Digital literacy and survival mechanism of micro-small enterprises in practicing sharing economy

Abstract

Amidst the COVID-19 pandemic, Micro-Small Enterprises (MSEs) have faced severe challenges and many are on the brink of collapse. To address this issue, this study investigates the survival mechanisms of MSEs in the digital economy platform, including the barriers they encounter when adapting to sharing economy practices. Additionally, the study examines the digital literacy capabilities of MSE actors and the extent to which these capabilities impact the continuity of businesses involved in the sharing economy. Using a descriptive research approach with 300 MSE actors in East Java Province as respondents, this study reveals that, aside from receiving financial assistance, digitization is essential for MSEs to avoid failure. MSE actors, who previously relied solely on traditional channels for product marketing, are now compelled to use digital platforms and encouraged to participate in sharing economy practices. The study indicates that, despite the perceived benefits of MSE actors’ engagement in the sharing economy practice, the profit earned must be shared with the application owner, without any guarantee of proportionality to the risks they bear. Digital transformation, however, presents a unique opportunity for both new and established MSE actors to upgrade their businesses. Notably, online promotion is much more accessible and cost-effective, with options such as Instagram, Facebook, and Google Business. Nevertheless, the readiness of MSE actors to adopt digital transformation is uneven, as some possess outdated gadgets and inadequate digital literacy. Therefore, digital literacy training for MSE actors is a crucial need.

Keywords:

• sharing economy
• digital platform
• MSE actors
• digital marketing
• digital literacy

PUBLIC INTEREST STATEMENT

The MSEs have long been perceived as resilient to various challenges. However, the ongoing COVID-19 pandemic has severely impacted the ability of MSEs to survive. In many regions, numerous SMEs face the threat of collapse. This research reveals that despite the benefits of MSE actors’ engagement in the sharing economy, they must share their profits with the application owner without guaranteed proportionality to the risks they bear. This raises awareness of the challenges and potential drawbacks associated with the sharing economy model. The readiness for digital transformation among MSE actors is uneven, with some facing challenges due to outdated gadgets and inadequate digital literacy. Thus, the research emphasizes the importance of providing digital literacy training as a crucial need for MSE actors.

Introduction

In Indonesia, MSEs, or Micro-Small Enterprises, have long been regarded as the most resilient business sector, capable of overcoming market fluctuations and economic pressures. However, the COVID-19 pandemic has posed an unprecedented challenge to the survival of many MSEs. Across various regions, a significant number of SMEs are facing the threat of collapse. While MSEs have traditionally demonstrated remarkable resilience during economic crises, the current situation is markedly different. The pandemic has left approximately 50 percent, or 32.1 million MSEs, on the brink of bankruptcy, with around 88 percent of micro businesses reporting a depletion of their savings. Moreover, 60 percent of micro businesses have been compelled to lay off employees. Consequently, the fate of MSEs in Indonesia hangs precariously in the balance.

To ensure the survival of micro-small enterprises (MSEs), digitization is viewed as a promising strategy in addition to financial assistance. With the help of digital platforms, MSEs can expand their market beyond the conventional channels. By integrating the use of digital technology, MSE actors can market their products online and accept payment through digital transactions, replacing the traditional door-to-door or physical market approach. Currently, there are 64.2 million MSEs in Indonesia, consisting of 63.35 million micro business units, 783 thousand small businesses, and 60,702 medium businesses. However, according to Bank Indonesia’s data, only about 4.3 million MSEs have adopted digital payment systems using the QRIS (QR Code Indonesia) method.

The market share of MSEs, which was previously limited to the village and city/district levels, has expanded through online networks. Gojek, for instance, has connected more than 400,000 MSEs to its platform and employed around 1.7 million motorcycle taxi drivers as partners in the past three years. Similarly, Bukalapak has linked with over 700,000 independent entrepreneurs and 500,000 shops nationwide since 2019, while Tokopedia has established five million partnerships, including providing capital assistance to MSEs. Fintech and e-commerce in Indonesia offer inclusive opportunities for the 51% of unbanked adults and the 62.9 million MSEs.

