From booking a cab to ordering food, from clothes shopping to grocery shopping, e-commerce is dramatically transforming the lives of the online users by making things easier. The consumers are making a leap from physical retail to the mobile lead digital retail in search of low-price deals and convenience. The e-commerce industry has seen colossal growth in the last few years.
But, Indian e-commerce market is still very small as compared to the other nations. If we look at the global e-commerce scenario, in the year 2015, India’s online retail share contributed a little more than 1% in the total share of global B2C e-commerce market with China capturing the most significant share of this e-commerce pie (i.e., 33.70%). The low percentage is due to the weak presence of the Indian MSMEs in the global market and their limited reach to the foreign buyers.
However, if we go by the above figure, we can see the surging B2C e-commerce sales. It reflects the retail e-commerce volume in India is slated to reach US$ 52301 million by the year 2022; more than thrice the e-commerce volume in the year 2016. Without a doubt, the ongoing developments in the form of policy changes, initiatives like Digital India, Start Up India etc., infrastructure development, increasing incomes and shifting consumer preferences to buy online, are together feeding into the growth of this sector. Other e-commerce enablers like technology advancement, rising adoption of smart phones, internet access, artificial intelligence etc. are driving the e-commerce growth.
Let’s now analyze the primary pillar of e-commerce, i.e., internet users. The above statistic presents the digital population as of January 2017 in India. India stands second with the highest number of internet users (owing to its vast population) after China as of June 2017. This is, however, very low as compared to the USA which has roughly 90% of its population using the internet.
Rather than considering this as an obstacle, e-commerce giants should look at the inherent growth potential in this sector as an opportunity which is yet to be unleashed. Looking at the internet penetration in India which was only 10% in 2011, it is seen that the internet users have been on a continuous rise as they are forecasted to further rise to 635.8 million by 2021.
The Indian market is poised to reap enormous benefits as all these factors provide an excellent opportunity for e-commerce players to expand their influence.
Let’s now analyze why Cross Boarder Trade E-Commerce is the next frontier for Indian Global Ecommerce Players.
Fundamentally, the ecommerce does not have any boundaries. What one can sell in a village can also be sold in a district, state, nation and foreign markets. So the question is, what should be right strategy for a move from local to international for any market place to offer its sellers? With the globalization of major ecommerce companies especially from outside India, is it right for Indian marketplace ecommerce companies to remain in Indian territories or they should also globalize their marketplace. With the entry of each player in marketplace the share of ecommerce is getting thinner day by day. There is news that the india’s biggest business house (Reliance) may create further disruption by entering in ecommerce space as they have already outreached to more than 15 crores subscribers via mobile phone.
It is therefore recommended that the leading national ecommerce players should start working on the strategy to globalize. The retail e-commerce sales worldwide are projected to grow to 4.48 trillion US$ in the year 2021 indicating the vast scope Indian companies have to sell their items globally via online mode.2 Even the number of digital buyers worldwide is envisaged to cross 2.07 billion by the year 2019 further enhancing their scope to tap the increasing global buyers.3 The Foreign Trade Policy 2015-20, provides incentives to these exporters to enhance the cross- border sale of the products hosted on their websites and dispatched through postal or courier mode. The MEIS Policy by the Government extends rewards to the online exporters selling the specified items cross-border. It is also estimated that by the year 2025, the annual global cross border e-commerce revenues could escalate to between $250 billion and $350 billion.
Taking into account all these positive aspects, it is evident that e-commerce is a great medium for exporters to expand their product lines. Then what are the prime factors discouraging the cross- border e-commerce?
What will it take for an e-commerce firm to win in the global market?
For an e-commerce company to make an entry into the global market and carve a niche for itself, it needs to enlarge its customer base by targeting more and more new countries and not just limit itself to some specified markets. Now, the question arises as to how to recognize the markets which have high potential for an Indian e-commerce company. There three possible ways
- Targeting existing International markets for B2C, B2B
- Targeting New markets with good IT infrastructure
- Target import of selected commodities for Indian B2C
- Identify potential specific new markets
Targeting Existing Markets for B2C, B2B
An e-commerce market player can target the countries where India is majorly exporting its items (merchandise products of B2B converts to B2C). The Table below highlights the items which are e-commerce ready along with their export figures and countries which have a high demand for such products. Analyzing the data in annexure-1 proves that rather than just concentrating on countries like UK, USA and China, an e-commerce company should expand its presence to other countries namely Spain, Brazil, Mexico, Italy, France, Australia, Hong Kong, Singapore, Germany, Denmark, Belgium, Canada, Netherlands, Sweden, etc. where our traditional exports are good. We may take analogy from the Alibaba experience which is complementing the efforts of standard exports from China.
