Zinnov, a leading global management and strategy consulting firm, in partnership with Cisco, has conducted an impact study titled, “Indian SMBs: On the Road to Recovery from COVID-19”, evaluating the effect of COVID-19 on the Indian Small Medium Businesses (SMB) landscape as a whole, and on major verticals such as Manufacturing, Retail/Wholesale, and Services that comprise of almost 75Mn SMBs. The report identifies the effect of the extended lockdown across industries as well as how the major players in the ecosystem – the government, technology companies, and SMBs themselves – can work together to accelerate recovery of SMBs post COVID-19.
The Indian SMB segment forms the bedrock of the country’s economy, contributing upwards of 30% to the national GDP and employing more than 130Mn people. However, the ongoing lockdown due to COVID-19 has affected millions of small businesses as production, distribution, and consumption have been impacted. With SMBs’ financial runways cut short during this time, in addition to their reduced migrant workforces, planning their immediate survival and preparing for long-term sustainability is crucial.
The Zinnov-Cisco study notes that while all SMB verticals have been impacted by COVID-19, the impact has not been evenly distributed. Manufacturing has been affected deeply, with plants and factories shut down for those SMBs that do not manufacture essential goods. Even as things start edging towards normalcy, given the impact to the supply chain and the social distancing norms, this segment is still far from recovery, let alone growth. Although Retail is witnessing a surge in demand across groceries, personal care items, and pharmaceuticals, it is likely to slow down over the next 2-4 weeks as discretionary spending takes a hit. Travel & Hospitality have been the most affected in Services, while Healthcare has been the least affected.
The study further highlights that mitigating the worst of the COVID-19 impact depends on the SMBs’ willingness to disrupt themselves, and those who do will emerge stronger on the other side. SMBs across verticals need to adopt digital technologies such as Cloud, Internet of Things (IoT), Automation, etc., to enhance resilience and future-proof their businesses. SMBs also need to leverage digital technologies to facilitate discoverability through online presence and digital storefronts, keep customers updated through regular digital updates, and increase efficiency by adopting Cloud and Automation-based solutions for common horizontal functions such as Finance & Accounting, Payroll, etc.
The equity support that the government has announced should be invested by the SMBs in buying new inventory as well as adopting technology solutions to make them disaster-proof. The recently announced government benefits could help SMBs accelerate their digital transformation, and with the definition of “SMB” being revised, more businesses will be able to avail those benefits, which would also provide impetus for micro-businesses to grow. The study notes that Manufacturing SMBs could look at sourcing raw materials locally to overcome supply chain challenges and use technology to streamline their supply chain operations. Retail SMBs can use mobile applications to accept orders and leverage hyper-local logistics players to offer doorstep delivery. With social distancing norms still in place, Services SMBs should increasingly leverage ‘at home’ services wherever possible, with other necessary precautions in place like wearing a mask, sanitizing hands and frequently touched surfaces, etc. One major initiative that is gaining traction across the board is the need for contactless payment options.
Speaking about the study, Praveen Bhadada, Managing Partner – Emerging Tech & Private Equity, Zinnov, said, “India has a massive base of 75Mn Small Medium Businesses (SMBs), contributing around 30% to the country’s GDP and employing nearly 130Mn people. COVID-19 has pushed the majority of these SMBs into survival mode. While the government’s newly announced measures including the stimulus packages aimed at SMBs offer a much-needed boost to them to restart their operations, SMBs also need to be agile to embrace the new normal, which includes a strong digital foundation. They need to be more customer-focused and should leverage digital technology solutions such as Online Appointment Scheduler, CRM, Collaboration Applications, Accounting/Billing Applications, accept Digital Payments, and automate repeatable tasks. Overall, the concerted efforts by the government, technology providers, and SMBs can help SMBs combat and lessen the impact of COVID-19.”
Commenting on the study, Sameer Garde, President, Cisco India, and SAARC, said, “With the new stay-at-home economy emerging, digitally-enabled SMBs will be better placed to service customers. Pervasive broadband connectivity and uptake of digital technologies will fuel this new economy. Technology will play an important role in helping small businesses acquire customers, enhance service, experience, and efficiency, optimize supply chains, and grow beyond local boundaries to state, national, and international markets.”