E-Commerce

Indian E-commerce Report: Dynamics of Online Retail

E-Commerce

This report takes you through the galleries of the Indian e-commerce and gives insights into what significant has happened over the past 2 months. This report has been prepared by Soumya De, Unmesh Phule and Andy Zhou.

1.   Introduction

India is a huge market with a population of over 1.3 billion and an economy of over $2.8 trillion. This combination of money and people makes it one of the most lucrative markets in the world. Companies from far and wide have travelled to this land to earn fortunes in the past and it is happening even today. Indian e-commerce Industry has given high hopes to numerous local and global e-commerce players. The industry is performing well due to the increasing number of netizens in the country and their rising disposable income levels.

The rise of the Indian online market place:

Rise of Indian digital buyers by Statista
[e-Business INDIA]
Source: e-BUSINESS INDIA

However, with the good performance of the Indian e-commerce market, the offline players faced a steep fall. They were unhappy with the current state of affairs and were very vocal about their challenges. Moreover, the local players were worried about their businesses due to the entry of the foreign goliaths into the Indian e-commerce scene.

The Indian government was considerate enough to listen to the woes of the local players. The government in December 2018 to address the issues lingering locally launched the e-commerce policy. Many changes have been made and protests against those have been staged. This report goes through the developments in the e-commerce industry and ponders upon the nuances through relevant case studies and examples.

This report takes you through the galleries of the Indian e-commerce and gives insights into what significant has happened over the past 2 months. It also forecasts and suggests ways to players for enhancing their performance.

If you would like more information regarding this document, please contact us at giantviewresearch@gmail.com (official email id of Market Trends Research Foundation, Pune).

 

2.   Highest selling product categories on E-commerce platforms

Online shopping is more of a convenience than anything else. The users can purchase products of their liking, pay for it and receive it all without leaving their home. Moreover, the e-commerce platforms often offer huge discounts compared to the offline retailers that make the online shopping an even better experience. According to a report by e-BUSINESS India report from February 2018, the top three most sold categories in India are Fashion, Electronics and Baby products.

2.1 Fashion, Footwear & Jewellery

Men's clothing and accessories
[ReviewTech]
Fashion rules the e-commerce platforms, as it is the highest sold category of all. Indian consumers are addicted to online fashion. Few factors that result in such a situation are the availability of fresh fashion in tier 2 and tier 3 cities as well, easy refund and return policy and options such as cash on delivery and interest-free EMI options. These factors add to the rise in sales of fashion online.

Footwear also makes up a huge portion of the fashion category. Indians have started investing a good amount of money in their footwear, as it is crucial to their wellbeing apart from just a fashion product. Global companies such as Adidas, Nike and Puma are faring well in the Indian market and as per reports; their sales have globe up due to the presence of online platforms.

Jewellery is also a part of the fashion industry. India has a rich history of fashion through Jewellery. Women are fond of jewellery especially gold and then silver. It is reported that around 24000 tonnes of the gold reserves are with the Indian households that account for around 11% of the global reserves.

2.2 Consumer Electronics and Smartphones

Black & Grey Smart watch, phone, headphones and laptop
[ReviewTech]
India is the second largest smartphone market in the word and one the fastest growing too. The market provides immense opportunities that cannot be found anywhere else in the world. The sale of smartphones in India is outpacing any other market in the world. According to research firms across the globe, 2018 was the first year when the total number of smartphones sold in the country crossed the 50 million mark. In 2017, the data was 45 million but the huge discounts offered by the e-commerce players and smartphone brands have pushed the sales data over the top.

Consumer electronics and electronics home appliances sales have grown manifolds too. A plethora of Chinese companies have entered the Indian market and are in a cut-throat competition to grab as much market share as possible. This has led to extremely competitive pricing and a massive increase in sales.

2.3 Baby Products

Baby playing with toys and books
[ReviewTech]
Considering the fact, that India is home to the second largest population in the world, having one of the highest numbers of babies is not surprising at all. The large numbers of babies in India have compelled the parents to reach out to the e-commerce platforms to purchase the babies’ necessities.