However, the challenge is whether MSEs can leverage new offers and advancements in the digital era. Despite the shift in new consumption behavior for MSE products triggered by the public’s increasing online shopping behavior, not all MSEs possess adequate digital literacy skills to adapt to this new development. Nevertheless, the availability of financial digitization and the growing use of gadgets and the internet present a new profitable opportunity for MSE actors (Suliswanto & Rofik, 2019). By utilizing free digital applications, MSE actors can compete with larger business actors, who previously dominated the market due to their ability to place advertisements in jumbo-sized billboards and mass media. Moreover, participating in sharing economy practices presents another opportunity for MSEs to expand their market share. The sharing economy is a novel social and economic transaction system in which individuals utilize third-party technology platforms to exchange goods, services, and ideas without transferring ownership (Eckhardt et al., 2019).

When MSEs are connected to market networks through various digital platforms, their opportunities to market their products are significantly expanded. Online marketing allows MSEs to offer their products to consumers around the world, with administrative boundaries of regions or countries no longer serving as obstacles. According to a study by Bank Indonesia in 2020, digital innovation has transformed social interaction and enabled economic democratization, resulting in increased efficiency through enhanced access to information, and facilitating the creation of new business models, industries, and sources of economic growth. The interconnectivity of economic agents cuts the distribution chain of goods and services, promotes equitable distribution of information, and streamlines economic activity.

For MSE actors who are information technology literate, the potential to open new markets is greater. The opportunities for MSEs to compete and succeed in digital markets are expanded since they can offer products produced through digital platforms. However, the key challenge is to determine the number of MSEs in Indonesia that possess information technology literacy. Additionally, how many MSE actors already have the necessary banking accounts to conduct online trading or marketing activities remains a critical concern.

In Indonesia, the lack of digital literacy skills among MSEs is a significant obstacle to their ability to take advantage of digital platforms to market their products. The uneven distribution of digital literacy skills is a challenge that needs to be addressed, as many MSE actors still do not have access to the technology and gadgets needed to promote their businesses online. This lack of digital literacy skills and resources is particularly problematic for those with a low educational background, making it difficult for them to fully utilize information technology to support their business development. Although the government has implemented MSE digitization programs, the reality is that these programs may not be enough to address the digital gap, and much work still needs to be done to ensure that all MSE actors can fully benefit from digital platforms.

Given the challenges faced by MSEs in Indonesia, it is important to conduct research to understand the survival mechanisms developed by MSE actors in the digital economy platform, including the obstacles they face in adapting to sharing economy practices. Additionally, studying the digital literacy capabilities of MSE actors and the extent to which these capabilities affect the continuity of businesses engaged in the practice of sharing economy can provide important insights into how policies and programs can be developed to help revitalize MSEs. Overall, policy decisions related to the revitalization of MSEs must be based on contextual data that takes into account the unique challenges faced by MSE actors in Indonesia.

The novelty of this study lies in its investigation of the survival mechanisms of Micro-Small Enterprises (MSEs) in the digital economy platform amidst the COVID-19 pandemic in Indonesia. It addresses the barriers faced by MSEs when adapting to sharing economy practices and examines the impact of digital literacy capabilities on the continuity of businesses involved in the sharing economy. By surveying MSE actors in East Java Province, this study reveals that digitization, in addition to financial assistance, is crucial for MSEs to avoid failure. The study highlights the shift from traditional marketing channels to digital platforms and the potential benefits and challenges associated with MSE actors’ engagement in the sharing economy practice. Moreover, it emphasizes the unique opportunity presented by digital transformation for both new and established MSE actors to upgrade their businesses, particularly through accessible and cost-effective online promotion options. However, the study also recognizes the uneven readiness of MSE actors in adopting digital transformation, necessitating the provision of digital literacy training as a crucial need.

Literature review

The entry into the digital era has brought about distinct challenges for the development and sustainability of MSEs. The rise of the online economy, digital transactions, and the sharing economy represent inevitable challenges that MSEs must confront. According to Aigrain (2012), the online economy and the concept of “sharing” have become a newly emerging culture and dominant business model in the internet era. The sharing economy, as an economic principle, has experienced tremendous growth and holds the potential to upend traditional business sectors and transform consumer behavior patterns (Mayasari & Haryanto, 2018). The evolution of information technology, particularly with the advent of Web 2.0, has facilitated the proliferation of the online economy, and there is little doubt that this trend will continue as society becomes increasingly digitally connected. In this peer-to-peer network system, sharing economy platforms connect individuals who offer services or goods with those in need. In essence, the sharing economy provides a solution for those seeking savings, ease of purchasing, or additional income (Aigrain, 2012; Slee, 2015; Sundarajan, 2016).

