How viable is the model for Indian consumers and retailers

All You Need to Know About Cross border eCommerce and Indian Customers, and Retailers

The retail landscape has witnessed a paradigm shift over the past couple of decades. Technological advancements, breakthrough innovations, the introduction of endless eCommerce platforms have paved the way for this transformation. And, the ever-evolving customer buying behaviour also has a pivotal role to play here. The buying journey has become multifaceted and even more complex than ever before. The gen-Z millennials enjoy a greater inclination towards multi-device usage and online shopping than hopping brick-and-mortar stores. In a nutshell, India is becoming a hotspot destination for global commerce with a massive millennial population as eCommerce customers for today and tomorrow. In this blog, we will discuss how viable or lucrative the Indian customer base is and how ready Indian retailers are for catering to the evolution.

Key Factors That Make India the Hotspot for Cross border Commerce

With the second-largest population in the world, budding start-ups, and entrepreneurs, and high-end internet penetration, India is all set to attract cross-border commerce. The eCommerce sales volume and the promising CAGR of 17.8% have been encouraging global businesses to initiate/extend commercial operations in India.

India’s love for eCommerce shopping has enabled many customers to become early adopters of products from overseas markets. The Indian eCommerce giant Amazon has cashed in on this lucrative opportunity already and has been promoting global stores to meet customer expectations. As per a study by Acapture, India imports 14% of products from the USA, 6% from the UK, and 5% from China, and the exports data is also equally promising.

• Cross-border commerce is expected to measure up to $1 trillion by 2021, which reinstates India’s viability for cross-border commerce.
• The Indian eCommerce market is expected to grow to $200 billion by 2026 from $38.5 billion in 2017.

The above stats clearly indicate that the eCommerce space in India is not going to see doomsday anytime soon. However, the cross-border commerce boom is highly reliant on the expansion of mobile technology to facilitate easy, quick, and hassle-free cross-border transactions.

Challenges

Despite the lucrative statistics, there are challenges associated with India’s cross-border commerce potential, and journey. Some of the key ones are:

• Low urbanization, internet penetration, and income levels
• Internet dispersion
• Heavy reliance on domestic retailers due to lack of online infrastructure facilities. Close to 80% of the Indian population don’t have access to the eCommerce arena due to a lack of internet.
• Cross-border commerce products tend to be pricey, and there are shipping, and other cost components also associated with them. With a moderate purchasing power, a vast majority of Indian customers might not be willing to spend a pretty penny on overseas products.
• The resistance from local retailers and retail brands

Business Models for Cross-border Commerce in India

By now we have fairly established the fact that India is brimming with an eCommerce-enthusiastic population. And, this has been the key catalyst that has been intriguing the global players to try out the Indian customer base. They can leverage either the ‘Direct Purchase Import Model’ or the ‘Subsidiary Model’ to enter the Indian eCommerce market.

In the direct purchase model, Indian registered brands can purchase products directly from overseas. They are responsible for clearing the goods from the customs port by paying all the applicable duties. These products are then showcased on the Indian eCommerce portals for sales. However, according to the subsidiary model, a company is formed in India as a subsidiary of a foreign company, which will import the goods and store them in a warehouse. Then a wholesaler model is leveraged to sell the goods across the eCommerce channels. The key to this business model is that the control of the Indian subsidiary will be with the foreign company as shareholders would be the parent company outside India.

Best Practices

Here are some of the best practices that international brands can leverage to orchestrate successful cross-border strategies for the Indian customer base.

• First, and foremost, overseas brands must perform a product demand analysis as per the Indian customers’ context
• Next, the internal competition must be looked at from the pricing, channels, and terminology point of view
• Appropriate channels that are also mostly preferred by the target customers must be identified and leveraged
• Before initiating full-fledged cross-border commerce operations, the new market must be tested out
• Consider product data localization if needed

Got more queries? Do connect with the experts at Vinculum right away!