Thursday, January 21, 2021

Surviving COVID: The Challenges Facing Indian Small Businesses | Business and economic news

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Mumbai, India – Standing behind the counter of what is widely recognized as India’s oldest sports store, fourth-generation owner Manohar Wagle reflects on how the COVID-19 pandemic ultimately forced the company to 155 years of his family to enter the 21st century.

“People are so reluctant to leave their homes and want to do everything online now, even though stores like ours are open again,” the 62-year-old owner told Al Jazeera. “We had to respond to that.”

Wagle now spends much of his day talking with customers on WhatsApp, sharing photos of his inventory, and initiating online transactions through GooglePay.

In India, the ongoing struggle to contain the world’s second largest coronavirus outbreak has crushed demand, disrupted supply chains and transformed consumption patterns. To survive the changing landscape and uncertainty created by virus protocols, many small businesses are innovating or adapting their business models to cope.

Wagle Sports, for example, now allows customers in Mumbai to purchase its products on WhatsApp without leaving their homes; a completely contactless shopping experience.

The company, which typically employs 10 people but currently has four staff members, has also decided to offer free shipping after WhatsApp orders from carrom board (an Indian pool-like game involving small discs that are thrown into corner pockets ) and home fitness equipment surged.

“We had [move online] even though it’s a significant cost to us, ”explained Wagle. “Otherwise, we would have lost to sites like Amazon, which already offer deadly discounts.”

Catering to retail customers, as opposed to organizations, became even more important to Wagle after government coronavirus restrictions shut down schools and sports clubs – a move that wiped out 70% of the company’s revenue.

Without large reserves of capital to fall back on, small businesses like his – and around the world – have been hit hardest by the pandemic-induced slowdown.

More than a third of small and medium-sized businesses surveyed in June by the All India Manufacturers’ Organization said their businesses were beyond bailout.

Manohar Wagle, standing with a carrom board, now spends much of his day talking with customers on WhatsApp and initiating online transactions through digital payment providers like GooglePay [File: Tish Sanghera/Al Jazeera]

Their financial health and recovery is essential for many Indian livelihoods – micro and small businesses employ around 110 million workers and contribute 30% of the country’s gross domestic product (GDP).

“Small businesses will have to be more innovative than larger ones and harness technology to their advantage if they are to survive,” Radhicka Kapoor, an economist at the Indian Council for Research on International Economic Relations (ICRIER), told Al Jazeera.

Those who survive this crisis are more likely to be the ones who have done better in the past, adds Kapoor. “We’re probably going to see a sort of natural sorting out between the weaker and stronger players.”

A digital future

For Kuntal Malia, co-owner of StyleNook’s small business, surviving the pandemic meant quickly changing the direction of his business.

Overnight, demand for their personalized office clothing recommendation service – aimed at Bombay City employees – collapsed.

“Our customers loved what we did, but at the same time we kept hearing that they didn’t need anything right now,” Malia told Al Jazeera.

“We spent the first few months of the shutdown thinking about how we were going to cope.”

But the pressure of paying rent on office space and the fear of becoming irrelevant can be a powerful motivator.

Soon they decided to add loungewear, pajamas, and other clothing more suited to the lifestyles of the pandemic era, to their existing offering of straight shirts and dresses.

StyleNook sales have now returned to pre-pandemic levels. And with more and more Indian consumers getting used to shopping online during and after the lockdown, Malia says the company’s future is bright. She believes that people will probably use the Internet more and more for their fashion purchases.

Another survival strategy for StyleNook was to help suppliers who were stranded with excess stock due to canceled orders. Partnering with manufacturers who had never thought of selling direct to consumers also helped.

“We’ve been able to let them know what kind of things clients are looking for now,” says Malia.

By adding loungewear, pajamas and other life-friendly clothing under lock and key to their office clothing recommendation service, StyleNook has managed to return to pre-pandemic sales. [File: Kuntal Malia of StyleNook via Tish Sanghera/Al Jazeera]

Strategies like these could offer untold opportunities for micro, small and medium-sized enterprises (MSMEs) in India, says Amit Basole, associate professor of economics at Azim Premji University in Bengaluru.

