McKinsey: India must equip small businesses with the digital tools to unlock the next phase of e-commerce growth

In today’s ‘digital-first’ times, is it possible the last handwritten note you received was from a grateful small business thanking you for your purchase? These little touches—a personalized feedback request on WhatsApp or a delighted repost of your review on social media—can turn one-off transactions into sustained customer relationships. In these simple yet meaningful ways, small businesses across India are leaning on direct channels and tech infrastructure to connect with buyers.

India’s over 60 million micro, small and medium enterprises (MSMEs) contribute roughly 30% of our gross domestic product (GDP). Small and scattered, they could drive half of India’s e-commerce growth by 2030, growing especially fast in Tier-2 and Tier-3 cities.

And their channel of choice to connect with buyers is increasingly direct-to-consumer (D2C).A survey of over 1,000 Indian MSMEs conducted by McKinsey to evaluate the e-commerce opportunity—and which forms a part of its report The Great Unbundling of Indian E-commerce: MSMEs and the Direct-to-Consumer Revolution—finds that these businesses are almost evenly split in their channel preferences: 47% rely on marketplaces while 53% favour D2C routes, reaching buyers through channels they can own and control, such as social media storefronts, independent websites and hyper-personalized WhatsApp or Telegram groups.D2C channels also appeal to these small businesses by virtue of being economically viable even at smaller order volumes and offering a platform for brand stories and customer engagement. With D2C adoption among MSMEs growing three times faster than in traditional marketplaces, the D2C market could reach $60 billion in e-commerce sales in India by 2030 from $10-$12 billion today.