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Indian MSMEs must leverage e-commerce and cross-border e-sales as a strategy to weather the Covid pandemic storm.
The pandemic has led to more buying online from domestic as well as international e-tailers. More consumers than ever before meet their shopping needs by ordering online than walking into a retail store.
As per UNCTAD estimates for 2018, the world market for e-commerce was $25.6 trillion. It also reports that the share of cross-border online shoppers to all online shoppers rose from 17 per cent in 2016 to 23 per cent in 2018. Though reliable statistics for India’s share in cross-border e-commerce are not available, Amazon announced that Indian goods clocked $5 billion between 2015 and 2020, an indication of India’s paltry share in global e-commerce.
In global e-commerce, consumer electronics and low cost consumer goods such as clothing, home furnishings, footwear, cosmetics, healthcare items, toys etc. dominate. While India is not a mass producer in some of these categories, the residual market size is still sizeable. India should begin its global e-commerce journey by expanding its share in residual categories.
Apparel and handloom, handicrafts, footwear, metalwares, beauty and nutritional products are some segments for which there is global demand which Indian products can potentially tap. Indian products find it hard to make it to the international e-commerce consumer due to the cost of logistics.
Policy push
National policies play an important role in preparing countries to leverage e-commerce. To tap the global e-comm market, India must create dedicated E-Commerce Export Zones or ECEZ.
Such zones may have synergies such as e-commerce ready customs clearance, easy access to Foreign Post Offices and other logistics centres, smart warehousing and international fulfilment centres. These zones may even have banking, credit and export insurance facilities in the same space for ease and efficiency. Such zones could provide the necessary ecosystem to fulfil global orders from India.
There are a few crucial dimensions to this proposal. First, such zones should act as technology enabled international e-commerce fulfilment centres. Goods here should be “export ready” in the sense that Customs should pre-screen the products at the time of entry to the zone. Any compliances should be addressed before they are allowed to be “warehoused”. An end-to-end electronic track and trace may be used for quick permissions for export or for removal. A product leaving an ECEZ under the customs seal may be sent to the gateway port without any further clearances. This will bring predictability and timeliness for a fast paced e-commerce.
Second, an ECEZ should be treated as “domestic territory”, and not like a SEZ. A variety of goods can then be warehoused here without cause for levying any duties if they have to be withdrawn from the warehouse for any reason. However, once an export order is received, approval is sought and a Customs Let Export Order may be given. With the promise of a competitive delivery time, entrepreneurs would have the option to experiment listing products for international sales more easily.
The third dimension is logistics. The cheapest e-commerce export route in India is via Foreign Post Offices (FPOs) as they charge a mere third to a fifth of the cost that private couriers charge. Although there are FPOs in 28 cities of India, it may still not be within reach of potential exporters across the country. Here, the ECEZ could act as an aggregation point and make direct access to an FPO less of a hurdle. For instance, an exporter will be required to bring his product to their aggregator in ECEZ and not deal with clearance and courier. The aggregator can then choose from their courier services including that of an FPO. With streamlined logistics and clearance, the Indian exporter could concentrate more on their product and marketing.
In addition to ECEZs, a suitable policy framework may be considered for providing support to smaller artisans for the initial costs and technical assistance to help them leverage global e-commerce.
E-commerce has the potential to provide market access for sellers based in regions which get left out because of logistical gaps. E-commerce can provide a level playing field for entrepreneurs, reduce dependency on middlemen in remote areas and socially deprived groups. The right approach has the potential to transform the businesses of thousands of Indian entrepreneurs by helping them tap into international markets.
Making Indian products available to the international customer at the click of a button would be an effective push to ‘Make in India’ as ECEZs become the gateway to ‘Make for the World’.
The writers are officers in the Indian Trade Service. Views expressed are personal
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