“Digital platforms could help them access bigger markets and get through tough times,” he told Al Jazeera.

He cites organizations like the Independent Women’s Association (SEWA) as an example. Even before the COVID-19 outbreak, they were helping female entrepreneurs market their products nationwide or join Airbnb to help start their own eco-tourism businesses in remote and rural areas of India.

Basole says initiatives such as that by Chinese city officials to help farmers promote their products on video streaming and e-commerce sites during the height of the pandemic are instructive.

“These models are there and I think we can learn a lot from them,” Basole said. “Shifting more political attention in this area could be really helpful.”

‘No financial footprint’

In an economy that depends heavily on consumer demand to drive growth (private consumption makes up three-fifths of the economy), small businesses adapting, pivoting and turning to creativity for their survival may not be enough. .

The pandemic has plunged consumer confidence to record levels, registering 49.9 on the Reserve Bank of India’s monthly survey index last September – the lowest on record. India was already struggling to provide enough jobs for its people, but millions more have been lost in recent months and are not guaranteed to return.

Uncomfortably high inflation and signs of strain on household income could pose insurmountable obstacles for many struggling small businesses.

“If you look out the window it almost looks like things are normal, but that doesn’t translate into sales,” said Wagle, the owner of the sports store. “The future is very uncertain at the moment.”

The Indian government has rolled out an unsecured credit program worth around $ 42 billion to support cash-strapped MSMEs. About $ 20 billion had reached businesses in November, according to government figures.

But analysts say the program may not be helping those who need it most.

“Informal enterprises dominate the micro and small enterprise landscape and many of them have no financial footprint,” says Kapoor of ICRIER.

She explained that business owners operating in the informal economy – such as street vendors who have not registered with the authorities – are not eligible for the loan program or other program that offers wage support to workers. registered employees.

The prospect of sinking deeper into debt may be another reason many businesses may have ignored the government’s credit offer.

“In a pandemic situation where the future is very uncertain, many MSMEs are asking: why would I want to take on additional responsibilities?” Amit Bhardwaj, secretary general of the Federation of Micro Small and Medium Enterprises (FISME) told Al Jazeera. “Plus, taking out additional loans affects your credit rating.”

Small businesses such as Wagle Sports have had to deal with several regulatory changes in India in recent years [File: Tish Sanghera/Al Jazeera]

After the double economic shock of demonetization – when the government decided overnight in 2016 to ban high-value banknotes to fight corruption – and the failed deployment of a goods and services tax l he following year, many small businesses were left behind. Their ability to withstand another crisis has been greatly diminished.

While coming out of the COVID-19 crisis by radically changing their business model has worked for some, others have not had the resources and capacities to attempt such initiatives.

“There is never a lack of entrepreneurship, it is usually structural constraints and the vulnerability to failure that restrict people,” explains economist Basole. “If companies have the opportunity and the capacity to take risks, we could see a lot more reorienting themselves and trying to be more innovative.”

Many analysts have suggested that the government should inject liquidity into the economy to revive consumer demand. This in turn would benefit small businesses and the economy as a whole, they say.

“Cheap liquidity can only go that far,” says Basole. “There is no substitute for a direct tax expenditure – and it has to be much larger than what we’ve seen so far.”

Economists have criticized moderate government spending during the crisis, which is said to be closer to 1% of GDP and not the 10% figure claimed by the finance ministry.

For now, sports retailer Wagle says it is surviving on a “conservative life” until the pandemic subsides and normalcy returns.

He is grateful that he owns his premises and therefore has no rent to pay or any debt burdened by him. “A lot of others won’t have this chance,” he says.

This article is part of Al Jazeera Digital’s continuing series that features small businesses around the world that have survived market disruptions from COVID-19 as well as unique economic challenges in their country. Click on here to learn more about small businesses in Beirut, Lebanon.



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