MSMEs Gear Up For USD 13 Billion E-Commerce Opportunity This Festive Season

MSMEs operating in non-metro cities are experiencing a surge in Diwali orders this year, leaving behind their counterparts in metro cities. The e-commerce opportunity for country’s MSMEs during the festive season could reach a staggering USD 13 billion, said a report.

Tech-enabled logistics platform and unicorn, Shiprocket’s analysis indicates that e-commerce is gaining significant momentum, with an estimated 10-15 per cent of the total order volume coming from first-time online shoppers.

With an estimated USD 13-billion e-commerce opportunity for Indian MSMEs during the festive season, the report underscored the rapid adoption of online shopping and digital transactions in smaller towns and rural areas. MSMEs from tier-2, tier-3, and tier-4 cities anticipate a higher influx of Diwali gift orders compared to their metro city counterparts. The logistic platform cited that 56 per cent of its order volume comes from non-metro cities.

Furthermore, Shiprocket expects 10-15 per cent of the total order volume to be attributed to first-time shoppers. Delhi NCR leads the festive sales with a significant 28 per cent share, closely followed by Mumbai at 13 per cent, and Bengaluru at 7 per cent.

Delhi NCR, known for its thriving business environment and a substantial MSME presence, is driving consumer spending during the festive season.

Shiprocket also noted a rise in festive exports from India, with leading categories for global exports encompassing artificial jewelry, beauty and grooming products, clothing and accessories, healthcare items, books, automotive accessories, home furnishings, decor, and pet supplies. This export demand is primarily driven by countries including the US, the UK, Germany, Australia, Canada, France, and the UAE.

To meet the heightened demand during the festive season, Shiprocket has expanded its warehousing capacity by adding three new facilities. This expansion, coupled with a 50 per cent increase in the workforce, ensures efficient order processing and fulfillment.

RedSeer Strategy Consultants, a firm that monitors more than 100 online platforms, covering approximately 90 per cent of online sales, is projecting that virtual shoppers are set to break records by spending a substantial USD 11 billion during the month leading up to mid-November, nearly 20 per cent more compared to the previous year.

A survey conducted by RedSeer underlines the enthusiasm among sellers to invest significantly in marketing and advertising endeavors for the upcoming festive season. Their primary goal is to foster an expansion in sales.

The survey findings reveal an expected increase of 15 per cent in marketing expenditure when compared to the festive season in 2022. Notably, there is a significant surge of 50 per cent in marketing spend when contrasted with regular business periods this year. Smaller sellers exhibit a strong willingness to increase their advertising budgets, coupled with a bullish outlook on overall sales growth.

Amazon India reported substantial online traffic, with 95 million customer visits to its website within the initial 48 hours of the 'Great Indian Festival 2023' sale commencing on October 8. Prime members displayed an impressive 18-fold increase in shopping activity during the first 24 hours of Prime Early Access (October 7) compared to the average daily purchases. Additionally, more than 80 per cent of the customers hailed from non-metro cities.

Similarly, Flipkart witnessed a robust response during its 'Big Billion Sale 2023' on October 8, amassing a considerable 91 million customer visits.

E-Commerce market Growth

India's e-commerce sector is poised for remarkable growth, with projections indicating a surge from USD 83 billion in 2022 to a substantial USD 150 billion by 2026, as revealed in the FIS 2023 Global Payments Report.

The report highlights a significant shift in payment methods, with a decline in cash usage from 71 per cent of point-of-sale (POS) transaction value in 2019 to a mere 27 per cent in 2022. A pivotal player in this transformation is the Unified Payments Interface (UPI), which has driven the growth of e-commerce account-to-account (A2A) payments, surging to USD 12 billion, marking a remarkable 53 per cent increase between 2021 and 2022. Additionally, digital wallets have witnessed substantial growth, expanding from 5 per cent to 35 per cent of POS value. By 2026, A2A transaction value is expected to increase by 195 per cent to USD 36 billion, the report noted.

UPI has solidified its position as the primary payment choice in India. While cash remains in circulation, an increasing majority of peer-to-peer transactions are facilitated through this platform. FIS data foresees a decline of 34 per cent in cash transactions by 2026, while digital wallets are projected to experience an 88 per cent growth in transaction value during the same period.

The e-commerce market is expected to grow by 82 per cent by 2026, further propelling the adoption of digital payment methods.