Sharing economy is an emerging social and economic transaction system, facilitated by third-party technology platforms, that matches providers and users to exchange goods, services, and ideas without transferring ownership (Eckhardt et al., 2019). Schor (2014) categorizes sharing economy activities into four broad categories: recirculation of goods, increased utilization of durable assets, exchange of services, and sharing of productive assets. For instance, the popular platform, eBay, facilitates the circulation of goods between foreigners (Arcidiacono et al., 2018).

The term “sharing economy” has gained popularity to describe a wide range of services, activities, businesses, and modes of consumption. Consequently, it is often used as an umbrella term or interchangeably with “collaborative consumption” (Hamari et al., 2016; Herbert & Collin-Lachaud, 2017; Zalega, 2018), the “digital economy” (Rinne, 2017), the “platform economy” (Kenney & Zysman, 2016), the “gig economy” (Bates et al., 2019; Peetz, 2019), “connected consumption” (Schor & Fitzmaurice, 2015), and “collaborative services” (Nguyen & LLosa, 2018), among others. Nevertheless, the sharing economy and collaborative consumption are the most commonly cited terms in the literature.

The underlying principle of the sharing economy is the act of sharing rather than owning. In the case of MSEs, participation in online sales service sites such as Bukalapak, Tokopedia, Lazada, among others, offers opportunities to market their products to a wider audience, not only within Indonesia, but globally. While the sharing economy has gained traction in recent years, the act of sharing itself is not a new phenomenon and has been practiced among family, friends, and neighbors for generations (Belk, 2013, Schor & Fitzmaurice, 2017; Sundarajan, 2016). The practice of sharing has long existed as a way to generate and reproduce social relationships (Belk, 2008; Bayly et al., 1986). What sets the contemporary sharing practice apart is its ability to facilitate sharing between strangers through digital technology (Schor & Fitzmaurice, 2017).

Hamari, Sjöklint, and Ukkonen (2016) assert that the sharing economy’s current practices are a product of the technology-driven Silicon Valley culture, where content-sharing services originated and grew. Therefore, academics concur that information technology plays a significant role in the development of sharing economy practices. For a platform to qualify as a sharing economy business model, it must be an online website, mobile app, or a combination of both that users continuously use and maintain (Hamari, Sjöklint & Ukkonen, 2015, p. 2049). According to Sammut-Bonnici (2015), the sharing economy is a consequence of the third wave of information technology. He argues that the twenty-first century is marked by a network of interconnected people, objects, and resources.

Method

The study was conducted in East Java Province, focusing on several cities and regencies known for their popular MSE centers. Field research was carried out in Surabaya City, Malang City, and Sidoarjo Regency, which are home to numerous MSEs producing a variety of goods such as food, batik, handicrafts, and other products. The data collection process involved 300 MSE actors who were selected from the aforementioned cities/regencies. The field data collection process was facilitated by a team of experienced students from the Faculty of Social and Political Sciences of Universitas Airlangga. The sampling technique used in this study is simple random sampling.

This study utilized primary data obtained from direct interviews, guided by a structured questionnaire prepared beforehand, and in-depth interviews to explore the impact of the COVID-19 pandemic, digital literacy, and the involvement of micro, small, and medium enterprises (MSEs) in sharing economy practices. The latter was especially important since this study aimed not only to identify the profile of MSE actors, but also to analyze their experiences in the sharing economy context.

The age range of MSE actors interviewed for this study spanned from 19 to 60 years. Of the 300 respondents, more than half (51.0%) fell between the ages of 21 and 40, while 28.7% were aged 19–21, and 20.3% were aged 41–60. This demographic distribution indicated that the study mostly targeted young and productive individuals, who play a crucial role in MSE activities. The majority of respondents were women (71.7%), reflecting the dominance of female participation in MSEs in East Java, where these enterprises are often extensions of domestic work activities.

Overall, the research design combines quantitative data collection through surveys with qualitative aspects to provide a comprehensive understanding of the survival mechanisms of MSEs in the digital economy. The design of this research involves a descriptive research approach conducted in the context of the COVID-19 pandemic and its impact on Micro, Small, and Medium Enterprises (MSEs). The study focuses on the survival mechanisms of MSEs in the digital economy platform, particularly in relation to sharing economy practices.

