Today, Suryaflame sells more than 5,000 gas stoves and some 1,000 mixer-grinders every day. It also manufactures and markets a large number of irons, copper bottles, utensils and kitchen fireplaces. The increase in online orders has helped the company record 10% sales growth every month for the past two years. These were pandemic years when the fear was that only big manufacturing brands with big balance sheets would survive. The prognosis for small local manufacturers was dire.
Suryaflame is one of the companies that debunked the prediction and thrived during Covid-19, thanks to e-commerce platforms. Some of them have recorded four to six times greater growth in their turnover, although on lower bases. ET examines nine such outliers in consumer spaces.
It took almost 40 years for Suryaflame to expand all over India, with its products available in many PINs across the country. Vaibhav Malhotra, MD, Suryaflame says, “The cookware industry is highly decentralized and competitive. It is still at the mercy of big wholesalers and retailers. But with the rise of e-commerce over the past two years, the terrain is changing rapidly. At least the digital space is a level playing field. The competition there is relatively fair.
E-commerce platforms such as Amazon, Flipkart, Udaan, and Meesho have helped many consumers discover many smaller brands. The frenzy of adding more sellers to platforms and the backcountry race to connect with more buyers has helped these manufacturers grow faster. High smartphone penetration, cheap data and consumers’ eagerness to shop online during Covid have helped these local businesses. “Scaling is important for any product manufacturer. But to grow, they need access to a large market, a network and credit support. Well-established e-commerce players have been successful in offering the three essentials to small manufacturers,” says
Bidasaria, Business Leader (General Merchandise), Udaan, a leading B2B shopping platform for retailers and merchants.
“E-commerce platforms could remove many bottlenecks related to the supply chain. Covid-19 has accelerated digital adoption in India, both on the buyer and seller side. Manufacturers could leverage the success of these platforms. They have benefited from market access and timely payments,” he adds.
Can this hold up as we move into a post-pandemic era or life with Covid? Although it has been relatively easy for tech-savvy business owners to identify markets and secure new customers, high input costs, power shortages, slowing demand and excessive leverage could derail the growth trajectory of small manufacturers.
Before the pandemic, Tweakymod, a Hyderabad-based company that makes cellphone cases, was filling just 80-100 orders a day. But once he started selling on e-commerce platforms in 2020, orders skyrocketed. In 2022, it increased its sales 10 times compared to 2020. The company fulfills more than 2,000 orders every day.
During festival season, Tweakymod sees over 5,000 orders per day. “We plan to add new product lines. We can add a lot of value to our products because we manufacture them in-house,” says Raghavendar Gupta, founder of Tweakymod. “We operate with decent margins; our products are now sold all over the country. Only the logistics need to be streamlined. Very often we have to wait for other bulk shipments to congregate in the hubs for our goods to be shipped as well,” he adds.
Similarly, Delhi-based Pexpo, which manufactures and sells vacuum flasks through online and offline modes, has seen monthly sales growth of 20% over the past year. The company sells almost 18 lakh vacuum flasks per year. “We have a lot of competitive advantages because we manufacture locally. We are able to sell our products at MRPs that are 30-35% lower than established brands,” says Vedant Padia, Founder-Director of Pexpo.
But business got tough for Pexpo with rising steel prices. Commodity price inflation hurts many businesses. Metal prices have risen 70-90% over the past two years, prompting many to revise their production plans.
“We operate in a very price-sensitive market, so we cannot pass on additional costs to our customers,” says Akash Suresh, founding CEO of Bengaluru-based Ahar, which manufactures a range of pressure cookers and other cooking tools. “To maintain our market share, we now manufacture cookware that is lighter but with high quality and safety standards. We have also reduced scrap metal to a large extent,” he adds.
In terms of online sales, Ahar has done well with its products reaching many corners of the country. The company has launched 25 new products in the past year, but its best-selling product remains the 3-liter cooker, which records sales of 50,000 units a year. Ahar sales have increased 15-20% year-on-year since 2020.
Even though people are shopping online, the amount of their purchases has dropped sharply in recent months, says Sagar Kohli, managing director of Foxglove, a Ludhiana-based bicycle manufacturing company. “Demand has dropped a lot since January. Customers wait for prices to drop. Even resellers have reduced their stocks. Also, for cycle manufacturers, the past few months have not been great due to the scorching summer,” he says.
The company now sells more than 8,000 cycles per month, up from 4,000 before the pandemic. Foxglove sees better conversion rates from online sales. The growing number of cycling enthusiasts, especially during the Covid, has helped the company.
Most manufacturers who sell online need to do a bit of digital and social media marketing to increase their visibility. Priyanka Jaiswal, founder of Ghaziabad-based Samridhi Design Creations, sells over 1.5 lakh of oxidized jewelry every month. She managed to double her business in the past two years through online marketing and social media presence. “Visibility is very important if you want to sell online, so we focus a lot on marketing our products,” says Jaiswal. “The best thing about e-commerce platforms is that their payouts are regular. Better cash flow helps us invest more in our business. The wider reach we get on these platforms also helps us attract customers from small towns and villages,” she adds.
Most manufacturers prefer a hybrid sales model – where they sell through online platforms as well as offline networks such as traditional resellers, wholesalers and retailers. Manufacturers of mobile phone accessories rely on both channels to increase their sales. But relatively lower value products such as power banks, chargers and earphones are selling in large numbers online.
“Phone accessories are a rapidly growing category, so we need to be both online and offline to show higher sales,” says Sahil Kandhari, Founder and CEO of Dvaio, a Delhi-based accessories maker. . The company sells more than 2 lakh audio products (headphones, speakers) every month. Its sales have increased by 20% over the past two years. “Digital channels can give you a wider reach than offline models can. Plus, you can create your own space in the market with very little investment.”
The use of both offline and online sales channels is desirable, but in some product categories offline markets have stalled. Take the case of clothing manufacturers who are forced to sell their products online. Many offline clothing sellers in South India are not sourcing as they are not expecting many buyers at high prices. “Cotton prices have increased significantly; T-shirts that sold for €80 a few months ago now cost €120. Offline traders have stopped ordering fresh stock from manufacturers,” says Rajat Jain, owner of Smartees, a Tirupur and Coimbatore-based t-shirt brand. Smartees receives more than 7,000 online orders every day, up from 2,000 orders in 2019-20. During festivals, he sells 14,000 pieces a day. In the last financial year, the company recorded sales worth 32 crores. “Offline business is difficult because there are a lot of middlemen in the value chain,” says Jain.
Most of these MSME owners plan to expand their business and product lines in the coming months. Many set up manufacturing plants. Platforms such as Meesho and Udaan offer loans to SME owners, either through their own books or through NBFCs and bank reconciliations. According to Lakshminarayan Swaminathan, CXO (supply growth), Meesho: “The idea is to sell quality products at affordable prices. Price becomes even more important in times of inflation. We are still seeing reasonably good demand on our platform; 70% of our buyers are from Tier 2 and Tier 3 cities. They are still buying,” he adds.
Several small manufacturers have incurred significant debt on their books. There is a problem of over-indebtedness in certain pockets. Only sustained demand and cash flow will help these companies reduce their debt over time. Inflation is the sword hanging over their heads. “MSME turnover is quite stable even now; but over-indebtedness is a problem,” says Mukesh Mohan Gupta, President of the Indian Chamber of MSMEs. “The government will have to control inflation to maintain demand.”