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Impact Of Digitalisation On SMEs, Merchant In India

Plastic money and online payment transactions are gaining acceptance not only due to the convenience involved but due to additional discounts offered by e-business players

Photo Credit : ShutterStock


Over the last four years, the internet population in India has increased by 100 per cent to touch 430 million. One fall out of this has been the emergence of e-businesses, a colossal new virtual economy valued at $40 billion at present. According to study “Digital Consumer Spending in India: A $100B Opportunity,” conducted by Nielsen and the Boston Consulting Group (BCG), at present, only 20-25 per cent of internet users in India spend online. However, by 2020, barely two years from now, the study estimates that with further improved infrastructure and greater digital maturity, online transactions in categories such as e-commerce for apparel, electronics, durables, and food and groceries are likely to drive rapid growth, inching us closer to the $100 billion opportunity.

Interestingly, while in 2017, 60 per cent of online shoppers in India are based in metros and tier 1 cities, by 2020, almost 50 per cent will be in tier 2, 3 and 4 towns. Further, while only 37 per cent is women, at present, this proportion is expected to leap to 45 per cent in the next few years. Taken together these demographics indicate not only an increase in the number of online digital spenders but a much larger volume of overall digital spends. 

Financial Implications for SMEs and Merchants:

There is an ongoing evolution of an e-commerce eco-system that includes the provision of end-to-end services, flexible payment models, integrated infrastructure network allowed smooth operations, and lead to an increase in monetisation avenues across most e-business segments.

Cashless transactions: Plastic money and online payment transactions are gaining acceptance not only due to the convenience involved but due to additional discounts offered by e-business players. This trend is relatively well entrenched and is here to stay. Accordingly, buttressing cashless transaction offerings and leveraging the system could benefit enterprises seeking scale.

Payment services: Over the past five years, a number of payment gateways and e-wallet services have emerged as a logical extension to the financial ecosystem supporting e-commerce. While the use of these structures was initiated by larger e-businesses, over they have gained popularity with smaller businesses too as they enable added control of customer and their loyalty.

Capital funding options: A report, #IndiaTrends2018Investments: Trends shaping Digital India, reveals that investment in the e-commerce industry in India witnessed a y-o-y growth of 41 per cent to reach $11.2 billion in the first half of 2017. Beyond debt for expansion as well as working capital requirements, the availability of equity for online businesses is growing strong.

Funding of logistics and warehousing: The report also suggested that the Indian logistics market is likely to touch $215 billion by 2020 from $160 billion in 2017, increasing at a CAGR of 10.5 per cent, widening the reach of retailers to remote locations even in tier-2 and tier-3 cities. The boundaries of an e-business are vast and ever-expanding, supporting exponential scale-up possibilities.

Until the infrastructure, technology and funding for e-businesses evolve and improve to levels that support much greater online businesses, #IndiaTrends2018Investments foresees the emergence of ‘Alternate Commerce’ - an integrated platform, alternative to traditional e-commerce, which brings together offline buyers, sellers and local merchants (such as kirana stores, Aadhaar centres, railway ticketing centres, medical stores and mobile shopping outlets). This bridge will enable retailers to capture semi-urban and rural markets despite several technical barriers by playing a vital role in allowing them deeper market access, even in areas that were hitherto out of the reach of offline customers.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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Sudip Bandyopadhyay

The author is is the Group Chairman of Inditrade (JRG) Group of Companies

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