Aided by the rapid growth of internet penetration in both rural and urban areas, the e-commerce industry is booming in India. The domestic e-commerce market is expected to reach US$ 64 billion by 2020 and further grow to US$ 200 billion by 2026. It has been rising and is expected to overtake the US as the second-largest e-commerce market in the world by 2034.

B2C cross-border e-commerce is a large growing part of this industry. The cross-border e-commerce market is estimated to reach US$ 2 billion by 2020, up from US$ 500 million in 2016.

Due to limited infrastructure and urbanization, the bulk of India’s cross-border e-commerce trade is export. Indian merchants prefer selling online to US, UK, India, Russia and Israel while most of the imports come from China, Germany, Malaysia and Singapore.

Indian Legislature on eCommerce

The concept of common ownership refers to the widespread tactic of investing in competing companies in the same segment, to diversify the portfolio, which can lead to consolidating tendencies and in general, lowers the natural healthy competition in the economy.

As the growth of the Indian eCommerce market has attracted large foreign investment, this concept has proven to be a pressing issue in the discussion of legislature available on e-commerce and is only more highlighted by the lack of any legislative or executive intervention or any policy measure. However, this issue has been dealt with in some recent case laws by the courts in India.

One of such cases was the case of Meru Travel Solution Ltd v. ANI Technologies. The petitioners in this case raised concerns over the rise in investment in competing firms by a common investor as this could lead to a situation where the incentive to compete diminishes.

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The court referred to the ‘Theory of Harm’ which adds to the fact that common ownership could lead to unilateral price increases which would benefit the investors, rather than the consumers and more importantly, allows the companies the opportunity to collude with each other.

In this particular case, the Commission noted that the company, SoftBank seemed to be an active investor, and has the ability to actively exert material influence on both Ola and Uber. The Commission noted that such a control could have potential adverse effects on the competition and the material influence exerted by SoftBank ranks lowest in the hierarchy of control, as recognized under Competition Law.

The Commission did finally concede that there could be a potential effect on competition because of common investors affecting horizontal incentives to compete, but it could not go ahead on investigations on mere speculation.

The Draft E-Commerce Policy, 2018 was released to great dislike among investors, vendors and retailers who united against it. Even though the draft was created after hearing the suggestions from various industrial players and bodies, it has its shortcomings.

The draft policy states that deep discounting has affected offline sales in a negative manner and that unregulated discounts must be brought to an end, which can be seen as a step towards micro managing businesses and intervening negatively in the natural course of the economy.

It also states that direct or indirect influence on the price or sale of products and service of an online retailer may not be allowed to any group company investing in the online retailer.

Cross-Border ECommerce 

Cross-Border eCommerce is on the rise in India with players like Club Factory, SheIn, Romwe, Jollychic, Wish and Ali Express attempting to capture the lucrative Indian e-commerce market, especially in the apparel and accessories segment.

According to a report published research consulting firm Redseer in August 2018, the market size of online fashion in India during April-June 2018 quarter was estimated to be US$ 1 billion, of which cross-border e-commerce sector was estimated to be 5% of the entire market. The report also further states that 30% of these orders are generated from Tier-2 cities and beyond.

China is a major player in the Indian cross-border e-commerce market, with 1.3 lakh shipments being made on a daily basis. B2C cross-border e-commerce attracts companies because it allows them to cut the middleman and increase the profit margin.

The cross-border e-commerce market is beneficial to the consumers as they are provided with access to a wider range of products and at lower prices.

However, there are still some challenges that the cross-border e-commerce market is still to overcome such as high shipping costs, import duties and complexities in returns and exchange of products.

The Government of India has hiked the limit of foreign direct investment (FDI) in the e-commerce marketplace model up to 100 percent (in B2B models) in order to increase the participation of foreign players in the e-commerce field.

The Effect of Custom Duties on Cross-Border eCommerce

Any product that has been imported for personal purposes attract basic customs duty of 10%. In addition to that, GST would also be applicable, depending on the slab rate fixed by the government.

The extra charges and duties attached to the products make them almost 1.5x the listed price.

However, the Indian government is still pushing on the digital payments market by distributing rewards and incentives worth approximately US$ 23.8 million to over one million customers for embracing digital transactions.

Cross Border Business Models 

There are risks and costs associated with import when it comes to cross-border e-commerce due to lack of infrastructure and urbanization. However, businesses have adopted different models to deal with such issues.

A model that many small businesses are embracing is dropshipping. Dropshipping is a business model where the business does not stock up on their inventory. Instead, they buy the product from a third party supplier and then get them shipped directly to the consumer.

Dropshipping cuts the costs associated with traditional retail model such as overhead and stocking charges. The small business effectively acts as a middleman while still retaining the lion’s share of the profit.

Companies like Club Factory deal with around 80,000 orders per day in India. The company deals with this with ease as it is a registered importer and uses freight forwarders to move the products to India.

Some companies like SheIn use Indian merchants who are importers on record and receive 2-3% commission based on their sales while some companies like AliExpress prefer to ship directly to their consumers, with long shipping times. Since ePacket delivery is still not available in India, consumers have no other choice but to wait in this scenario.

Conclusion 

India’s e-commerce market is one of the largest in the world and cross-border e-commerce is a natural byproduct of globalization and technology. There are still many challenges in this growing sector such as lack of streamlined legislature and infrastructure problems.

Methods such as dropshipping allows entrepreneurs and small businesses to overcome the hurdles somewhat but they are far from being perfected business models.

There is also the pressing issue of legislature regarding this emerging market which must be dealt with properly, to regulate this undeniably growing sector in the Indian economy.