The online baby products have gained huge popularity. Companies such as First Cry and Johnson & Johnson deal in baby products. It is a huge convenience for the parents especially the working ones to just order while they are busy working in their offices and receive the products at home. A wide variety of products can be available online which might is often not available offline.

Apart from the top three product categories, a few other categories also shoot up online sales. Books, Cosmetics, Home Décor and FMCG are the other most sold product categories online. However, online success has irked the offline retailers as more and more people are turning their back to offline retailers due to the massive discounts and other advantages of online shopping. There were widespread protests from the offline retailers’ side against government policies and online players.

 

3.   Chinese Products’ popularity on the Indian e-commerce platforms

Indian e-commerce sector’s rise is unparalleled. One of the major reasons behind such massive growth is that people can order numerous products that are not easily available in the country. They order the products from some e-commerce platforms operating out of a different country or similar products from a foreign brand that are selling through the local e-commerce websites. Chinese brands are gaining extreme popularity among the Indian consumers. The USP of these brands are:

  • Affordability
  • Stylish
  • Durability

Various interviews have been taken of the retail electronic outlets, e-commerce delivery executives and Indian consumers. Analysis of the interviews showed us the highest sold Chinese products in the country. They are in the following:

  1. Smartphones
  2. Electronics such as entertainment and media equipment
  3. Smartphone accessories
  4. Home Appliances
  5. Toys
  6. Apparel

Smartphones have been revolutionary in terms of telecommunication developments in India and the world. People now feel empowered due to the connectivity that the combination of a smartphone and fast internet connection provides. The smartphone revolution started with Apple and Samsung. However, the Chinese manufacturers that cover a whopping 60% are leading the current Indian market. Most of the smartphones are now being sold via e-commerce platforms due to the crazy offers on them. Many companies such as OnePlus and Xiaomi also focus more on online sales than offline, causing the category to be the most sold Chinese product in India.

Having said that, other electronics devices and home appliance products are also sold heavily from the Chinese manufacturers. Though the South Korean brands lead in this segment, the Chinese brands are performing very well and are rapidly capturing the market. The festival season in India especially during the last October and November sees a massive wave of purchases through the e-commerce platforms. This is the time when the brands give mega offers and discounts on their products. Chinese brands have tried to capture the market during those times by giving more discounts and offers.

Apart from these, the two other crucial products are Toys and Fashion. Toys are important for the huge number of Indian kids, whereas, the adults are going crazy over the fast fashion coming in from China. We have observed that the platforms such as ClubFactory and Shein are leading the growth rate of fashion products sale in the country.

4.   New E-commerce Policy in place

Indian market went through a transitional phase as the internet grew and the online mode of shopping made its mark in the country. However, what seemed to be a boon for the consumers became a bane for the offline retailers. The online stores removed the need for the intermediaries and could offer products at extremely low prices. There are way more options to choose from and the goods can be received at one’s own house without the need to put a single step outside.

Following the rise of the online market in India, the offline vendors started protesting against the unfair policies that were thrashing the offline marketplaces. This year numerous offline vendors and their associations across the country protested the online sellers. This resulted in major changes in the e-commerce policy in India.

The Indian E-commerce policy is going through a transitional phase. The Indian government is taking steps towards making it a level playing field for the all the players in the marketplace be it global or local. In a crucial decision dated 26th December this year, the Indian government tightened the guidelines for Foreign Direct Investment (FDI) in India. There were numerous minute specifications but let us focus on the major ones that will have a significant impact on the e-commerce industry as a whole.

The changes come in after constant complains from the domestic vendors in India. They claimed that the major players had very deep pockets. Hence, they could afford the deep discounting methods. This had a huge negative impact on the business of the domestic players. Serious cases of discrimination against the smaller domestic players have been noticed in the Indian e-commerce industry. The new E-commerce policy is set to be implemented from 1st February 2019.

One of the rules bans the e-commerce players from selling exclusive-only products on their platform. It has been seen that the major players benefitted from selling something exclusive to their platform. For example, OnePlus made a deal with Amazon for their online sales. In the Indian market, the phones could be purchased exclusively on Amazon’s platform. This took away a huge market from its rivals such as Flipkart and Snapdeal. Following such issues, the Department of Industrial Policy and Promotion curbs the exclusive-only deals. In fact, no company can sell more than 25% of its online selling stock through a single e-commerce player in India. This will not only curb the monopoly of one platform but will also give rise to other platforms. Companies will have to look out for various players to sell its goods online instead of just one.

