Wednesday, 18 November 2015

Rise of the Middlemen ?



For long , marketing pundits have been telling us :

"  Internet is all about disintermediation . There is no place for middlemen .

   Distributors / Dealers / Agents / Retailers etc , will gradually become redundant .

   With arrival of Online Market Platforms ( aka, e-Commerce web sites ) , manufacturers
   will accept orders online and directly deliver to end users , bypassing supply chain  "


Coming from Marketing Gurus of Harvard etc, this was accepted as Gospel Truth  !

Now a bunch of Indian Start-ups are proving them wrong !

These are , Bluebox / Browntape / Unicommerce ( and others I have not heard of  )

How  ?

By acting as " Middlemen " ( of some sort  ) between e-Commerce web sites and MSMEs of India

And what role do these " Middlemen " play ?

*   Getting MSME listed on e-Commerce web sites as " Sellers "

*   Cataloguing their products

*   Managing their inventories

*   Reconciling payments

*   Maximizing Sales

*   Photo-shooting products.......etc


Is there a big enough " Market " for such " Middlemen " Start-ups  ?

Consider this :

#   There are 500 lakh MSMEs in India

#   Of these , barely 3.6 lakhs are currently registered as " Sellers " on e-Commerce web
     sites , distributed as follows :

     *   Flipkart...............  60,000    sellers

     *   Amazon.............. 100,000   sellers

     *   Snapdeal............  200,000   sellers


#   Indian e-Commerce market was worth mere $ 5.3 billion in 2014

#   As per Merril Lynch , this would go up to $ 220 billion by 2025, with 530 million buyers


So , there is scope for many more of such " Mentoring Middlemen "

May be some such " Middlemen " can help the MSME to export their products, considering that India's exports have been continuously shrinking for past 10 months

Is there a " Scope " to increase exports from MSME  ?

Take a look at the following :

---------------------------------------------------------------------------------
Country         /     No of  MSME     /     Ave Export / year ( $ )
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------

Singapore     /    9,296                /       6.74    Million
------------------------------------------------------------------------------------
Malaysia       /    28,840               /       2.05    Million 
-------------------------------------------------------------------------------------
S.Korea        /    2.9 million           /       45 , 000
-----------------------------------------------------------------------------------
India            /   30 million        /          4, 000
------------------------------------------------------------------------------------

Now , even if each of our MSME succeeds in exporting just $ 40,000 worth of exports per year , that would amount to ,

$ 40,000*50 million  !


Currently each MSME ( on an average ) employs 2.5 persons

How many more persons would 50 million MSME need to employ , if each were to raise exports by 10  times ? ( from $ 4000 to $ 40,000 )

It is reported that , even at the current level of operations , India's MSME sector creates 1.3 million jobs every year

For raising (Ave) MSME exports by 10 times , would that figure go up to 13 million new jobs / year  ?

Enough to absorb the 12 million persons joining our job market each year ?


It is time for Indian Governments ( Central + States ) , to encourage these " Mentoring Middlemen " Start-ups , by abolishing for them , Corporate Income Tax , for next 10 years


Anything other than such a " BIG  BANG  REFORM " , will amount to tinkering !

---------------------------------------------------------------------------------------------------

hemen  parekh

19  Nov  2015

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