On average, micro, small, and medium enterprises (MSMEs) integrated with e-commerce platforms report higher turnovers and profitability, with 60.4 per cent reporting a turnover of more than ₹5 million, compared to 47.6 per cent in the case of non-integrated firms, according to the annual survey of Micro, Small, and Medium Enterprises (MSMEs) in India by the India Council for Research on International Economic Relations (ICRIER) 

The data is based on a survey encompassing 1,005 enterprises integrated with e-commerce platforms and 1,002 enterprises that are not integrated.

India’s e-commerce market is rapidly growing, with 933 million internet users in 2022, positioning the country as having the world’s second-largest internet user base after China. E-commerce platforms provide new sales channels for MSMEs, enabling them to reach a broader geographical market beyond their local boundaries.

New opportunities

The surge in e-commerce adoption was particularly pronounced during the COVID-19 pandemic, with a significant increase in online purchases, both in India and globally. This trend presented new sales opportunities for MSMEs that had previously operated primarily in local markets.

Among integrated firms, approximately 35.5 per cent  reported turnovers between ₹1 crore and ₹50 crore In contrast, among non-integrated firms, the proportion of firms in the ₹1 -50 crore turnover range was considerably lower, at 15.6 per cent (based on data from 2021–22).

In terms of profitability, roughly 40 per cent of integrated MSMEs reported profit margins of 15 per cent or below, while the corresponding figure for non-integrated firms was 58 per cent. Conversely, among integrated firms, 57 per cent reported profit margins exceeding 15 per cent, compared to 40.5 per cent for non-integrated firms.

Trends

Further, the survey also revealed that MSMEs with younger and more educated owners were more likely to integrate with e-commerce platforms. Interestingly, women-owned MSMEs demonstrated a strong presence on e-commerce platforms, despite the underrepresentation of women in the broader MSME landscape.

Moreover, the survey indicated that a higher proportion of export-oriented firms were integrated with e-commerce platforms compared to non-exporting firms. This suggests a positive correlation between a firm’s export orientation and its digitalization efforts.

According to the Ministry of Micro, Small, and Medium Enterprises, India is home to 63.38 million unincorporated non-agriculture MSMEs, primarily operating in the informal sector. In contrast, there are 17.6 million registered MSMEs, employing 121.7 million individuals, on the Udyam portal, a government platform that provides them with permanent registration and eligibility for priority-sector lending, government schemes, and various benefits. Of the registered enterprises, 96.2 percent are classified as micro, 3.4 percent as small, and the remaining as medium enterprises. Furthermore, 27 percent of registered MSMEs are involved in manufacturing activities, while 73 percent operate in the services sector.

The current sample comprises of 2007 MSMEs (manufacturing units). Similar to the previous report, six sectors that have a large MSME presence have been covered—sports goods, toys, furniture, handicrafts, apparel, and processed and preserved food.