On educational background, the majority of the respondents (59%) had completed university/academy education. Furthermore, 38% of respondents had senior high school education, while 1.7% had junior high school education, and 7% were not able to recall their educational background. These findings reveal that more than half of the participants possessed higher education degrees, which facilitated their entrepreneurship endeavors in the MSE sector. These graduates could utilize their theoretical knowledge and personal experiences to establish and manage their businesses successfully.

The nature of the sharing economy businesses in which respondents participated is a salient feature of the present investigation. The majority of respondents (63%) considered their involvement in the sharing economy as a secondary business, with only 37% identifying it as their primary source of income. In addition, most participants reported that they depended on their main businesses to sustain their livelihood, with the sharing economy businesses contributing to their family income. Furthermore, the results showed that 36.3% of respondents did not have a secondary job. Among those who did, 31% had a regular side business, while 32.7% had an irregular side job. The latter acknowledged that the work they engaged in was occasional, and they could not depend on it for a fixed income.

In terms of income, more than half of the MSE respondents reported an income above IDR 3 million per month, while 33.3% of respondents reported an income of around 1 to 3 million rupiahs. Only a small percentage of respondents (10.7%) earned below 1 million per month. Interestingly, the size of the income earned by respondents who engage in sharing economy work as a side business was generally not significant. This finding contrasts with respondents who rely on sharing economy work as their primary or only source of income, who generally earned over 3 million per month.

Regarding the ability to survive during the COVID-19 pandemic, the majority (58.7%) of MSE respondents claimed to be able to endure the economic impact, with 19.7% of respondents feeling confident about their ability to cope. However, 17.3% of respondents expressed doubts about their ability to survive during a prolonged pandemic, and a small percentage (1.7%) stated that they may not be able to afford it, while 2.7% of respondents were unable to cope with the pandemic’s impact.

Additionally, this study found that the majority of respondents (50%) reported that their family’s economic condition worsened during the pandemic, while only 2.7% stated that their family’s economic conditions improved. About 47.3% of respondents reported that their economic situation remained relatively the same. However, a small number of respondents took advantage of the pandemic situation, and were able to improve their financial status, particularly by increasing their income.

All the collected data was sorted and analyzed in line with the study’s research objectives. The results of the study were compared with previous research on SMEs to ensure the findings were consistent with previous literature in the field.

Results

This study conducted interviews with 300 MSE actors in three regions, namely Surabaya City, Malang City, and Sidoarjo Regency. These regions were selected due to their highly active and dynamic sharing economy activities compared to other cities/regencies in East Java Province. In several urban areas, sharing economy activities have flourished in line with the rapid development of society’s activities. As the activities of people in urban areas increase, the need for and dependence on sharing economy activities also tends to increase.

The study aims to gain insights into the challenging situation faced by MSE actors amid the COVID-19 pandemic, to examine their survival strategies, to assess the impact of the digital divide, and to identify the obstacles to their involvement in digital economic platforms and sharing economy practices. The importance of this study lies in the fact that many MSEs in Indonesia have been struggling to survive over the past two years. MSEs that have managed to endure are usually those that have adapted to online marketing practices or the sharing economy.

The majority of MSE products produced by respondents in the three areas studied were food (51.4%) and beverages (6.3%), which are popular commodities in sharing economy activities. Consumers frequently order food and beverage products through various delivery applications such as Gojek. Other popular products include clothing or garment products (10.7%) and crafts or accessories (7.7%). Garment products are often ordered through various online platforms such as Tokopedia, Bukalapak, Lazada, as well as through direct orders from sellers using sharing economy mechanisms.

The development of MSEs in various regions during the COVID-19 pandemic has experienced ups and downs. While some creative MSEs have managed to survive, others have collapsed due to the decrease in people’s purchasing power. Only certain MSEs were able to survive, largely due to the support of online economic practices, which serve to bridge the needs of the community with the economic activities of MSE actors.

The majority of MSE products marketed online were self-made (63.7%), with only 36.3% being wholesalers. As producers of various commodities, most MSE respondents in this study offered their products through digital platforms.