Most of the developed and developing economies in the world take their Foreign Direct Investments (FDI) seriously in an attempt to safeguard its local enterprises from the foreign giants in the same industry. India too follows the similar policies and it has so far worked for the country mostly in a positive manner. However, it has been noticed that the e-commerce giants have dodged the FDI policies on numerous occasions.

Domestic players such as Snapdeal are satisfied with the new e-commerce policy while the top-level leadership of the major global brands are upset with the rules. They are calling the norms to be regressive and not in line with the aim of globalization. However, if the rules of most of the major economies such as the US, China and Europe are to be seen then one can find protective measures being taken all over the world and not just in India. They cover it under the veil of national security or strategic complexity but is actually a shell to protect their domestic businesses.

Another major point compels the e-commerce platforms from using an inventory-based business model and shifts to the marketplace-based model. Inventory based model allows a company to buy specific products from the manufacturer directly and sell at a favourable, time, place and price. This is the reason that the major players can influence the market price for most of the goods that they sell on their platform. However, the marketplace-based model is a toned down version where the e-commerce players need to play the role of an intermediary. They have to provide technology and other services such as delivery and return. They are not allowed to keep a huge stock of a product and later sell them at customized prices.

The new policy bars the e-commerce players to sell the products of the companies that they have a stake in. For example, an e-commerce player X has a stake in company A. A is in the shoe business and sells its shoes online. Now, X will not be able to sell shoes from A on its platform. This rule will curb the use of promotional methods to gain profits for a company out of self-interest.

The new policy will completely root out the massive discounts given all year round by the e-commerce players. Cashback and other forms of discounts provided should be fair and non-discriminatory. This has irked most of the Indian consumers and businesspersons. The consumers loved the massive discounts that came by all year round and the e-commerce platforms were happy doing business and increasing turnover year on year.

Another rule that needs to be complied with is the annual audits. The new guidelines clearly mention that the e-commerce players with even a pinch of FDI in them need to submit compliance with the guidelines report regarding FDI. They need to present a compliance report made by a statutory auditor to the RBI confirming the compliance guidelines by September 30th of every year. The rules have been made stricter and that calls for changes.

The group of people who are actually very happy with the decision counts Kishore Biyani in their team and that has a major reason behind it. Kishore Biyani is the founder of India’s largest offline marketplace called the Big Bazar. It is a huge offline retail chain and also has a fashion arm called the FBB or Fashion at Big Bazar. He has never been in favour of FBB’s online rivals as most of the business was taken away from FBB by the newer players in the market such as Jabong, Myntra, Amazon and Flipkart. He was always wary and negating the thought of fashion being sold offline. He created the stores with the needs of the common people in mind where a person wants to go and try out a piece of the dress before purchasing it. This is not possible in the offline version.

Other major offline retail chains in India are RK Damani’s D Mart, Reliance Industries’ Reliance Mart and Aditya Birla Group’s More. These businesses also seem to be quite happy with the decision of the government as there will not be much cut-throat competition in the online stores which was eating into their offline businesses. However, this landed the reliance group in major confusion as they intended to jump into the online business soon. They were making plans to take on Walmart-Flipkart and Amazon in the Indian market.

Chinese e-commerce goliath and the world leader Alibaba is the one who would breathe a sigh of relief after this decision. They were very cautious of the situation in the Indian market and never really intended to barge in through the doors suddenly. They are present in India through their mammoth investments in various tech-based startups in the country but never really opened their own business here. In fact, they are the majority stakeholder in Paytm and helped the company start its e-commerce arm similar to Alibaba’s TMall in India named the PayTM mall. Alibaba’s decision to analyse the Indian market and wait for the right opportunity to enter the market proved to be right.

The new guidelines by the Indian government will see numerous reforms in the existing business models, shareholding patterns and transaction methods. No matter what the companies do, they will be playing on the same level as per the rules are concerned and it will depend upon the quality of service they provide that will determine their future.

