MSME Businesses No Longer Ready To Play Safe; They Are Willing To Invest Despite The Current COVID Scenario: Kantar ITOPS 2020 Study

* In the last one-year, MSME business landscape has undergone significant change owing to COVID crisis both from an attitude and behavioral perspective.

As per Kantar’s ITOPS 2020 study which completes 25 years of tracking the MSME market in India, covering close to 7000 MSMEs across 35 cities of India and SMB COVID Barometer study conducted by Kantar last year, the pandemic has had a strong impact in changing the business landscape of the MSMEs in India.

The change in business landscape can be classified into two:

1. Attitudinal changes 

2. Steep increase in business priorities.

Attitudinal changes

Number of ‘Safe players’ (Businesses that do not see any benefit in investing if the economic condition is not at par) has significantly increased - from 35% in 2019 to 91% in June 2020. This means that during COVID, more than 9 out 10 businesses were not ready to invest further in their business. However, as COVID started setting down towards the end of the year (November/ December’ 20), Kantar witnessed a major revamp in the MSME market. Only 2 to out 10 businesses preferred to remain safe players as others probably realized that playing safe may not yield much during this overwhelming situation.

This is also evident from the fact that the proportion of businesses in the ‘Fighter’ segment (Businesses that are willing to invest despite a poor economic condition in the country) increased by 4 times within 5 to 6 months (from June’ 20 to Nov/ Dec.’ 20). Even if we compare the number with last year (2019) ITOPS, it has doubled. This explains that businesses are now ready to fight in this scenario so that they can stay competitive and grow.

Kantar has also witnessed a V-shaped change in attitude of a particular segment called the ‘Wave riders’. These are the businesses that are willing to invest despite a poor economic condition in the country. A year back, there were 48% such businesses. Quite understandably, the number went down to a meagre 3% in June 2020 when COVID was on the rise and the country was under strict lockdown. However, it made a sharp recovery thereafter. By the end of the year 2020, more than half of the MSMEs were ready to invest in business again.

Steep increase in business priorities

It is not only the attitude towards approaching the business that has changed, ITOPS 2020 has also revealed that MSMEs are again upbeat about planning for their business in next year, even more strongly than earlier, in spite of them being impacted by COVID significantly. 

MSMEs had certain business plans for 2020 but due to COVID they went into a shell and plans were not implemented to the extent expected. Eventually businesses have understood that COVID is going to stay and in order to sustain and grow, they need to plan ahead well.

Launch new products or services, new variants: Amid COVID situation, nearly 40% of the MSMEs in 2020, as compared to 34% last year, are looking towards launching new products and services in the coming next one year. During the first wave of COVID, businesses were only maintaining the status quo and avoided innovation and new product or services launches. However, towards the end of the year this changed, and companies ramped up to launch new products and services. This indicates a sharp recovery here as well and even more businesses today are looking to offer something new to their customers.

Increasing staff: In 2019, around 25% of the businesses were looking to increase their employee strength in 2020. As COVID struck, many businesses were letting employees go. While such decisions were rational in certain cases, in many cases the decision was taken out of anxiety. However, this situation didn’t last long. As the first wave of COVID started subsiding, businesses realized the criticality of manpower in running the show successfully and have started hiring. As per latest ITOPS data, hiring is one of the major business plans in 2021 for every 1 out of 3 MSMEs in India.

Tech and Digital: It’s been a while since MSMEs started investing in technology. If we go back to 2019, technology was largely an enabler for the business. As per ITOPS 2019, 15% of the businesses were looking to upgrade technology and around 2 out of 10 businesses wanted to focus on their digital presence. But COVID has made the businesses realize the importance of technology as more businesses are now eager to invest in technology and digital. ITOPS 2020 data shows that almost 1/4th of the MSMEs have plans to upgrade technology and 3 out of 10 have planned to focus on their digital presence in 2021, with activities like selling, marketing online, etc. 

It is important to mention that the above phenomenon is not only from the MSME businesses of Tier 1 or Tier 2. Such attitude and behavior have been noticed from the businesses from lower tier cities as well.

Commenting on the findings from ITOPS 2020, Indranil Dutta, Associate Vice President, Insights Division at Kantar, said, “MSMEs are becoming aggressive post COVID. They have started believing that playing safe is the riskiest proposition. Thus, they are no longer doing things just to survive. More businesses today are investing in multiple activities to stay afloat and looking for growth as well. This provides a strong opportunity for tech and digital players to help MSMEs to make them understand the potential of technology in their business growth.”