Presented in Table 1, out of the 300 MSEs surveyed, more than half of the respondents (59%) expressed optimism that their businesses would continue to grow in the future. In contrast, 15.7% of respondents reported a current decline in their businesses, and 3% admitted that their businesses have already failed. Another 22.3% of respondents acknowledged that their businesses have survived, but their development has been stagnant. Enhancing the economic performance of MSEs remains a significant challenge due to the current sluggish economic climate. While a number of respondents expressed gratitude for their ability to survive, many MSEs have failed due to their inability to sustain themselves in an increasingly competitive environment. Only MSEs that are creative and produce goods that are in demand by the community can thrive during times of declining purchasing power.

Table 1. Sharing economy business development

No.	Sharing Economy Business Development	Frequency	Percentage
1.	Ongoing and growing	177	59.0
2.	Ongoing but stagnant	67	22.3
3.	Declining	47	15.7
4.	Failed	9	3.0
Total		300	100

The present study reveals, (see table 2) that the majority of MSE actors (66.7%) interviewed report an increase in their business due to their online marketing efforts. Only 33% of respondents reported that their businesses had remained the same, and a mere 0.3% of respondents claimed a decline in business. Despite the magnitude of the profit generated, the involvement of MSEs in sharing economy activities is perceived as a source of hope. Initially, the market share was limited, but as online marketing support became more readily available, the potential for growth in these businesses increased.

Table 2. Business conditions after online marketing efforts

No.	Business Conditions after Online Marketing Efforts	Frequency	Percentage
1.	Improving	200	66,7
2.	Unchanged	99	33,0
3.	Declining	1	0,3
Total		300	100

It was found that many respondents were able to finance their business capital needs through their own savings, as the amount needed was relatively small. The majority of respondents (35.3%) required less than 1 million rupiah for their business capital needs. In addition, 34.7% of respondents required a capital investment ranging from 1 to 3 million rupiah. Of the 300 respondents, 30% reported needing external financial assistance from the government, corporate CSR programs, or other sources.

The above (table 3) shows the majority (54%) of the profit margins obtained by MSEs range from 30 to 50 percent. A considerable proportion of respondents (37.3%) reported that the profit margin earned was slightly below 30%. It is noteworthy that merely a small fraction of the 300 respondents (8.7%) claimed to have earned a profit margin exceeding 50 percent.

Table 3. Profit margin

No.	Profit Margin	Frequency	Percentage
1.	<30%	112	37,3
2.	30% − 50%	162	54,0
3.	> %50%	26	8,7
Total		300	100

The data presented in (table 4) among the 300 MSE actors who participated in online product marketing, the majority (51%) reported that they found the sharing economy mechanism to be profitable. A further 7% of respondents even claimed that it was highly profitable. In contrast, only 40.3% of respondents felt that the mechanism was marginal, while 1.7% considered it unprofitable. Respondents believed that utilizing digital marketing platforms is more profitable than marketing their products directly themselves, resulting in an increased market share.

Table 4. Profit performance as a result of sharing economy

No.	Profit Performance as a Result of Sharing Economy	Frequency	Percentage
1.	Highly profitable	21	7,0
2.	Profitable	153	51,0
3.	Marginal	121	40,3
4.	Unprofitable	5	1,7
Total		300	100

The decision to engage in online product marketing was initiated mainly by the MSE actors themselves (72.7%). However, 16.3% were influenced by family members, and 11% by friends. Respondents realized that relying solely on traditional face-to-face interactions to offer products was no longer sustainable. Social mobility limitations also restricted customers from visiting UMKM centers to buy their products. The only option was to take advantage of digital platforms or online marketing. Hence, it was natural that respondents took the initiative to participate in online product marketing.

From the perspective of MSE actors, profitability is a significant factor that influences their decision to participate in digital economic practices. This study reveals that various product marketing platforms are followed by the respondents. Table 5 shows the majority of the respondents (85.3%) reported using social media platforms such as Instagram or WhatsApp to market their products. In addition, 55% of respondents reported using marketplaces such as Tokopedia, Shopee, Bukalapak, among others to sell their products. However, a small number of respondents (15.7%) reported using e-commerce channels to market their products.