4.1 Government’s set deadline: February 1st 2019

E-commerce companies have been hit hard by the new FDI policy. The companies are in a panic state and are fighting for the date to be extended. The new FDI policy is supposed to take effect from February 1, 2019, and it is only a couple of weeks away. Amazon India had to literally shut down its food-retail business in which it had recently invested around $500 million.

Flipkart also has to reconsider all of its plans. It is facing a lot of struggle anyway because of high profile exits and of course because of the new management at the helm. Amazon and Flipkart are on the same side at this moment and are fighting the government for the same reason. It takes a lot to bring two arch-rivals on one side and the Indian government has managed to do it. The companies are now sweating it out to comply with the same and are looking to comprehend with the government’s decision.

The new FDI policy doesn’t allow the e-commerce platforms to sell the products of the companies they themselves own or have a stake in. It also doesn’t allow the companies to sell more than 25% of a product online which is a loss for e-commerce players. Apart from this, the e-commerce companies cannot get exclusivity such as OnePlus only sells on Amazon.in and no other platform is allowed to sell. So it is a loss-loss situation for e-commerce players and that has given rise to another sale happening currently.

All the e-commerce players including Amazon and Flipkart are offering insane sales on their platforms. They have termed it under the Republic Day sale that is fast approaching. However, everyone has figured out the real reason for the sale and it has nothing to do with Republic Day. It is FDI policy that has sent the companies into a frenzy. The discounts offered are huge and the consumers are digging it as long as it goes on.

There are massive 70% discounts on every category. The discounts are 3%-5% higher than the Diwali sale or the ‘Big Billion Sale’ but the consumers don’t care. While the senior people of smartphone-based companies, which sell their products online, believe that, the e-commerce players are clearing their inventory. That means this is nothing but a clearance sale. That is happening because the online retailers are failing to know if the date is going to be shifted or not and hence the discounts and sale.

There are massive discounts on products which have zero offline presence and this suggests a pattern. This tells us that it is nothing but a clearance sale. Apart from this, the e-commerce players are offering to add on discounts if the consumer is paying online. There are further discounts for certain bank credit cards and also if you are paying through a certain application or a wallet.

All in all, the Republic Day sales were never this big. The discounts were never so deep and aggressive and it is not just Amazon or Flipkart but both of them with other players such as Myntra and Snapdeal are also offering discounts. This is odd if we look at the timing of the sale. That said, the sale is supposed to go on for a week until Republic Day arrives on 26th of January. It is Diwali in January for all the consumers and they surely are cashing in on it.

5.   Flipkart: The largest e-commerce platform of all

Flipkart is the leading e-commerce website in India. It received major competition from its American counterpart, Amazon India, but has managed to sustain even then. It is still the number one online shop in India and nothing has toppled it. Its acquisition of Myntra and in turn of Jabong has helped them a great deal. Apart from this it recently entered in a huge deal with Walmart where it sold its rights to the other American giant.

Flipkart has been on the rise since its inception, coming with new ideas and ventures almost every other year. They experimented with new businesses and were successful in it. Their grocery business or the fashion brand, which absolutely shattered other retailers or may it be payments application, everything is always to the point.

Amidst the chaos of new policies and protests the company is not away from trying out new things. They recently started a women’s clothing brand especially targeting the tier 2 audience. Ann Springs is the sixth private label Flipkart has launched. This came when they saw a boom in the market of women’s western wear. The company has similar strategies where it invests and then grows to identify the market even better. It also has a knack of picking up businesses at the right time.

5.1 PhonePe

Flipkart also has its own payments platform called PhonePe. one of the first payments apps in the country to use the UPI interface and is doing really well. This application was founded in 2015 and faced little to none resistance from the government as it uses their interface. The application is one of the few apps, which has been licensed by the Reserve bank of India.

PhonePe Wealth Services was launched in December. Wealth services in India are doing extremely well. According to the 2018 IBEF report, Indian mutual funds has recorded an insane growth. The industry has reached a mind-boggling $375.9 billion from April to August 2018. PhonePe Wealth Services, however, will deal with consultancy to financial services such as deposits, mutual funds, and government securities. In addition to this, it will also act as an agent and an advisor to its consumer. It will be headquartered from Bangalore but it is still not sure if the Wealth Services thing will be available through the application or the website. According to the Registrar of Companies (RoC) around $7.42 million were deposited to start the business and there was a paid up capital of $2.85 million.

