A Panel On Crossborder: Approaches for Expanding Abroad (B2B, B2C, Marketplaces, etc.)

At the recently concluded eTailing India Expo 2017 – “India’s Flagship Conference & Exhibition on Retail, eCommerce and Mobile” (http://etailingindiaexpo.com), leading thought leaders shared their perspective on “Technology Services for Retail & eCommerce”. This article summarizes the session for Crossborder: Approaches for Expanding Abroad (B2B, B2C, Marketplaces, etc.). (The session is not verbatim here)

Size of eCommerce market

Indian eCommerce market is about $30 billion in size at present and expected to reach $5 billion dollars in the next 3-5 years. The market size in US, Amazon and eBay put together would be approximately $300 billion. Also, Alibaba and other eCommerce companies combined together would be of $500 billion in China.

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In India, 90% of the population which goes online is in the age group of 16-44 years. So the typically young crowd provides immense opportunity. The international trade taking place in eCommerce (cross-border) is about $300 billion and India constitutes about 2-3% of the total trade.

The market is really global and we will discuss what are the challenges faced in cross-border trade.

Fear of the unknown: There is a lack of awareness about doing eCommerce outside India. Many people are not clear on how to go about it. So, there is a need to understand the process where the earning opportunities are high.

The manufacturing cost is the same but it is the shipping cost that one needs to take into consideration. Technology wise, there are products out there which helps to manage the products across different markets. What is required is to take a leap of faith and do the business.

The cross-border is still at a nascent stage and the opportunity out there in US and Europe is really big. If you have the right set of product, assortment as a brand and company, there shouldn’t be inhibition to go out there. Once you start, you will be able to expand to other market which makes your company grow further.

The biggest challenge is in logistics. When it comes to B2C, the size of the market is very small and the cost becomes very high. Return shipment also hurt where it gets broken underway or rejected. Today people like Alibaba and Amazon are helping out sellers to deal with the shipment process.

India ranks 9th in terms of buying from abroad countries. Handicraft is one of the fastest growing segments in the global market. So the right product selection definitely helps. It is the fear of taxation and remittance that is holding back the sellers from doing business abroad.

The observation that Alibaba had on cross-border trade is that the Indian government is really supporting the eCommerce sector. India ranks 2nd for Alibaba as a supplier country and ranks in the top 5 as a

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buyer country. Both on the importing and exporting end, India has become more and more important in the B2B commerce platform. The key things that Alibaba feels for sellers today is market awareness and education, the logistics (b2b, b2c) and the ease of payments. There are different payment methods and it is difficult for consumers to avail the best option for payments.

What are the best practices for entrepreneurs to deep-dive into this?

The challenge lies in the b2c segment. In b2c, there are 2 ways of dealing it. Once is a fulfillment and the other is a drop-ship. For fulfillment, you need to store your inventory for say Amazon or Alibaba’s warehouse. For drop-shipping, once your product gets sold, it will delivered by international logistics companies like FedEx. Plus, there are technologies available for payment reconciliation which will collect payment in the local form and convert it to Indian currency charging minimal service charges.

Are there factors that need to be considered before choosing a market abroad?

Alibaba focus a lot on SME (b2b) sector. Most the large corporation has in-house functions to choose market and support themselves. However for SMEs, there is few key factors need to be considered.

Market size: How much consumers are ready to spend online. Ease of doing business that includes a lot of policy, understanding

infrastructures (setup for payments and logistics). The most important is to find marketplaces and partner to work in a

local market abroad. A lot of work has to be done locally in order to make sure that you are complying with all the rules and regulations. To get cost-efficiency before you build the scale, it will be beneficial to avail services of a partner. For instance, Alibaba has a b2c platform Tmall.Tmall global is getting a lot of international brands on its platform and brands in a lot of cases are working as a Tmall partner instead of

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Tmall directly to sell. So all the local things can be take care of by local people.

Case study:

When you look at market, here are 2 examples. One is Jaipur where they manufacture a lot of ethnic wear. They decided to sell in US and European markets where Indians generally usually don’t get to wear ethnic wear. They set up their own websites and did pricing according to different market standards. They tied up with logistics partners and build it into shipping cost. This is one successful story where they did everything themselves.

On the other example, there is Prayog who makes ethnic yoga wear for women. They wanted to build a big brand for yoga wear out of India. They identified several marketplaces to sell in different countries. They talked and tied with those marketplaces for selling.

In both cases, it is about identifying your target segment. If you have a differentiated product like that of Jaipur’s, then decide whether you want to sell by your own site or sell it through marketplaces.

Identifying the market to go to is extremely important. The thought process should not be to find places that are easier to sell, but should be the market size for the product. Where the market size is already there, the channels are more open. If you go there as vendor and speak to marketplaces and flash websites, you can have great success by focusing on the particular segment of customers by speaking to and selling them.

Do sellers need to create a parallel strategy (e.g. margin, dependence on marketplace) to build their own space in marketplaces?

Sellers need to work on their strength that is product selection and assortment. Margin depends upon the top-line.

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How do marketplaces go about solving or carrying out Collection Mechanism?

Alibaba for some countries like India and Indonesia go directly and set up partner networks to collect money. In different countries, they are places and markets that are more open where forex and currency changes are easier to access. The mechanism is more established where sometimes banks or Paypal can be used. Then there are markets where you can collect only certain currencies because of the fluctuation in currency values due to regulations. That is why; it is advisable for somebody expanding business abroad to look for a local partner who can help you with the local rules and regulations.

There are platforms where you can get a higher remittance amount than those offered by marketplaces.

Q&A

Which product categories are doing well on international marketplaces?

According to Alibaba, textile and leather products, handicrafts, machineries, food and beverage and chemicals are the top categories from India which are very competitive in the global markets. Besides, unique products which cannot be re-engineered will do well.

Identifying the niche marketplaces is very important that serves the best platform for your product-base.

Panelist: SANDEEP LADDA (Partner: PwC India), SATYA RAY (Ecom Head: Gati), CHRIS WANG (General Manager: Alibaba.com), UMANG SRIVASTAVA (Joint MD: Casa Brands (Bonita)) and VENKATARAMANA RAO NOTT (Founder & CEO: Vinculum).

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