Table 5. Marketing platform

No.	Marketing Platform	Yes		No		Total
		Frequency	Percentage	Frequency	Percentage	Frequency	Percentage
1.	Market Place (Tokopedia, Shopee, Bukalapak, etc)	165	55	135	45	300	100
2.	e-Commerce (website)	47	15,7	253	84,3	300	100
3.	Social Media (Instagram, WhatsApp, etc)	256	85,3	44	14,7	300	100

The above (table 6) depicted the majority of respondents (72.7%) perceived online marketing to be more profitable than traditional offline methods. MSE actors acknowledged that by marketing their products online, they have a greater opportunity to increase their profits and expand their market reach. Out of the 300 MSEs surveyed, a mere 6.7% reported offline marketing to be more profitable, while 20.7% claimed both marketing channels were equally profitable.

Table 6. Profit comparison between online and offline marketing

No.	Profit Comparison between Online and Offline Marketing	Frequency	Percentage
1.	Online marketing is more profitable	218	72,7
2.	Both are equally profitable	62	20,7
3.	Offline marketing is more profitable	20	6,7
Total		300	100

To sustain their businesses, most respondents (83.1%) focused on maintaining standard product quality. In addition, the development of their market share was achieved by increasing the variety of their products (68.6%). Only a small proportion of respondents attempted to augment their productivity by increasing their working hours or hiring additional workers.

The adaptation to the sharing economy mechanism was perceived as relatively easy by most of the 300 MSE actors studied. Specifically, 46.7% of respondents found the process easy, while 53.3% found it very easy. Despite some respondents admitting difficulties in using information technology, MSE actors have been compelled to adapt to change due to the demands of the times.

Regarding the promotions or advertisements uploaded online, the majority (74.7%) of respondents reported creating them by themselves. About 19% of respondents acknowledged family or other relatives having the ability to create promotions on social media, while 6.3% of respondents requested and paid for assistance from others to promote their products on social media and the internet.

As for online business management, which includes taking orders and responding to consumer requests, the majority (72.3%) of respondents handled the tasks themselves, with most of them holding undergraduate degrees. Around 17.7% of order management is carried out by other family members, while 10% is done by workers or employees.

Some findings from in-depth interviews with one of the MSE entrepreneurs indicate that the choice to use digital platforms is driven by their easy and straightforward usability, as well as their ability to reach a large customer base. One of the MSE owners explained,

I started using the online platform Tokopedia to sell food and beverages from my nephew. At that time, my nephew created an account and then taught me how to use it. Well, I am old, but because it’s easy to use, I quickly learned and could operate it within a few days.

On the other hand, the convenience of selling through digital platforms also comes with its own challenges, such as detrimental complaints and the limitless nature of time. Another clothing store owner mentioned, “Because it’s easy and fast, I can directly negotiate with my customers, anytime and anywhere. Although I feel tired because there’s no limit to time, it becomes difficult for me to rest.”

The respondents’ reactions when faced with consumer complaints showed that almost all of them were promptly addressed with the aim of retaining customers. Only 1% of respondents disregarded complaints, while 1.3% stated that they were unsure of how to handle them. Similarly, almost all respondents (97%) showed concern regarding consumer ratings, whereas only 2% demonstrated indifference and 1% lacked knowledge or understanding of ratings. It is noteworthy that many MSEs have recognized the importance of building consumer loyalty in marketing management. However, the primary issue now is how to ensure that MSE actors have adequate digital literacy to compete effectively in the increasingly fierce competition of the 4.0 industrial revolution era.

Discussion

This study reveals that the implementation of sharing economy practices has brought significant benefits to a majority of MSE actors. Nonetheless, it should be noted that some MSE actors have not yet fully taken advantage of these practices. As a novel innovation, the sharing economy has offered numerous conveniences to MSE actors for expanding their market share, opening up numerous possibilities for transformative changes in the way we work, consume, socialize, create economic value, and compete for greater profits (Kenney & Zysman, 2016). However, the digital divide persists among MSE actors, and those who lack technological literacy may miss out on the opportunities presented by new developments in the digital era, which are only accessible to individuals who possess adequate digital literacy and technical devices.

