Vocal for Local — A need for MSME Social Commerce Platforms
From the smallest villages to tier-one cities, shop owners are facing high rents, rising businesses taxes, and online competition, that’s causing these small owners to pull down their shutters to cut their losses. In India online shopping has seen steep growth since the early 2010s and has been growing quite exponentially. Though it can prove to be a great channel for any new business to start selling and grow, certain hidden things go unnoticed in this commotion of online retailing that proves to be difficult for small sellers to sustain.
MSMEs (Micro Small Medium Enterprises) in India number up to 70 million and contribute around 30 percent to the nation’s Gross Domestic Product (GDP). These enterprises are among the worst hit during the corona virus pandemic. Amazon, Flipkart, and other e-commerce giant deliver our groceries, hosts our websites, sell just about anything, and can get it to you in two days or less. Amazon has effectively changed everything — and that includes small businesses.We often see these e-commerce websites project themselves as a free market where the best and the most efficient retailers can grow their business that is no longer limited by geographical limitations. They often encourage small retailers to sell on their websites. After all, in theory, e-commerce websites are marketplaces that are open to all retailers.
As a small business or a start-up, they say the easiest way to get visibility is to get online or end up drowning in the competition. In this age of e-commerce and the convenience of 2 Hour Delivery services at the doorstep, that is what people are preferring over physically going and buying.In many countries across the world, small retailers are against e-commerce websites as they have the unfair advantage of predatory pricing, free home delivery, and even easy return.
At the end of the day, here are a few reasons by which these small scale seller’s don’t gain much profit and the website ends up making all the money.
Commission Cost of Products
Commissions are one of the largest expenses that small sellers pay to e-commerce websites which are as high as 50%. Usually, these online platforms have various plans of fixed-rate commissions that keep changing as several products are listed. No matter if there are sales or not, these commissions have to be paid. There are even certain charges such as packing fee, cataloging fee as well as delivery fee which vary that makes it furthermore difficult to understand to these small sellers.
We as customers find it easy when it comes to the variety of payment methods available to complete our purchases from this online platform. But have you ever thought of the chargers the sellers face? Take Amazon, for instance, charge a certain gateway fee if the money is received electronically, while they charge cash handling fee cash on delivery (COD)
Returns of Goods Cost
Following the tradition of ‘Customer is king’, E-commerce platforms allow customers to return any product without having any questions asked. However, convenient it is for us as a customer, sadly for the retailers, the return is very expensive. Sellers are often made to pay the cost of reverse logistics when consumers return or even want to exchange the product. The sellers are even fined with penalty charges if returns exceed a certain percentage. This could be due to consumers returning the products due to petty reasons or it could also be due to damage caused during transportation which may be beyond the control of the seller. The costs of returns tends to eat up into suppliers’ margins. Hence due to competition for established suppliers, the local sellers find it hard to compete with the low-profit margins.
Visibility Cost
With so many sellers and competition of prices, sellers need to find a way to make their product prominent among similar products. This is where e-commerce websites charge their sellers extra to make their product more prominent on their website which adds to the increased marketing expenditure from the seller.
We all are familiar with the Big Billion Day / Great Indian Day Sales, that these platforms announce huge discounts during festivities. To stay competitive, sellers have to sacrifice on their margin to build in all the penalties, commissions, marketing costs, fixed costs, etc in their costing and then offer a great discount. Sellers receive multiple reports from various portals which include sales reports, settlement reports, and commission invoice reports. But most of the time the reports shared are not consistent and helpful specially to local vendors who are not at par with such technological advancement.
Again to stay visible these platforms offer various schemes on their portal such as banner, collection page, feed page, notifications, social media push, etc to attract customers. While this visibility is great it comes at a huge cost which many sellers cannot afford due to their thin line of margin.
Account settlement
While platforms immediately receive the purchase amount of the product, it’s not the same case with the sellers. The payment cycles followed by the firms are quite complex. Usually, when a purchase is made online, the invoices are drawn before goods are sent. The companies have a payment settlement cycle which is made once a month based on the order status. So what happens is that these e-commerce websites tend to hold money for a long period. Hence, sellers lose interest in the receivables which again adds up to the cost of selling online.
If an order is delivered on the first of a month, the seller will receive the payment in the next month only if that product hasn’t been returned. Keeping track of the previous month’s orders along with tallying the payment can be quite challenging.It then takes a lot of time and effort for sellers to tally the sales against the settlement for multiple marketplaces. Due to this complexity, sellers are now forced to invest in accounting software and processes along with employees which is an additional cost to them.
Keeping in mind all these issues faced by the local sellers, companies must come forward and propose to start a micro platform for local business owners. For instance, a startup in the UK called ‘NearSt’ has partnered with Google to provide local retailers with a means to attract shoppers who might otherwise buy online.
Another app called ‘Gogappi’ that aspires to be the largest crowd sourced network for promoting local street vendors who do not make it to big food-based platforms.
To continue making progress in this direction, we at Design Espacio India have been working with various local sellers across India to bring them together for various Interior design projects that we handle. We encourage our Clients to order directly form our network of boutique Home décor and furnishing sellers. Our goal is to empower our local markets by cutting out the middlemen and building a platform where sellers and buyers can interact directly. We are building a platform where our aim is to provide a professional and best-in-industry social commerce platform for interior designing and decoration needs for all styles and sizes of Homes across the country.
We hope this article finds interest and gets shared to Home Decor Lovers, sellers and buyers so that the awareness grows and we create a sustainable network for our home grown boutique sellers.
You can visit our website www.designespacio.com or you can reach us at info@designespacio.com for discussing more.
Written by our Lead content writer for Design Espacio.