Focusing on the countries which have signed Trade Agreements with India
There is a huge potential in the countries where there are bilateral and multilateral trade agreements with India for B2C and B2B trade. India has entered into Trade Agreements (Free Trade Agreements and Preferential Trade Agreements) with many countries. In PTAs, lower customs duty is levied on the products originating from the member countries and in FTAs, which is a special case of PTA, all tariff and non-tariff barriers are abolished, and free access to products is allowed of member countries.
The table below provides a list of such agreements. An e-commerce company can determine the countries which have high B2B and B2C e-commerce potential and start trading with them by availing benefits of the trade agreements.
Export markets with e-commerce potential
In this table, gives list of with excellent, high and medium e-commerce potential by their online market attractiveness score.
How feasible is it to enter these markets which have been highlighted in the above two points?
We can check the feasibility of these markets by referring to the AT Kearney Global Retail E- Commerce Index. The Index ranks the top 30 countries basis their online market attractiveness score which is calculated on the following metrics:
1) Online market size (40%)– based on current online retail sales
2) Consumer behavior (20%) – its indicators are internet penetration, purchasing trends, and
3) Infrastructure (20%) – it is the indicator of financial and logistical infrastructure
development including credit cards per household and quality of logistic providers.
4) Growth potential (20%) – based on the projected online retail sales growth.
Majority of the countries where India exports its apparel, leather, handicrafts, handloom, gems and jewelry items were present on this Index in the year 2015. Given all these factors, it is highly feasible to target these promising countries as they fare well in all the areas.
Importing from other countries and selling them domestically via B2C mode
India has been a major importer of a large number of commodities, its total imports in the year 2016-17 were Rs.257,766,559.22 lakhs, and in the year 2017-18 (April-August) has been Rs. 117,335,214.23 lakhs. An e-commerce company can identify the products which are imported in bulk quantity and check their B2C feasibility within India. The items fulfilling the criteria can then be imported and sold domestically.
The table below highlights the items out of India’s top 50 imports in the year 2016-17 which can be sold B2C within India.
Identifying the potential specific new markets
1) Malaysia – India exports articles of apparel and clothing accessories to this country. Fashion and accessories constitute 23% of Malaysia’s overseas online shopping.
2) Mauritius– Currently, ecommerce usage is limited, but its use is on the rise. The Government is working towards addressing the issues of internet speed and bandwidth required for modern e-commerce transactions. It is one of the potential new markets for e-commerce.
3) Vietnam – the internet user penetration is reasonably good and is expected to increase in the coming years.
4) Nigeria – Online commerce and financial technology in Nigeria is strengthened by fast- growing youth population, expanding consumer power, and increased smartphone penetration. As per McKinsey, the current e-commerce spending in Nigeria is estimated at $12 billion and is projected to reach $75 billion in revenues per annum by 2025.
5) Colombia –Increasing Use of smartphones and growing internet penetration is allowing for an increase in online transactions in Colombia.
6) Middle East and North Africa- The increasing penetration of internet and mobile, high disposable income of middle east, sound GDP growth of key African nations have enhanced the scope for E-commerce in these markets in long terms. Middle East and North Africa internet usage will increase from 30.4% to 33.2% in the next 2-3 years4
7) SAARC– Other potential markets include Bangladesh, Sri Lanka, Nepal, Mauritius, and Bhutan due to physical proximity and India’s dominance in the region.
If India lives up to its projected revenue potential, it is on the road to becoming one of the world’s fastest growing e-commerce markets. When global e-commerce evolves to a level where its eco- system is in place, every consumer will be able to shop globally at or near domestic prices and service standards.
Disclaimer: The view and hypothesis expressed in this article are of writer and do not reflect the opinion and assessment of former or present employer.)
Annexure 1 & Sources:
- https://www.atkearney.com/documents/10192/5691153/Global+Retail+E- Comm%20erce+Keeps+On+Clicking.pdf/abe38776-2669-47ba-9387-5d1653e40409
- http://www.thehindu.com/business/Industry/policy-drags-ecommerce- exports/article17412925.ece
Also published on Medium.