The impact of the development of information technology and the internet has been identified as a paradigm shift that has had a greater impact than the industrial revolution (Davis, 2016). As we move towards a digital society, the emergence of new opportunities and market shares has become more accessible through the consumption or provision of sharing economy services, provided that MSEs have adequate digital literacy. However, the proliferation of collaborative web communities, the growth of consumer awareness, the expansion of companies, and the appeal of the idea of sharing have brought about certain risks (Dwivedi et al., 2021; Hamari, Sjöklint & Ukkonen, 2016; Kauffman & Naldi, 2020; Saud et al., 2020; Zeng, Tavalaei, & Khan, 2021).

The findings of this study indicate that MSE actors report an improvement in their standard of living when engaging in sharing economy practices. By utilizing third-party technology platforms to connect with consumers, these actors state that marketing efforts become more accessible and effective in reaching a wider audience. Furthermore, involvement in the sharing economy facilitates the acquisition of new consumers, as individuals increasingly rely on cyberspace and digital platforms for their consumption needs. As a result, MSE actors can achieve greater profits and increase production in this new economic landscape.

The utilization of information technology and the internet is crucial for MSEs to keep pace with the competitive environment of the sharing economy and avoid failure due to insufficient access to online marketing. The present study highlights that digital literacy is a prerequisite for MSE actors to remain competitive in this era of the sharing economy. Digital literacy goes beyond owning and using gadgets for social and economic purposes, as it involves the active construction of multimodal texts, the manipulation of technology for diverse purposes, and the experimentation with new ways of self-expression and identity formation (Jenkins, 2006). By developing digital literacy skills, MSE actors can effectively navigate the digital landscape and leverage the benefits of the sharing economy.

Digital literacy is a multifaceted concept that extends beyond mere technical competence in using digital tools. While technical proficiency in operating digital equipment is undoubtedly an essential aspect of digital literacy, it is equally important to consider how the use of digital tools impacts social relations and social identity in a digital environment. Digital literacy encompasses the ability to adapt to digital technology-mediated activities and engage in mediated social practices, which are becoming increasingly ubiquitous in contemporary society. As such, digital literacy is an essential component for MSE actors to stay competitive in the current era of the sharing economy. The notion of digital literacy is not only limited to the technical aspect of digital tools, but also involves the integration of social skills and technological skills to navigate digital environments effectively (Jones & Hafner, 2012, pp. 12–13).

In the current information age, the survival and success of MSE actors is often linked to their level of digital literacy. The lack of ability to use digital devices will result in MSEs being left behind in the digital landscape, including in social and business interactions. Scholars have defined digital literacy in various ways. For instance, Jones and Hafner (2012) define digital literacy as proficiency in operating digital tools and adapting to the constraints of those tools. Alternatively, Thorne (2013) defines digital literacy as the ability to engage in semiotic activities that are mediated by electronic media. Another definition of digital literacy is related to mastery and operational capabilities or evaluation and criticism (Lankshear & Knobel, 2011). On the other hand, Gilster (in Pool, 1997) argues that digital literacy is knowledge and the ability to absorb, evaluate and integrate information.

MSE actors who are unable to operate digital tools and take advantage of modern features offered in their devices are likely to be left behind, unlike those who have good digital literacy skills. Furthermore, with outdated gadgets, short-lived batteries, and anxieties when dealing with technology, this group of MSE have yet to successfully utilize digital platforms to boost their product market share (Kenney & Zysman, 2016). Although on the one hand digital platforms offer new opportunities, for some MSEs, not everything goes as expected.

The study reports that while a significant number of MSEs have recognized the importance of online marketing and have adapted to sharing economy practices with ease, the adoption of these practices is not straightforward for the majority of MSEs. Despite a 43% reported mediocre business relationship with the application manager, 14.3% of respondents suffered losses, and 12.3% of respondents felt severely disadvantaged. Thus, it is clear that digital literacy is an essential requirement that needs to be mastered by MSE actors in order to succeed in the ever-expanding sharing economy and avoid being passive bystanders.

The present analysis employs Castells’ network society theory to examine technological advancements employed by MSE actors in the digital era, where available electronic information and communication technology plays a crucial role. The findings of this study corroborate the study by Rakshit et al. (2021) which underscores that social media serves as a viable platform to create and reinforce social networks that have the potential to help MSEs grow during the COVID-19 pandemic. This study further reveals that MSEs require strategies that focus on developing social networks and online marketing through digital media to expand their businesses and reach a broader range of customers. Digital media is thus considered a vital tool for marketing development. Castells (2010) emphasized that networked communities can transcend their traditional boundaries as a form of organization and social interaction, while the internet’s added value through communication media lies in its capacity to reunite at selectable times and process information in real-time. This added value is critical to the recombination of innovation as a source of economic productivity and cultural creativity.