 

5.2 Myntra’s recent woes

Myntra, the online fashion marketplace for most people today is a company doing extremely well. It has its own private labels coupled with a lot of exclusive brands. It has done everything right until now. The huge sale that took place a couple of weeks ago was well received by the consumers. Jabong is still in the huge sale phase as the deals are still running around its platform. Myntra and Jabong are running on the same thing even if they appear to be two different companies.

The two companies have completely integrated on all levels of business and systems. Their operations in the department of technology, finance, revenue, creative teams, marketing, and category are the same. The companies have been working hand-in-hand in all ways possible. This has allowed them to tackle the competition out there. In 2018, both the companies did not plan huge things but were busy developing their own brands and collecting exclusive rights.

However, everything might come to a stand-still for Jabong and Myntra after the newest e-commerce policy. The new e-commerce policy does not allow the websites to sell the products in which the company has stakes or owns. This has totally pushed back the plans of the Flipkart-owned fashion companies. All the work of 2018 has gone down the drain as the companies will have to look for a new plan in order to get back on track for 2019.

That said, Myntra has suffered a huge drop in revenue in the Financial Year 2018. The revenue of the company has slid down by almost 80%. As of March 2018, the company’s revenue stood at $60.6 million which is about INR 427 crore, according to MCA filings. Such a drop in the revenue was because of the heavy losses it incurred during the last fiscal year.

Myntra’s losses rose to $21.4 million which is around INR 151 crore. The total expenses of Myntra also took a climb to $131.5 million which is about INR 926 crore. Myntra’s finest seller Vector E-commerce has plummeted by 90%. Its revenue is what took the fall. Its revenue was $173 million about INR 1216 crore in 2017 which dove down to $11.5 million in 2018. This all boils down to the high profile exits at Flipkart.

 

6.   Food Retail has gained significance in Indian E-commerce

6.1 Amazon’s Food Retail Business

Amazon India entered the food retail business in the year 2016. It ventured into the business seeking the stake in the rise of that market. Food retail segment in India was not at all exploited until Amazon India entered the market. As soon as Amazon entered, Flipkart started working towards it as well. Amazon had started out this business in metro cities only and was planning to enter other cities before foreign direct investment (FDI) guidelines took a sharp turn.

Amzon Box Robot
[ReviewTech]

The newest FDI guidelines are very harsh for the e-commerce companies. It will be very hard for them to go around those and still function, all the guidelines need to be followed and there is no otherwise. That said, Amazon is already finding it hard and there is still a month to go for those policies to take effect. Amazon’s food retail business will be shut down if, from February 1, the new policies take effect. This is because the new policy does not allow e-commerce players to sell products, which come from their partners or affiliates.

The foods which are on sale on Amazon.in will vanish from the website from February 1 in order to follow the new FDI policies. Amazon had recently invested $500 million in its food-retail venture after India accepted a 100% FDI for agricultural products in order to help farmers and create jobs. These products which were locally produced were allowed to sell. Apart from this, Amazon and Flipkart have their own storage centres and logistics now those are also not going to be exclusive to their partners. E-commerce players will now have to give the same treatment to all the sellers while providing logistics support.

Amazon has also stopped the acquisition of a stake in Future Retail. This is only because of the new FDI policy and nothing else. They will look to buy the stock in the same company after they wrap their heads around this new policy.

According to Crisil, online retailers are also going to find it hard in the Financial Year 2020. The retailers are going to lose around INR 30,000 to INR 40,000 crore in revenues in the next financial year. It is going to be a hard time for them. That said the brick and mortar shops will grow larger and this will create a balance between the online and offline world. The offline retailers are going to see a surge in their market of about INR 10,000-12,000 crore.

The losses of the retailers will mostly be on the electronics side according to Crisil. The apparel segment will also be amongst the losses. The offline retailers, on the other hand, will see a rise in the fashion market mainly and also in the electronics market and this balance is what the offline retailers were crying for from a long time.

