Indian SMEs Poised to Drive $50 Billion in E-commerce Sales by 2027, Redseer Report Finds
- ByStartupStory | August 23, 2023
Small and Medium-sized Enterprises (SMEs) are set to drive around $50 billion in e-commerce sales by fiscal year 2027, outpacing the projected 25% compound annual growth rate (CAGR), according to a report by Redseer Strategy Consultants.
“This is testimony to MSMEs’ adeptness at harnessing online platforms underscores their pivotal role in India’s economic makeover,” it added.
The report, titled “MSMEs – The Next Catalytic Force for Indian E-commerce,” emphasizes the significance of SMEs in India’s economic transformation. E-commerce is seen as a catalyst for improved customer insights, targeted outreach, efficient service, and enhanced profit margins. E-commerce platforms are adapting their policies to support SMEs by offering reduced commissions, broader user bases, cost-effective logistics, simplified onboarding, powerful marketing tools, and robust seller dashboards.
The retail market in India is expected to reach $1.4 trillion by 2027, with SMEs contributing 65-75% of this market. Despite accounting for 30% of India’s GDP, offline-selling SMEs face challenges like overhead expenses and extended settlement periods. The report highlights that adopting online channels can help SMEs overcome these challenges by enabling quick payments, wider global reach, lower marketing costs, and reduced competitive pressure.
“Ecommerce has been a crucial growth driver in India where about 200 million people shop online,” the report said, adding that MSMEs have begun to list themselves as sellers on ecommerce platforms, thereby expanding their customer base and increasing sales.
Around 70% of the 85 million MSME sellers are connected to the internet, a number expected to rise to 80% by 2027. The report predicts that the adoption of e-payments, currently at 60% among MSMEs, will increase to 70% by 2027. Currently, around 1.5 to 2.5 million MSME sellers have an online presence, with a projected penetration rate of 5-6% (5.5-6 million online sellers) by 2027, leading to the creation of over 35 million job opportunities through online sales.
The report also suggests that initial online sales contribute to one-third of total revenue within the first year for MSMEs on e-commerce platforms, which surpasses 50% within three years. Notably, categories like fashion, beauty, and personal care experience improved net profits upon venturing into the online market, with 96% of surveyed MSMEs reporting higher net profits and over 55% of those with turnovers exceeding Rs 1 crore per annum noting an increase of over 15% in net profits.
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