SMBs use Google My Business (35%), WhatsApp (13%), and Facebook or Instagram (7%) to list products and services
Around two-thirds of small and medium businesses (SMBs) in India used online channels to sell their products and services in 2021, a survey by digital lender NeoGrowth Credit showed. However, the survey found that despite rising digital adoption, cash sales remained the top payment mode by far, and day-to-day digital operations were mostly limited to statutory tax-related functions.
The survey, conducted between February and December last year, covered 9,564 SMB owners, of which 93% had annual revenue of less than ₹1 crore. NeoGrowth is a fintech firm primarily serving under-banked SMBs.
Arun Nayyar, chief executive officer of NeoGrowth, attributed the technology adoption to the “unprecedented economic, social, and business disruptions due to the pandemic”.
Enterprises in the apparel segment were the most likely to sell online (77%), followed by mobile and accessories (73%) and the food and beverage segment (67%). Online sales by SMBs were the most common in Mumbai (81%), Bengaluru (66%), and Hyderabad (63%), with Facebook and Instagram turning out to be the most popular platforms across cities.
While comparable pre-pandemic figures for digital adoption among Indian SMBs are not available, a rising trend has been observed worldwide. A 2021 report by the Organisation for Economic Co-operation and Development (OECD) cited other surveys to suggest that as many as 70% of such firms globally “intensified” their use of digital tools due to the pandemic, and “many of these changes were poised to last given the investments made and business benefits of the new models”. A Salesforce survey in mid-2021 also found that 63% SMBs globally had an e-commerce presence now since customers increasingly wanted to transact digitally.
SMBs in India use tools such as Google My Business (35%), WhatsApp (13%), and Facebook or Instagram (7%) to list their products and services for discoverability, the NeoGrowth survey found. Businesses in Mumbai were the “most discoverable” online (24%), followed by Bengaluru (13%) and Delhi (8%). Segments such as apparel, food and beverage, FMCG, pharmacies and spas and salons were the most likely to prefer Facebook and Instagram for discovery. For customer engagement, reviews and ratings on Google and JustDial were the most popular modes.
The use of digital tools brings significant benefits, such as lower transaction costs, quicker access to information and communication with staff and suppliers, among others, said the 2021 OECD report. However, many SMEs lag larger companies in digital adoption, which threaten to increase inequalities among people, places and firms, the report said.
The disparity may also be true for India. Despite the gains, cash payments still rule the roost, with 70% SMBs opting for such payments and just 16% for UPI payments, found the NeoGrowth survey. Digital payments adoption was the highest in the petrol pump segment (32%), mobile and accessories (28%), F&B (27%), and pharma (26%).
SMBs have also not yet taken to online tools to deliver their products and services, with as many as 50% conducting delivery through their staff. Digitalization of daily operations is still mostly limited to GST and income tax filing (for which 67% of firms reported using digital tools), whereas just 7% of firms used digital tools for billing and stock management. Digital stock management was more popular in Mumbai, and digital billing and accounting in Kolkata, Hyderabad and Bengaluru.
“The survey unearths challenges such as lack of awareness of various digital solutions, loss of business due to limited reach, and inefficient inventory management leading to delays and business losses,” Nayyar said.
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