Cross border eCommerce: How viable is the model for Indian consumers and retailers?

Chinese shopping apps have been aggressive in claiming a share of India's online retail market over the last few years.
Cross border eCommerce: How viable is the model for Indian consumers and retailers?

India is gradually becoming an important player in the eyes of the world stage, with a population that ranks at number 2, just behind China and an economy that is set to accelerate in the coming years.

While India has often received brickbats for its lack of pace in infrastructure and developmental issues and not being able to sustain investors' interest, this has turned around completely in recent years, with country paving the way for startups and entrepreneurship.

India is being strongly associated with the tech industry for some time now,eCommerce is seeing a boom among Indian consumers, especially in urban areas. With the advent of technology and internet penetration, the online sales market in the country is offering promising prospects for the global business giants, which have already set their sights on capturing.

According to the leading global digital commerce agency TMO Group, India’s eCommerce sales make up a sheer of 4.4% of its total retail sales that allows major players such as Amazon and Alibaba to explore the market to the fullest. The country’s untapped potential and a compound annual growth rate (CAGR) of 17.8%, higher than any other country for the period 2019-2023, is a major reason for global online shopping firms to eye their fortunes on India.

infographic

The above graph delineates the eCommerce landscape in India.

Amid the growing online shopping platforms in the country, the cross-border eCommerce is the new disruption in India’s ecosystem. The cross-border eCommerce is a global trade between a firm/brand and a consumer, or between two companies and even with brands and retailers through marketplace platforms. In simple words, cross border eCommerce is the procedure of buying products from outside borders.

Undoubtedly, India’s love for eCommerce shopping has enabled many customers to become early adopters for products from overseas markets. Keeping in view the fast-track consumer sentiments in the country, firms like Amazon India has a dedicated ‘Global Store’ which ships products from across borders to India, and if one has ever visited the Global Store he would know that it offers products that are not available in the country, due to companies deciding not to enter the market.

Not only that, a recent study conducted by Acapture shows that India exports 16% products to the US, 4.3% to China and 3.3% to the UK via cross border eCommerce channels. Likewise, for imports, the country gets 14% of products from the USA, 6% from the UK and 5% from China.

To validate this fact, Sanjay Keswani, Director at Eunimart, a cross border eCommerce startup, told the leading Indian media publication that the cross border eCommerce is growing at 17% compared to domestic eCommerce across the globe, and is expected to reach $1 trillion by 2021.

SMEs contribute to approximately 50% of domestic eCommerce but can get to only 5% when looking at exports. India, with 50 million registered SMEs stands to gain most by the momentum due to the large range of diverse categories that Indian artisans can churn out, Keswani added.

Moreover, a Global Ecommerce Study states that at least 73% of Indian consumers shop cross-border though many of them abandon the orders due to the high price on shipping.

The growing smartphones have also contributed to the rising eCommerce business in the country, with the launch of 4G network adding more impetus. As stated by the India Brand Equity Foundation, the Indian eCommerce market is expected to grow to $200 billion by 2026 from $38.5 billion in 2017. Online retail sales in India are expected to grow by 31% to touch $32.70 billion in 2018, led by Flipkart, Amazon India, and Paytm Mall.

Going by the above figures, it is evident that the eCommerce space in India is not going to see the doomsday anytime soon, however, much depends on the push in the mobile technology in the country.

Challenges for cross bordereCommerce

India’s eCommerce potential, especially cross border, is limited by low urbanization, internet penetration, and income levels. However, the biggest challenge for the country is the internet dispersion. Despite a reasonable demand for overseas products and consumers willing to spend money to purchase foreign-made goods, the large section of India’s population still relies on domestic retailers, due to the unavailability of the internet.

A research carried by Netherlands-based market intelligence firm The Paypers suggests that internet penetration covers only 19% of India’s population as of now. This means 80% of the country’s population is untapped rather lacks accessibility.

Another challenge lies with the purchasing power capacity of Indian consumers. The high-end overseas products come with a certain price tag, including the shipping cost. Interntional players such as Newchic and few more have higher shipping price, therefore, it makes consumers indecisive about buying the product. India, with not much strong purchasing power, will continue to witness a reasonable fall when it comes to cross border eCommerce.

Conflict in cross border eCommerce space

Despite a fairly well demand for global products and reasonably well-purchasing power especially in urban cities in India, the local retailers have alleged the unfair practice of selling goods in the Indian market by foreign brands.

Among the global players, Chinese shopping apps have been aggressive in claiming a share of India’s online retail market over the last few years. Apps such as Club Factory, Shein, AliExpress, and a few others have allegedly exploited by dispatching eCommerce packages as gifts, which was not under the scanner of import duties. However, the Indian government has announced that “gift” packages from abroad will no longer be allowed to come in without the collection of import duties.

For the same, Minister of Commerce PiyushGoyal has said that all online shopping services will have to register locally by June 2020 to ensure legal accountability.

The move is considered a reaction to the outcry from Indian traders who claim the Chinese apps have taken away business thanks to lower prices that were only possible because of the (alleged) avoidance of import duties and other taxes and regulations.

“Chinese goods are coming into India at 50% to 60% below the price of Indian sellers,” said a spokesperson for the All India Online Vendors Association, according to a media report.

Road Ahead

The eCommerce industry has been directly impacting the micro, small & medium enterprises (MSME) in India by providing means of financing, technology, and training and has a favorable cascading effect on other industries as well.

The Indian e-commerce industry has been on an upward growth trajectory and is expected to surpass the US to become the second-largest e-commerce market in the world by 2034.

Technology-enabled innovations like digital payments, hyper-local logistics, analytics-driven customer engagement, and digital advertisements will likely support the growth in the sector.

The article has been written by Aditya Rangroo. He is a retail consultant. 

 

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