Economic Downturn: Impact On Cross-border Ecommerce

While the Indian economy is in a bright spot, the global scenario is grim. Thus, many D2C brands and cross-border payments businesses are feeling the heat

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By S Shanthi

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After tasting success at home, Indian direct-to-consumer (D2C) brands have started expanding their retail footprints across global markets. Not only are they finding opportunities in the United States and United Kingdom, but they are also tapping into newer markets such as Asia-Pacific, Africa, and the Middle East. Indian products in categories such as apparel, home decor, and beauty, are becoming increasingly popular in these markets.

According to Internet Retailing, cross-border e-commerce is expected to touch the $2.1 trillion mark by 2023, up from $1.9 trillion in 2022.

Many factors have come together to make the cross-border dreams of Indian brands come true. To begin with, there is an uptick in e-commerce usage across the globe. There are atremendousdous technological advancementsthe in logistics and payments space. In addition to that, Indian brands are selling quality products at more affordable prices than their global counterparts. Further, every year, around 2.5 million Indians migrate overseas. These Indians are constantly on the lookout for products from back home. And, not to forget the growing influence of social networking platforms, promoting e-commerce.

The Indian government has also been backing global expansion plans of small and medium-sized businesses through initiatives such as the "Make in India" campaign. These factors have increased the trust on Indian brands in Global markets. According to Statista, retail e-commerce market global sales will reach 6.5 trillion dollars in 2023, an increase of more than 85 per cent as compared to 2019 it was 3.5 trillion dollars.

However, the current global economic downturn as a result of Russia-Ukraine war, disruptions in supply chains and skyrocketing inflation has come as a dampener.

Impact on India's cross-border e-commerce

While the Indian economy is in a bright spot, the global scenario is grim. Thus, many D2C brands and cross-border payments businesses are feeling the heat. For Ping Pong India, as compared to last year's holiday season, this year's season was slower. "The exports, especially in the goods category, we are seeing is depleting to an extent. We have a good number of clients in e-commerce exports side that are seeing at least 10-15 per cent of degrowth," said Mukesh Sahu, country head, Ping Pong India.

However, since the economic downturn is being felt more severely in some parts of the world than others, Indian brands, payments companies and stakeholders are so far managing the show well. These business are dealing with the degrowth by focusing on markets that are doing better and also by looking at other segments. "We are looking at other segments for growth, such as service sector, service-based exporters, and freelancers. These are some of the ways we are trying to tackle the slowness we are experiencing, especially in the e-commerce section," said Sahu.

According to an United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) report, the value of Asia Pacific (APAC) exports and imports is expected to grow slightly below this year's performance at 7.5 per cent and 5.0 per cent respectively.

Dharmender Khanna, country head, AnyMind Group, an end-to-end commerce enablement company shared with us that its cross-border sales have held steady in the last few months, but it had to be more strategic in mitigating any potential impact of the global economic situation. The Series D funded startup has done this by diversifying its customer base and exploring new markets.

"This has helped us to mitigate any potential risks associated with economic challenges in a particular region or country. Additionally, we have focused on strengthening our relationships with our existing customers, which has helped to maintain a steady flow of business," said Khanna. In 2022, AnyMind Group enabled two brands on cross border- Tiger Kitchenware and CeeMee. MCaffeine is also exploring cross-border opportunities in Japan market besides a few large fashion and lifestyle brands that are planning to launch their top sellers in India into global platforms.

What should brands focus on

There are several steps that cross-border e-commerce firms could take when global demand slows down, say experts. To begin with, they should discover new revenue streams. "Paying close attention to the customers' needs will help you discover new products and services that loyal customers would buy from your brand. It would unlock new revenue streams with little effort or new investments," said Anirudh A Damani, founder, Artha Group.

Keeping costs in check also becomes very important now than ever. The brands should thus renegotiate terms with suppliers and shippers, i.e., find ways to reduce unnecessary expenses. Lastly, diversifying the customer base is crucial.

"Spread the risk of operating in a single market by expanding into new territories or market segments. It is important to remember that spending slows down during a recessionary environment but does not completely halt. Therefore, how a founder showcases superior value compared to their competition to win a share of that customer's wallet comes to the fore during these challenging times," added Damani.

Will this dampen the growth of cross-border e-commerce?

"A sluggish global scenario will dampen the growth of cross-border eCommerce startups as customers tighten their purse strings in preparation for a harsh economic climate. As a result, several businesses will curtail growth plans to focus on survival which is a prudent strategy," said Damani.

However, he strongly believes that intelligent founders can utilize this opportunity to grow at the expense of their competition through innovative pricing and marketing strategies.

"With Indian Rupee having a better exchange rate than other currencies, and Indian D2C brands getting accepted in foreign e-commerce portals like Shopee, Lazada, Rakuten, Amazon, eBay and better logistics setups, things are becoming easier and soon you will see Indian brands taking sizable share of presence in Global ecommerce platforms," added Khanna.

With both consumers and businesses wanting e-commerce to transcend geographical boundaries, growth in cross-border e-commerce is inevitable. However, in order to navigate the current stumbling block, brands need to focus on pricing, marketing strategies, and expanding into newer segments and safer territories, among others.

S Shanthi

Senior Assistant Editor

Shanthi specializes in writing sector-specific trends, interviews and startup profiles. She has worked as a feature writer for over a decade in several print and digital media companies. 

 

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