What is cross border ecommerce
Cross-border ecommerce can refer to online trade between a business (retailer or brand) and a consumer (B2C), between two businesses, often brands or wholesalers (B2B), or between two private persons (C2C), e.g. via marketplace platforms such as Amazon, Flipkart or eBay.
Opportunities in India
India is one of the fastest growing markets for e-commerce. The number of Internet users stood at 481 million in December 2017 and is expected to reach 500 million by June 2018. The number of online shoppers in India is expected to reach around 220 million by 2020 from only 39 million in 2015 (Confederation of Indian Industry (CII)). This growth has been supported by government initiatives such as Digital India. Post demonetisation, digital modes of payments have increased. According to the Reserve Bank of India (RBI), approximately 282 million point-of-sale transactions were made on debit cards and 115 million on credit cards in February 2018. In recent years, a number of start-ups have emerged in areas such as e-retailing (Flipkart, Snapdeal, Meesho), credit lending (Faircent), food delivery services (Swiggy.com, Zomato IN, Fresh to Home, ID Fresh Food), and logistics management services (FarEye, Unbxd). According to NASSCOM (National Association of Software and Services Companies) and Zinnov Management Consulting, aggregators in e-commerce are receiving substantial funding from investors, which is leading to the scaling up of start-ups. All these factors will support the growth of this sector in the domestic market.
One of the key concerns of players in this sector is that Indian companies are small compared to global multinationals such as Alibaba Group Holding Limited (which is mainly engaged in C2C sales), Amazon.com Incorporated, and Google LLC, and they lack the ability to compete with these global giants. India is a net importer of e-commerce. Moreover, While regulation is evolving, there are some gaps in regulations and policies. For example, India is one of the few countries that does not allow FDI (foreign direct investment) in inventory-based model for e-commerce, which has compelled global e-commerce companies such as Amazon.com, Incorporated to change its business model in India. Further, there are issues related to protection of intellectual property rights, consumer privacy, and regulation of global e-commerce and technology giants. The country is yet to have strong national security and data protection regulations, and there is no clear policy on how to tax e-commerce transactions.
Regulatory Landscape for eCommerce Foreign Direct Investment (FDI):
B2B: 100 percent FDI is allowed in companies engaged in B2B eCommerce, e.g. Walmart and Alibaba can operate a cash & carry (B2B) business.
B2C Marketplace: 100 percent FDI is allowed in the online retail of multi-brand goods and services B2C under the marketplace model, e.g. Amazon, Flipkart, Snapdeal. Any eCommerce entity providing a marketplace cannot exercise ownership over the inventory and is not permitted to sell more than 25 percent of total sales through its marketplace from one vendor to their group companies. There are also conditions restricting to offer discounts by marketplace.
B2C Inventory-Based: FDI is not allowed in inventory-based model of eCommerce.
Single Brand: A single brand retail trading entity operating through brick and mortar stores is permitted to undertake retail trading through eCommerce subject to local sourcing requirements. Food retail: 100 percent FDI is allowed for trading (including eCommerce) of food products manufactured or procured in India.
Multi-Brand Retail: No FDI is allowed in companies which engage in multi-brand retail trading by means of eCommerce.
Other Government Actions: The National Institute for Transforming India (NITI Aayog) has set up a high-level committee to consider issues related to eCommerce including FDI. The Food safety and Standards Authority of India (FSSAI) has also issued draft norms for licensing online food operators. The Consumer Affairs Ministry is also planning to regulate eCommerce through the proposed new consumer protection law.
To tap the huge potential in the B2B eCommerce market in India, leading B2B companies have started to build their own platforms for small business owners and traders. More and more companies and SMEs are buying and selling online and plan to shift procurement transactions through the internet. Understanding this untapped potential of the B2B eCommerce industry, the government has allowed 100 percent FDI in B2B eCommerce, which has enabled global companies such as Walmart and Alibaba to show interest in the Indian B2B eCommerce industry.
The Indian B2B eCommerce market is expected to reach $700 billion by 2020. India has 14 million retailers fueling a $525 billion market. The higher profitability in the B2B segment can be the result of the lack of heavy discounts, greater emphasis on quality rather than on price, and higher volumes of purchases, etc. Software as a service (SaaS) platforms can provide a stable platform to small and medium businesses in India that shy away from making huge investments to enter the online retail space, establishing their authority and payment infrastructure. With these platforms, a startup can launch its own eCommerce portal in a much-reduced cost over a monthly rental or a revenue sharing basis on pay-as-you-go model.
Import clearance regulation:
With the change in cross border clearance policies in CB XII and CB XIII courier clearance, supply chain and logistics companies are moving towards building a more robust and compliant model in cargo commercial channel. This will change the entire value chain where the goods will be valued properly and the taxation will be streamlined. The growth of Cross Border E-commerce import will slow down but definitely it will rise to a new channel of supply chain which is more long lasting.
International Supply chain companies like JUSDA supply chain, Flexport entering to this field which will definitely make the space more competitive and compliant.
I as the India lead of the cross border supply chain vertical in a global company like Jusda India SCM and seeing the change in India business trader's and marketplace's actionable in terms of moving towards more compliant process makes me believe that there is a huge potential in the market which is yet to start it's journey. The major crack down in the Indian customs on Chinese etailer's parcels has just slowed down the business for a short while but it helped the business to be more matured and long lasting. It is evident that bigger brands from China, US, Europe will enter this potentially huge market in near future but in a compliant way. That is when bigger global supply chain players will come into play in a full fledged scale also there will be quick ramp us of Indian logistics companies like Delhivery, Xpressbees, Shadowfax etc in the cross border SCM business.