India is one of the world’s fastest growing economies, and as it opens its industries up to foreign direct investment there are great opportunities for growth. While India’s retail and ecommerce sectors are still maturing, technology is broadening the market for online shoppers. Even if you’re not directly looking to India as your next market, it should be considered as a key global exporter, importer and goods manufacturer.
After reading this guide you will understand the opportunities presented by India and how to take make the most of them, as well as have a general understanding of India’s place in the global balance of powers and why this affects businesses.
2 Growing your business in India
India is one of the world’s fastest growing economies. It is fuelled by developments in infrastructure, a booming manufacturing sector, export and import trade, retail and agricultural related activities amongst other things. Due to the economic boom, the Indian logistics market has been growing exponentially over the years and the compound annual growth rate (CAGR) is projected to grow by over 12% from 2015 to 2020.1
You should think about the following factors when evaluating ecommerce logistics in India: consolidation, sorting, line-haul and last-mile delivery. Transport, particularly last mile delivery, accounts for a significant cost factor.2 In India, about 57% of freight is transported via road, the costliest mode of travel. Although India is home to the world’s second largest road network, road quality is very poor, and a robust transport infrastructure project is underway to enhance roadways, railways, seaports, airports and power across India.3
While India’s retail and ecommerce sectors are still maturing, technology is making strides to provide more options, lower prices and greater convenience to online shoppers. Amazon and Flipkart are the two leading ecommerce offerings in India, together accounting for more than two-thirds of online gross merchandise value in 2016, and India’s ecommerce market is growing at an average rate of 70% each year (it has grown over 500% in the past three years alone). Ecommerce is therefore a great option to consider to reach customers in India in the coming years.4
3 Quick facts
Ecommerce sales in India are projected to grow from 20+ billion USD in 2017 to 52 billion USD in 20221
In recent years, key sectors of India’s economy have been opened to foreign direct investment (FDI), allowing foreign companies to own up to 51% of business in India. This gradual opening of the FDI market in retail, aviation, ecommerce and defense should help drive the expansion and improvement of supply chains across India2
India’s version of Cyber Monday is the Great Online Shopping Festival. It began in 2012 with a partnership between Google India and Flipkart, HomeShop18, Snapdeal, Indiatimes shopping and Makemytrip3
About 74% of Indian Internet users are under 35 years old; this group accounts for the majority of Indian shoppers4
4 Customer trends
It’s crucial to think about customer behavior when expanding in new markets. How does your target customer usually buy products? What’s their preferred method of delivery? The following factors will help you consider how customer trends will affect the way you go about doing business in India.
The main source of transportation is via road, and ecommerce shoppers in India are used to waiting 10+ days to receive their purchases. Shorter delivery times aren’t necessarily going to influence your customers’ decision to buy
Today, men account for 80% of online shoppers in India. By 2020, however, a shift will occur and men will account for 58%, with women making up the remaining 42%1
Cash on delivery is the preferred online payment method in India2
60% of online purchases happen during business hours (9:00 AM to 5:00 PM)3
5 Fulfillment models
Cross-border into India
There are a number of challenges you could face when shipping cross-border into India, including high shipping costs, import duties and complexities around returns and exchanges.
With the enactment of the GST, decisions around storage locations became less focused on duties and taxes and more focused on where customers are located. With this change, a single warehouse location could offer a better option than having multiple warehouses as it provides more inventory control and increased tax savings.
When evaluating storage locations in India, there are 8 hubs to consider: Delhi, Kolkata, Hyderabad, Chennai, Bangalore, Pune, Mumbai and Ahmedabad. These 8 cities contribute over 40% of the country’s total GDP, and when storing and fulfilling your products from any of these locations, you can access about 60% of consumer demand within 12 hours.1
The image below shows important factors to consider when selecting where to store your product. Efficient access to airports and ports makes Mumbai a popular choice — Mumbai Port handles 70% of maritime trade in India and more than half of the country’s air traffic (there are 20+ international airports in India).2
6 How to get started
When thinking about your move into the Indian market, think about the type of fulfillment model and company structure that best suits your business. What’s the most effective way of reaching customers and fulfilling orders? Which company structure is best suited to export what your business offers? You should understand the regulatory requirements of ecommerce in India, its FDI policy and the potential GST costs you would incur. You also need to determine whether your product will need any trademark registration. Finally, find a fulfillment center and carriers that provide coverage in India in the regions that you’re targeting.
Market Finder contains a breakdown of the World Bank’s Doing Business Index, where you can get a heads-up about the ease of doing business in India. It ranks on a scale of 1 - 190 how easy it is for a business to set up and run a local firm in each of the world economies. Ten topics are assessed to gain the score. These include the ease of getting electricity, the ease of getting credit, and the potential for cross-border trade.
When trading in a new market, it’s good to know the administrative, regulatory, and logistical challenges that may lie ahead. Navigating legal requirements and working out logistics is made a lot easier with Market Finder - find further support and tools including in-depth guides and insights.
Ingram Micro Commerce & Lifecycle Services provides logistics solutions to help businesses connect supply and demand.
The materials provided on the site are for informational purposes only. For financial, tax, or legal advice, consult a specialist.