Synopsis: In the current world of digital boom, end-to-end digitization is not only helpful for customers but also for businesses to experience scalability, profitability, and ease of doing business like never before.  

Let’s take into consideration two random facts. First, nearly 90% of businesses and 50% of employment in India come from the MSME sector. Second, the projected e-commerce revenue generated by Indian companies will increase by 8% in 2024 as compared to the previous year. These two facts set the basis for why the Indian government is keen to infuse Rs 10,000 crore over the coming years into the technology and infrastructure development of MSMEs to promote end-to-end digitization. This article will help you understand how exactly end-to-end digitization benefits businesses to thrive to their full capacity while also highlighting the subtle challenges that still require companies to have a physical footprint for catering to a larger base of potential customers. Let’s start with the basics.  

What is End-to-End Digitization?

In simple terms, it refers to a fully digitized business process from start to completion. For instance, one of India’s biggest e-commerce platforms, Flipkart, runs its entire operation digitally for its customers. Be it placing orders, replacing or returning units, or handling payments, all activities are performed through an end-to-end digital platform. As of 1st of June 2023, around 69% of organizations in India like to identify themselves as “digital business” to indicate their shift towards end-to-end digitization. There is a continuous rise in digital transformation in the MSME industry as well. That’s because digitizing the entire supply chain dramatically reduces the turnaround time by up to 80% and operational costs by up to 40% with digital elements. Let’s understand all such benefits of running a digital business.  

Core Benefits of Digital Transformation

High Efficiency

MSMEs, and any business for that matter, experience efficiency by engaging digital tools to streamline their operations. For instance, if an MSME uses a software tool for accounting, it can automatically process invoices and payroll, to save time and reduce human mistakes. Inventory control tools can also keep track of stock levels and make ordering easier and more efficient, avoiding shortages and excess stock in the warehouse. The complete digital upgrade not only improves efficiency and converts orders quickly but also allows small businesses to focus on expanding their markets, presenting the advantages of going digital in a concrete way. 

High Convenience 

Through digital transformation, MSMEs can make services more easily accessible to their customers. Online businesses on e-commerce sites offer 24/7 shopping flexibility. MSMEs can leverage the power of e-commerce to allow needy customers to browse goods, order them, and pay from home at any hour. Additionally, digital communication channels like email and social media can help MSMEs offer real-time support to customer inquiries. This greatly increases satisfaction and promotes customer loyalty. That said, digital transformation streamlines customer service and strengthens the interaction between customer and business. 

High Scalability  

Digital transformation provides MSMEs with unparalleled scalability. It offers them support to scale their online shopping store as they grow. The majority of e-commerce platforms run on cloud-based solutions. That helps companies enjoy flexible and scalable IT infrastructures known for adapting to fluctuating scalability demands without the need for heavy investments. Moreover, the digital marketing power, including social media advertising and SEO, opens doors to new audiences without losing money on traditional marketing setups. This allows MSMEs to expand operations and pursue sustainable growth without the constraints of physical infrastructure expansion. That marks a strategic edge in scalability. 

However, there are some challenges as well. 

Challenges and Limitations of Complete Digitization

Though 72% of MSMEs prefer online payments, they still lack concrete digital solutions for the following reasons.  

Knowledge Gap:  

Many SMEs are still unaware of new technologies, such as digital marketing and e-commerce. This lack of knowledge, coupled with skepticism, holds them back from going digital. 

Understanding the Impact:

Though some industries know how digitization helps to grow, they lack that sweet experience of the positive effects of digital transformation on business operations, growth, and customer engagement. As a result, there is a delay or lack of massive actions from them to initiate digital transformation. Plus, without proper tech support, creating a digital transformation roadmap is challenging. Those who don’t have the same, often hesitate to seek external consultation. 

Regulatory and Security Concerns:  

There is a growing threat of data privacy and security issues in the digital world. Malware and cyber-attacks are posing major risks. Despite strict cybercrime regulations, many MSMEs are still reluctant to go digital due to these security concerns. 

Infrastructure Gaps:

Many tier-2 and tier-3 cities outside major urban centers often lack the necessary digital infrastructure. For instance, reliable internet and 24/7 electricity access are still a challenge in some rural areas of India. This makes it difficult for residents to rely on digital mediums to meet their shopping needs. 

Digital Literacy:

Many residents of tier 2-3 cities have a limited understanding of digital technologies. That’s probably the reason why there was a 32% surge in demand for digital literacy from tier-2 and tier-3 cities in 2023. It is expected to increase by another 20% this year.   

Language Hurdles:

Predominantly English digital content creates significant barriers for non-English speakers. This limits their ability to understand and adopt digital platforms. Only a few major e-commerce players have been able to provide e-commerce experience to their customers in local languages. 

The Role of Physical Presence

Despite the rapid shift towards digitization, physical presence is necessary for MSMEs, especially in India’s Tier 2-3 cities. These areas are a mix of urban and rural demographics. They have varied digital literacy levels. Thus, MSMEs need a business approach that transcends digital-only interactions. That’s where physical footprints offer tangible experiences. It is important to build trust with customers in communities where face-to-face interaction is highly valued.  

Moreover, the physical presence of MSMEs respects the preferences and purchasing power of local communities. MSMEs get the chance to offer tailored services and products as per the demand.  

While digital platforms expand reach and offer operational efficiencies, they cannot fully replace the personal touch and assurance provided by in-store experiences. When customers directly engage with products, the experience goes unmatched with e-commerce platforms. 

However, a hybrid model of maintaining physical and digital stores ensures MSMEs in Tier 2-3 cities can meet diverse customer needs while nurturing loyalty and trust. 

End Thoughts 

At Protium, we believe end-to-end digitization is helpful for MSME organizations to stay competitive, improve their bottom line, and future-proof business. However, we also believe that it is imperative to have a physical presence to cater to a mix of urban and rural customers to foster loyalty and trust during the early phase of business expansion. After all, brand loyalty reduces expenditure on customer retention. In this regard, this bonus guide will further help entrepreneurs and small business owners to acknowledge the best investment strategies to generate high returns.