Starting and successfully running a business requires a lot of dedication, patience, and skills with a pinch of luck. Today, Small, Micro and Medium Enterprises (MSMEs) are facing dire challenges with an intensity that makes them question- “Will I be able to survive?” I interviewed several small business owners in Mumbai to get their perspective on the current problems imposed upon them due to this COVID-19 induced pandemic.
Mr. Rakesh Shah, a small-scale plastic manufacturer from Mumbai discussed with me the hardship he faces. From arranging huge capital for operating his factory to giving credits to customers, the business has not been easy lately. He emphasises the delays in the reverse payment process i.e. the sequential process of payment from the consumer to the retailer to the wholesaler to the trader, and finally, to the manufacturer. If the manufacturer does not receive payments on time, he cannot purchase any raw material which in turn retards production. Besides, the credit periods that manufacturers receive are surprisingly less than what they give. He added that the recurring bills (fixed costs) such as electricity bills, water charges, and office expenses, make up to about a third of the total expense. He also mentioned the strict labour laws, due to which about 60%-70% of the labour is always in rotation and that permanent labour is too costly to maintain.
In another interview with Mr. Nandivardhan Doshi, a supplier from Mumbai, I was told that dealing with established big firms is difficult because of zero credit period and upfront advance payment. Big and established firms often create a monopoly which shows small businesses an exit gate from the competition. The biggest problem according to Mr. Doshi is, again, delayed payment. Suppliers cannot afford transportation over long distances because of the same. When asked if he would make his products available online, like the big brands, he showed his hesitation and said that he will not do it. Suppliers live on profit margins and selling online has a negligible margin of profit. Upon the question of “Would you advertise your product/brand?” the answer was negative regardless of the businessman as a manufacturer, a supplier, a retailer, a distributor, or a trader. The reason is, simply that they cannot afford it. They believe that most of their sales occur either through local networking or word-of-mouth.
Even though the last couple of years have been tough for micro-industry businessmen, most of them have not given up. They are ready for any challenge come what may. Businessmen from similar industries have come together to form associations and support each other. One excellent example is the All India Plastic Manufacturers Association (AIPMA). AIPMA has over 22,000 members and about 90% of AIPMA members are from the micro, small, and medium industry sector. AIPMA organizes National as well as international seminars, lectures, meetings, conferences, buyer and seller summit, and training programs periodically and liaison between the government and the industry. Such associations provide not just technical support but also incredible emotional support. Knowing that there is someone who is dealing with a similar challenge may just be somewhat reassuring.
Small businesses can help each other with contingency funds. Sometimes they also extend credit periods to help fellow businessmen be able to recover from existing debts. It has been seen that businessmen sell their products cost-to-cost so that the businessmen in the next segment of the chain can resell them. Doing business cost-to-cost breaks the first definition of business – doing it for profit generation, but this does not stop them from helping those not at their best. These challenges existed even before the Coronavirus pandemic, but the virus made the industry members come closer in a synergy. Despite the mental stress that the sector has gone through, they believe in themselves and the community. The future of the economy might be uncertain, but the standpoint of small-scale industry owners is hopeful and optimistic.
Authored by: Pooja Shah
Edited by: Keval Vyas