6.2 Amazon to buy Aditya Birla Retail

Amazon India suffered a huge blow when Department of Industry Policy and Promotion (DIPP) announced the new FDI policy. It has put all the e-commerce players on the backfoot, as they have to reform all their plans for the year. Amazon has taken a harsh decision amongst this storm. It has decided to shut down its food retail business to avoid confrontation with the government. The new norms have a lot of guidelines which are very harsh on the e-commerce companies but they will have to comply with it any which way.

Aditya Birla's MORE logo
[Morestore]
That said, Amazon is now looking elsewhere to make up for its lost business in which it had invested around $500 million a year ago. It has now partnered with Samara Capital and is going acquire Aditya Birla Retail’s supermarket chain ‘More’. More has been around for over a decade now and it has been doing okay around the country. Without exaggerating it needed some restructuring over the years but it is doing business good enough to exist in the market.

That said, Samara-Amazon is not going to directly buy More but are going to invest in Witzig Advisory Services which in turn will buy Aditya Birla Retail’s supermarket chain, More. That said, Samara-Amazon had to take care of a lot of things before biting down this deal. They had to go through a lot of regulatory lines before they could finalize it. Competition Commission of India, normally known as CCI, has looked over this deal and have approved of the same.

The organization has understood the motive of the deal and have worked its way through it. They communicated with Witzig and emailed them their decision which just said ‘approved’ without revealing anything else. Witzig which is totally owned by Samara Alternative Investment Fund had decided to acquire ABRL for INR 4200 crore. It had filed an application to CCI for the same. Amazon.com has also dealt with Samara regarding Witzig, Amazon will own 49% of the Witzig and Samara will have control over the company with 51% stake.

However, Amazon has not paid for the same yet. It has been waiting for CCI’s approval and the deals were decided in the month of September in 2018. That said, the Samara-Amazon deal is not totally through yet, they will have to restructure it multiple times because it is still going to be scanned by DIPP. They will have to modify the whole deal and structure if DIPP finds any flaws in it and if they fail to do so, they may be on the lines for some legal action.

7.   India’s largest conglomerate goes back to its roots to enter the E-commerce market

Reliance Industries is one of India’s most celebrated companies The Indian conglomerate has touched upon every kind of business and is successful. The golden touch is what the company has and their strategies are better than most of the companies in the world. Mukesh Ambani, the richest man in Asia is the man he is because of such strategies. The timing of entering the business is on the spot every single time.

Reliance Digital Paper Bag with Jio Sim
[ReviewTech]
We can look at Jio, Reliance launched Jio at a time when Airtel, Vodafone, and Idea were running the show with extreme prices. Jio entered with a free policy, created disruption, gained market and now its revenue is more than that of Bharti Airtel’s mobile business. Reliance has a way of working, which is very hard to replicate. The fact that it has all the money in the world gives the company the liberty to do the same.

Reliance is currently a step above everyone in the country. It can enter every business it wants and so it is. One of India’s largest companies is now going to enter the e-commerce platform. Reliance is going to launch its e-commerce platform and the timing of this cannot be more right. It is hitting the business when Amazon and Flipkart are going through a rough patch because of the new FDI policy. It has disrupted a well-established market before and it is aiming to do the same.

Mukesh Ambani revealed the plans for its e-commerce business while talking in Gujarat. He was at the Vibrant Gujarat Summit alongside India’s Prime Minister Narendra Modi. He said that his e-commerce platform will be launched in Gujarat first and will work towards making Gujarat the best digitally connect state in the country.

Apart from this, Reliance’s e-commerce platform will be enabled by collaborating with 1.2 million small shopkeepers from the state. They will look to help the shopkeepers embark upon a new journey with their plans and help them expand their business. Reliance will sell smartphones, electronic appliances such as televisions, Air conditioners, refrigerators and many things in this category online. The company’s subsidiary Reliance Digital already sells these things and the electronics part of their e-commerce platform is going to be an extension of the same.

That said, it has plans for distribution of the products as well. There are around 5100 Jio outlets or point stores as they like to call it, across India. These 5100 stores are spread across 5000 cities in India and these are the store, which Reliance will use as the delivery points. This will enable them to reach further into the country without making an effort of building delivery points as they already exist in the form of Jio stores.

