According to a recent study conducted by the Indian Council for Research on International Economic Relations (ICRIER), micro, small, and medium enterprises (MSMEs) that cannot embrace e-commerce platforms may face an escalating challenge in accessing the market, as this technology poses a potential "survival threat" to them.

The study, titled 'Annual Survey of MSMEs in India: Leveraging E-commerce for the Growth of MSMEs,' emphasises that although integrating with e-commerce platforms offers benefits to MSMEs, it is crucial to acknowledge that for those unable to do so, technology could represent not an opportunity, but rather a threat to their very existence. Businesses that remain disconnected from e-commerce platforms are likely to encounter increasing difficulties in entering markets, particularly when integrated firms are making substantial market inroads by harnessing these platforms.

In stark contrast, MSMEs that have successfully integrated with e-commerce platforms have experienced substantial gains, including increased sales, profitability, and investments. Notably, the report reveals that 63% of integrated MSMEs are export-oriented, compared to only 48% among non-integrated firms.

Furthermore, in the financial year 2021-22, 35.5% of integrated MSMEs reported a turnover ranging from Rs 10 million to Rs 500 million, while the corresponding figure for non-integrated firms stood at a mere 15.6%.

The study's findings suggest that MSMEs benefit significantly from e-commerce platform integration, with improved market access being the most frequently reported advantage. Consequently, it's unsurprising that the majority of integrated enterprises express their intent to increase the proportion of e-commerce sales within their overall sales in the future.

The study surveyed 2,007 MSMEs registered on the UDYAM portal across six product categories in 11 cities. Of these, 1,005 enterprises were integrated with e-commerce platforms, while the remaining 1,002 were not integrated.

Moreover, integrated units boasted a higher share of permanent employees, with 40.8% reporting that over 50% of their workforce comprised permanent employees, compared to only 32.9% of non-integrated firms achieving the same level of permanent staffing. In terms of profitability, roughly 40% of integrated MSMEs reported profit margins of 15% or lower, whereas this figure was 58% among non-integrated firms.

The study also revealed that integration with e-commerce platforms prompted firms to launch new products, enhance existing product designs, and adopt innovative business practices and organisational methods. This suggests that platform integration has encouraged investment and innovation at the firm level.

Additionally, integration has enabled MSMEs to bolster their digital presence, establishing their creditworthiness and improving access to formal finance. Approximately 42% of integrated enterprises reported that obtaining loans became easier post-integration, while around 75% of non-integrated firms believed that their ability to secure external financing would have been greater had they established a presence on e-commerce platforms.

The study underscores that the decision not to integrate primarily stems from a lack of knowledge and information about digital technologies and e-commerce platforms. However, it also emphasises that a firm's choice to join e-commerce platforms depends not only on its familiarity with the platform but also on its internal capabilities, which determine whether it stands to benefit from such integration.