How Indian MSMEs are navigating e-commerce supply chain hurdles

India’s e-commerce boom offers vast opportunities for MSMEs, but outdated supply chains, fragmented logistics, and digital gaps threaten to leave small sellers behind in the race for online growth.

- Parijat Sourabh

India's e-commerce boom has transformed retail, unlocking major opportunities for Micro, Small, and Medium Enterprises (MSMEs). With over 800 million internet users as of early 2025, the digital economy is expected to grow nearly twice as fast as the overall economy and contribute one-fifth of national income by 2029-30, according to the Ministry of Electronics and IT. However, despite this growth, Indian MSMEs continue to grapple with supply chain challenges that hinder their full participation in the e-commerce surge.

The MSME sector is a cornerstone of the Indian economy, contributing more than 30% to the country's GDP and providing employment to over 111 million people. These businesses now find themselves at a critical juncture where digital adaptation is no longer optional but essential for survival.

The Covid-19 pandemic significantly accelerated e-commerce adoption across India. According to data from the India Brand Equity Foundation (IBEF), online retail penetration is projected to rise to 14% by 2028, up from 8% in 2024.

This digital shift has been especially transformative for MSMEs, which have long depended on physical markets and intermediaries. Yet, moving online has exposed deep-rooted supply chain weaknesses that risk sidelining many smaller businesses. From inventory management to last-mile delivery, MSMEs are struggling to align their operations with the demands of the digital marketplace.

The digital divide in Indian MSME operations

The digital transformation of supply chains represents perhaps the most significant hurdle for Indian MSMEs entering the e-commerce space.