That said, the villagers who are not so used to buy stuff online will be helped by these Jio store managers to buy products online. They will help all the consumers to do so and this will help Jio expand its business into the remotest part of the country.

This business model will go live in Gujarat in the month of April according to Managing Director, Mukesh Ambani.

 

8.  Alibaba’s relations with the Indian Customs

Alibaba is China’s biggest e-commerce website. It was founded in 1999 by Jack Ma who is now an inspiration in China. Alibaba is an online marketplace for everyone. It is a consumer-consumer, business-business, and business-consumers online retail marketplace. It is one of a kind and allows every kind of businessman to do business via its web-portals. Apart from this, Alibaba has a lot of other business which ranges from shopping search engines to cloud computing.

Alibaba campus entrance
[ReviewTech]
Alibaba is valued at a staggering $231 billion. The market cap of Alibaba is $352 billion. It is one of the top ten companies in the world when it comes to valuation. Alibaba in January of 2019 became the second Asian company to break into $500 billion clubs. Alibaba is ranked as the company having 9th highest global brand value. That said, Aliexpress is one of the websites which deals in cross-border commerce. The cross border deals take place with all the customs and excise duty in place.

However, there have been some sellers who have found loopholes and are using those to a great extent. They are packing their orders as gifts and are sending it to the consumers. This is a major loophole and the Indian authorities couldn’t do anything. There were websites such as Club Factory, which used to get maximum out of these loopholes.

That said, the Indian government has imposed a rule, which has put a cap on gifts that are being imported. The Indian customs official will now allow gifts worth INR 5000 ($71 approximately) or less per Aadhar card number. This will totally shut down the imposters and now the government can keep a track of such sellers and detain them. That said, even Alibaba came out and said that it respects the government’s decision and is now tracking down all the sellers which have done this previously.

There are some government authorities who even thought of imposing a total ban on such imports. The decision now is harsh enough although the loopholes exploited were harsher. In spite of that, the authorities such as the Department of Industrial Policy and Promotion (DIPP) had suggested limiting the imports to four things per person. This suggestion came after INR 5000 limit can be used for any of your Know-your-customer (KYC) contact. This is another loophole but will limit the imports by a huge number.

Alibaba is for this rule totally and has dared the sellers to export the goods illegally and if they do, they might face store closure. This avoiding of customs has turned into a huge headache for the customs officials and the Indian government agencies such as DIPP are still trying to turn the decision to four items per person.

9.  Users leaving the e-commerce space

India’s growing internet users and online shoppers have been a crucial part of our research and analyses. However, there is another side to the story that needs to be addressed. This side of the story is not that great and reflects upon a downside of the Indian consumption pattern and preferences.

Indian e-commerce ecosystem is one of the largest in the world. Companies such as Flipkart and Amazon are dominating the market and global giants such as Walmart and Alibaba are gradually coming in the country to become a part of the profit-making machine.

The growing number of Indian internet users aided by affordable smartphones and cheap data rates have contributed to 50 million regular online shoppers. However, a nine months long survey by Google, Bain & Co. and Omidyar Network shows that almost 50 million people dropped the idea to shop online after their first ever-shopping experience.

The major reasons that surfaced during the research and language barrier are the first of them. Most of the users that dropped out were facing difficulties with English, which is the Lingua Franca. They prefer regional languages, as is the case with the new apps in India.

The second reason is the complex user interface of the shopping sites. The new users are not very familiar with the online shopping ecosystem and they find the UI very complex to handle. The number is also a huge disadvantage for the firms to as only 28% of Indians use the internet. It takes around 3-5 years for people to become regular Indian shoppers. The potential of the untapped resources in India is around $50 billion and e-commerce platforms have to approach the market in a new and enhanced manner to grab hold of the next 500 million internet users.

10. Conclusion

Indian laws are being re-framed in order to accommodate the local players and solve their issues of unfair competition. The Indian government is taking steps to bring the local and global players on a level playing field. This has raised concerns for the large global e-commerce platforms that were doing business in India. The issues are of grave concern for these players but given their massive pool of resources and will to challenge the decision, it is likely that these players will continue to fare well in future.

Comment here