Effect of Covid 19 to SME’s

MSMEs are now facing a major challenge as a result of the COVID-19 pandemic's

unprecedented effects. Customers visiting to physical stores has decreased to a large numbers

and has remained low as governments continue to enact physical distancing and quarantine

measures to track the virus's spread (World Trade Organization, 2020). The decline did not past

the worst scenario, even small industries in developed economies experience a big impact to

their business forcing them to temporarily go out of business.

SOURCE: road to Recovery and Resilience for Philippine MSMEs during the

COVID-19 Pandemic.

The Philippine Institute for Development Studies estimates that the COVID-19 pandemic

could cost the Philippines between P276.3 billion and P2.5 trillion in economic losses (Abrigo et

al 2020). Manufacturing will be the ones most affected, with losses ranging from P82.1 billion to

P855.2 billion, wholesale and retail trade will suffer losses ranging from P93.2 billion to P724.8

billion, and transport/storage/communication will suffer losses ranging from P11.7 billion to

P124.3 billion.

SOURCE: ADBI Working Paper Series (COVID-19 IMPACT ON MICRO,

SMALL, AND MEDIUM-SIZED ENTERPRISES UNDER THE LOCKDOWN:

EVIDENCE FROM A RAPID SURVEY IN THE PHILIPPINES)

Businesses were faced with a number of challenges during the global pandemic, and how

they reacted affected their resilience as well as their chances of surviving the crisis. Small and

medium-sized companies (SMEs) are adapting their business models to adapt to the changing

environment. The service industry has been hit particularly hard. (Iva Gregurec et. al, 2021)
 SOURCE: The Impact of COVID-19 on Sustainable Business Models in SMEs

Mostly MSMEs are behind of the large portion of jobs, company registration, and value-

added statistics in countries like the Philippines (Department of Trade and Industry, 2019;

Vandenburg et al., 2016). Nonetheless, as opposed to large corporations, they face particular

challenges in terms of sustainability and development during emergencies and disasters. When

unforeseen crises such as earthquakes and pandemics strike, many small businesses are usually

unprepared (Scarinci, 2016).

SOURCE: road to Recovery and Resilience for Philippine MSMEs during the

COVID-19 Pandemic.

A total of 3,877 respondents from MSMEs were surveyed, with 1,804 coming from the

Philippines. According to the report, the COVID-19 outbreak forced 70.6 percent of MSMEs in

the Philippines to temporarily close. Simultaneously, nearly 60% of MSMEs in the Philippines

posted that they have no revenue during the lockdown. Company closures impact employees'

ability to make incomes, whether due to the firm's decisions or government orders (Shinozaki,

2020). Furthermore, the closure of informal MSMEs could result in a loss of income and job

opportunities for vulnerable groups such as irregular workers (ICSB, 2020).

SOURCE: road to Recovery and Resilience for Philippine MSMEs during the

COVID-19 Pandemic.

Adaption of SME's to E-commerce

 Small businesses have been hit particularly hard by the COVID-19 pandemic, according

to the National Main Street Center (2020), Most SME’s are in danger of closing indefinitely if

the health crisis continues to spread among peoples. The pandemic, on the other hand, helps

companies to demonstrate flexibility by digitizing and selling products and services digitally.

Businesses that have adopted e-commerce and digitization have seen sales increases as more

customers accept e-commerce despite quarantine policies (World Trade Organization, 2020).

SOURCE: road to Recovery and Resilience for Philippine MSMEs during the

COVID-19 Pandemic.

Adoption of e-commerce has many advantages. E-commerce could give companies a new

way to use their resources and improve their efficiency and operations (Lee et al., 2015). Further

to that, it has been suggested that e-commerce will reduce costs and improve customer service in

general (Damanpour and Damanpour, 2001).

SOURCE: The impact of e-commerce adoption on business strategy in Saudi Arabian

small and medium enterprises (SMEs)

For the Small and medium Enterprises, technology adoption can be a game-changer. The

COVID-19 scenario has also shown that technology adoption is not an amenity for small and

medium businesses; it is a necessity (Kumar, et al., 2020). Most SMEs in developed countries

are inspired to embrace e-commerce and technology, but e-commerce and technology in

developing countries are still in their development.

SOURCE: Impact of Online Resources/Technology Adoption on SMEs Performance (Anuj

Kumar, et al., 2020).

 According to the research conducted by the World Bank (2020), Filipino SMEs began

selling online prior to the widespread pandemic and may have already garnered some benefits

from going digital. Filipino businesses of all sizes, from SMEs to giant enterprises, are using e-

commerce to support their existing stores and widen their market. Many e-commerce merchants

often create Social media Pages where they post information and details about their goods,

allowing online shoppers to contact the company or the retailer directly for a more informed

purchase. According to a 2018 survey of SMEs in Asia Pacific, which included 500 SMEs in the

Philippines, 96 percent of the surveyed SMEs use e-commerce to produce 52 percent of their

sales, and 89 percent use mobile commerce. Furthermore, 95 percent of SMEs use social media

platforms, and 81 percent use digital technologies to boost supply chain and distribution,

according to the study.

SOURCE:Philippines Digital Economy Report 2020: (A BETTER NORMAL

UNDER COVID-19: DIGITALIZING THE PHILIPPINE ECONOMY NOW)

The Covid-19 should prove beneficial for SMEs to transform and improve, as well as

adapt technology, in order to survive. Regardless of the limitations imposed by current social

practices, SMEs entrepreneurs can take advantage of current technologies. The company will

still operate and be successful if it adopts and uses the technology platform. E-commerce is

becoming more critical as one of the fields that is continuously expanding and increasing in this

pandemic period. SMEs use e-commerce to create e-commerce strategies aimed at increasing

their companies, as well as to find new ways to add value, new services, and new business

models (Mesut, Ahmet, & Sefer, 2014)

 Source: E-Commerce Adoption Level in SMEs Since Pandemic Covid-19 Case in

Bogor, Indonesia