Role of Cross-border E-commerce in Boosting Small Businesses Indian businesses are selling quality products at more affordable prices than their global counterparts, say experts
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The uptick in e-commerce usage across the globe has come in as a huge boost for small businesses in India. The technological advancement in logistics and payments space has motivated MSMEs (Micro, Small & Medium Enterprises) to accelerate growth using e-commerce.
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.
Today, we are also seeing an uptick in the number of small businesses selling outside India by taking the e-commerce route. 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. In addition to that, Indian brands are selling quality products at more affordable prices than their global counterparts.
India has around 9,714,279 MSMEs registered on Udyam, including 9,282,256 micro enterprises, 393,824 small enterprises and 38,199 medium-sized enterprises, as of July 2022. And, cross-border e-commerce is today contributing significantly to the wallet share of small businesses by taking an expansive approach to other markets. With digital businesses, the barriers to entry to other markets are comparatively lower as compared to their predecessors.
"More than 20 notable Indian D2C brands have already started serving international markets such as in the GCC, the US, the UK, Canada and Europe. And with the Indian government's encouragement and support, it's only a matter of time that many more brands, small, medium and large, will follow suit," said Chirag Taneja, co-founder and CEO, Gokwik.
The choice of countries to export to will depend on factors such as product demand, competition, shipping costs, and regulatory requirements. "However, GCC is turning out to be a lucrative market for expansion considering the Indian diaspora and the ease of doing business in that market. Other potential countries are also the US, the UK, Australia, Canada, Singapore and Europe. These countries have well-developed eCommerce markets, pose higher purchasing power, and have a strong demand for quality products," he added.
While the opportunity is large, there are some obvious challenges, say experts. These include regulatory and compliance hurdles, brand recognition and marketing, complexities in last mile distribution, logistics cost, returns and refunds, payments and currency issues and their impact on tax, import duty, etc. These challenges can affect their overall profitability. Moreover, competition from local players, understanding the cultural differences of different markets and customizing products or localizing marketing strategy can also be quite challenging.
How can we solve for that? "The best bet to enter a market for many businesses is via marketplaces where most of the challenges of discovery, payments and distribution get taken care of. However, if they wish to grow their D2C channel of business in other markets (lower commissions, better understanding of customers), they would need very good partners in the form of enablers," Taneja added.
Businesses can navigate the challenges by taking government support. "They can do it by utilizing government initiatives that support Indian businesses in international expansion, such as export incentives and trade agreements, leverage tech and partner with local logistics partners for better coordination and efficiency, and consider the various cross border payments platforms for processing of payments," said Ankit Kedia, founder and lead investor, Capital A. The firm has recently invested in Leremitt which is building for the cross-border payment and trade facilitation ecosystem by providing end-to-end solutions for compliance (KYC and due diligence), pre and post transaction documentation and, cost effective and timely payments.
What brands should focus on
There are several steps that brands that want to embark on cross-border e-commerce can take, say experts, especially since there is a global slowdown at present. "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, in an earlier interview.
Keeping costs in check also becomes more 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.
The MSME sector is a critical driver of India's economy, contributing approximately 33% to the country's gross domestic product (GDP) and 50% of exports. It is projected to contribute at least 60% to India's total export goal of $2 trillion in goods and services by 2030. "With the growing number of MSMEs in India, it is not too long when multiple domestic manufacturers with superior quality products would want to start selling outside," said Kedia.
Overall, cross-border commerce is not only a need but it's also a great opportunity. "I think India as a brand resonates extremely well in advanced nations, like the US, UK, Germany, France, etc apart from the Middle East and Africa. There's a tremendous potential for businesses to go global. In fact, one of the basic advantages of e-commerce model is you're not geographically restricted in your market outreach, and your customer could come from anywhere in the world," said Guru Prasad Sowle, founding member and director of Indus International Research Foundation, IIRF, Dallas.
He also added that there are different solutions to every problem and challenge but, addressing these challenges could get e-commerce players from India well beyond their scope of domestic sales. "It also increases the margin significantly because when you export you know there is value and there is also the chance to increase the ticket value of each sale when you export," he said.