifted to online shopping, hundreds of pages and accounts have started selling homemade products such as scrunchies, jewellery and custom fashion. Because of this boom, dedicated e-commerce platforms and software have emerged and seen a rise in business.

Starting or moving businesses online come with several new challenges that owners may find difficult to tackle independently, so these e-commerce services aid new small businesses to come online. For example, Shopify reported a 120 pc increase in new SMEs joining in the first six months of 2020 as compared to 2019. Instamojo is another service that aids the establishment as setup of online stores and has helped more than 200,000 small businesses digitise post-pandemic, 70 pc of which did not have any online presence beforehand.

Some businesses that have had problems managing money online have turned to services like OkCredit Udhar Bahi Khata, a bookkeeping app for small business owners, which helps facilitate the recording of payment transactions digitally and maintain an organised ledger to keep track of expenses and earnings more efficiently. An OkCredit report said they witnessed “33 pc growth from tier 3 cities, 30 pc from tier 2 cities, and 28 pc from tier 1 cities in 2020” and medical and kirana (small grocery) stores also grew by 21 pc and 15 pc respectively.

Not only locally or across India, but digitisation also helps MSMEs reach audiences in foreign countries, with a KPMG report revealing that online small businesses are 2.1 times more likely to gain revenue faster than when they are offline. Moreover, online stores have a 20 pc larger customer base.

These advances, although not enough to cover the devastating losses causes by the pandemic, show that many small businesses have an undeniable adaptability to adjust to the “new normal,” with digitisation being a crucial strategy for growth. They also promote the increasing trends of sustainability and a ‘Made in India’ policy that experts say have huge potential to expand once the pandemic has run its course, and with the flexibility and reach that digital commerce platforms provide, signal a welcome boom in home entrepreneurs and women-led businesses.