During the COVID-19 pandemic, MSEs have increasingly utilized online marketing as a strategy to sustain their businesses. This approach has enabled MSE actors to build robust social networks with other MSEs, customers, and raw material supply agents. By leveraging digital media, MSEs are able to establish and reinforce social networks that can facilitate their growth and development.

Conclusion

The MSEs have long been perceived as resilient to various challenges. However, the ongoing COVID-19 pandemic has severely impacted the ability of MSEs to survive. In many regions, numerous SMEs face the threat of collapse. Despite their ability to weather economic crises in the past, the current situation is different. Approximately 50% or 32.1 million MSEs are at risk of going out of business due to the pandemic. Micro businesses are particularly vulnerable, with 88% of them reporting a depletion of savings and 60% being forced to reduce their workforce. Thus, the future of MSE actors is uncertain and their ability to sustain themselves is under great duress.

The highlights of this research reveal that despite the benefits of MSE actors’ engagement in the sharing economy, they must share their profits with the application owner without guaranteed proportionality to the risks they bear. This raises awareness of the challenges and potential drawbacks associated with the sharing economy model. The readiness for digital transformation among MSE actors is uneven, with some facing challenges due to outdated gadgets and inadequate digital literacy. Thus, the research emphasizes the importance of providing digital literacy training as a crucial need for MSE actors.

To prevent the collapse of MSEs, apart from financial assistance, digitization of MSEs presents an opportunity to support their survival mechanism. MSE actors, who previously relied on conventional marketing channels, are now turning towards digital platforms and encouraged to participate in the sharing economy. Although most MSE actors claim to have benefited from their involvement in the sharing economy, the reality is that a significant portion of the profits earned by MSE actors are taken by the application owner. The proportion of profits earned by MSE actors is not guaranteed to be commensurate with the risks they bear. This study highlights the need for a fair profit-sharing mechanism that is mutually beneficial for both the application owner and MSE actors.

Digital transformation has provided opportunities for both existing and new business actors to make updates in their operations. Specifically, in terms of product promotion, MSEs are no longer required to invest significant amounts of capital in traditional advertising mediums such as newspapers or magazines, as online promotion is more affordable and accessible through various social media platforms including Instagram, Facebook, and Google Business. Nevertheless, this study discovered that MSE actors’ readiness to undergo digital transformation is not uniform. Some MSE actors not only lack updated gadgets, but also have inadequate digital literacy skills. To address this issue, it is crucial to develop socialization and training programs for MSE practitioners to improve their digital literacy skills.

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No potential conflict of interest was reported by the author(s).

Additional information

Notes on contributors

Bagong Suyanto

Bagong Suyanto is a Professor of Sociology at the Department of Sociology, Faculty of Social and Political Sciences, Universitas Airlangga, Indonesia. He teaches, Sociology of Economy, Sociology of Child, Poverty and Social Justice, and Social Welfare.

Rahma Sugihartati

Rahma Sugihartati is a Professor at the Department of Information and Library Science, Faculty of Social and Political Sciences, Universitas Airlangga, Indonesia.

Nadia Egalita

Nadia Egalita, is a Lecturer at the Faculty of Humanities, Universitas Airlangga, Indonesia.

Siti Mas’udah

Siti Mas’udah is Associate Professor at the Department of Sociology, Faculty of Social and Political Sciences, Universitas Airlangga Indonesia. She is also an Cheif Editor of Masyarakat, Kebudyaan dan Politk. She also published a lot of renowned work as origional research articles in Scopus, Web of Science and in international publishers.

Doddy Sumbodo Singgih

Doddy Sumbodo Singgih is Associate Professor at the Department of Sociology, Faculty of Social and Political Sciences, Universitas Airlangga Indonesia. He teaches several courses: Rural Sociology, Social Issues, and Indonesian Socio-Cultural System.

  Sudarso

Sudarso is Associate Professor at the Department of Sociology, Faculty of Social and Political Sciences, Universitas Airlangga Indonesia. He teaches several courses: Rural Sociology, Urban Sociology, and Social Change.