What is Social Commerce?
When you sell directly through social media platforms instead of or in addition to conventional selling points, the practice is called social commerce. Instagram, Facebook/Meta, Pinterest, etc. are the primary social media platforms best known for social commerce. At present, the social commerce business is worth $89.4 billion. In the next seven years, the social commerce industry will reach $604.5 billion.
The difference between e-commerce and social commerce lies in the selling mode. While e-commerce needs dedicated applications and websites to sell, selling through social media sites for MSMEs is comparatively simple.
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Social Commerce to Reimagining Indian MSME’s Growth
The Micro, Small, and Medium Enterprises (MSME) sector is critical to India’s economic progress. In India, there are roughly 6.3 crore MSMEs. But, only a small percentage of these are registered, and the majority operate unregistered in the informal sector. Through domestic and international business, they contribute roughly 29% of our country’s GDP. As the Indian government aspires to quadruple its economy to $5 trillion in the next years, it is critical to increasing MSMEs’ contribution to GDP through social commerce.
Despite the COVID-19 dilemma, the global market for Social Commerce is set to increase at a CAGR of 31.4% from 2020 to 2027, from an estimated US$89.4 billion in 2020 to a revised US$604.5 billion by 2027. India’s booming smartphone usage and internet penetration mark a perfect opportunity for MSMEs to take advantage.
Can Social Commerce Help in Reimagining MSME Sector’s Growth?
As per research on India’s e-retail growth, social commerce has the potential to enable over 40 million small companies to jump into the online commerce field. The industry will be growing at a Compound Annual Growth Rate (CAGR) of 55-60% between the financial years 2019-20 and 2024-25. According to Statista, social commerce will grow tremendously in India as a result of smartphone penetration and inexpensive internet, with the number of online customers expected to reach 150 million by 2020. The number of social network users, on the other hand, was far larger, at 518 million.
As a result, in quest of maximum user growth, businesses and digital platforms have flocked to social commerce. Businesses can access a digitised inventory of various commodities bought at wholesale pricing from suppliers, as well as logistics and customer service, through social resale platforms. Many of these platforms, unlike e-commerce sites, do not charge sellers a commission. The challenge with Tier-II and Tier-III e-commerce or social commerce, according to Pahwa, is the item return, because return rates are higher in these areas.
Can We Register e-Commerce in MSME?
The registration process of MSME is basically you registering your business with the ministry of small, medium, and micro-enterprises. After this registration, a certificate is issued that is official proof that the enterprise has been registered. Go to the ministry’s website and follow the steps and your enterprise will get registered. Registering e-commerce in MSME is extremely beneficial as it allows you to get flexible EMIs and lower interest rates on banks, tax exemption, rebates and discounts on patents, and the preference for government tenders.
Does social commerce render e-commerce less profitable?
No, both e-commerce and social commerce have their own audience and pros & cons. Talking about e-commerce; it opens paths, even for the tiniest MSMEs, to exhibit their items in any area across the globe without spending money on expansion or relocating sites. In this case, MSMEs do not need to build their social media following. Selling through e-commerce platforms provide them with a ready audience.
The government has had programs such as Digital India, Make in India, Start-up India, Skill India, and Innovation Fund since 2014 to encourage MSMEs to sell their goods on e-commerce sites. Moreover, the government itself operates e-commerce sites such as the e-Markets for supply sourcing by Ministries and Public sector undertakings. The Ministry of MSMEs is undertaking many initiatives as part of the Digital India initiative to digitize the MSME ecosystem, where all offices were digitally empowered and efforts are made to raise awareness and to do advertisement about the perks of digital payment results such as BHIM, UPI, and Bharat QR code.
E-commerce plays an important role to get the success of Indian MSMEs, “one must under check that transformation happens at a pace that permits them to capitalize on latest opportunities,” said Nitin Gadkari, Minister for MSMEs.
What are the impacts of social commerce on MSMEs in India?
Many firms are catapulting the web and going digital with social-first business strategies. Due to this, they are turning social networks into significant distribution channels. Meesho, for example, is enabling over a million small business owners to establish digital shops on social media networks; while not a perfect match, Shopify for India is built on social media platforms rather than the web.
Information technology and the internet have completely transformed the world in the previous two and a half decades. Smartphones imply a higher number of internet users due to the availability of excellent network (3G/4G) data packs. The number of people using the internet is steadily expanding.
What are the benefits and shortcomings of Social Commerce in the Indian market?
Benefits of Social Commerce for Indian MSMEs
- MSMEs may now offer their products and services via social commerce, regardless of where they are located.
- The MSME audience is not limited to a single location. Social commerce provides MSMEs with a platform for conducting business and transacting on a national and worldwide scale.
- MSMEs may reorganize, decrease costs, and even explore expansion options with the support of social commerce in order to achieve better growth and profitability by maximizing resource utilization.
- Because social commerce provides technical breakthroughs and a larger client base through the internet, MSMEs may reach a larger market for advertising their products and services.
- The social media penetration is bringing online a brand new category of consumers aka the silver tech generation lying between age 50s and 70s who may be getting online for the first time. Through social commerce, Indian MSMEs get to reach this section as well.
- The consumer journey is made simpler by social media stores, eliminating the friction from the process from discovery to purchase. With both products and consumers at one place, consumers have no other option but to checkout.
- Social commerce provides an immediate focus group. Along with expediting the transaction process, social commerce also makes feedback collection and studying consumer trends easier.
Shortcomings of Social Commerce for Indian MSMEs
- Consumer hesitancy is the biggest issue when we talk about social commerce. A person refrains from giving out personal or financial information.
- Moreover, cyber and data security laws governing social media and commerce in India are still at a primitive stage.
- Social commerce demands highly skilled and qualified individuals for portfolio creation, social media management, content creation and marketing.
- All sectors of the Indian economy have been affected by the recent crisis, particularly the MSME sector. Social media channels have helped MSMEs in their growth by providing a platform for them to promote their goods and services. The MSME sector was thrown into chaos by the shutdown, resulting in significant losses and, in some cases, closure. Social commerce enables MSMEs to enhance their products and services by increasing revenue, profit margins, market reach, marketing and communication, and customer feedback.
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Written by,
Prasad P. Patkar