🥻This article will inform you about:
- Since the COVID-19 pandemic, the Indian e-commerce market has become as hot as Southeast Asia. The e-commerce transaction volume in India has increased about 7 times from 2019 to 2023. According to the Telecom Regulatory Authority of India (TRAI), there are 1.14358 billion smartphone wireless data service subscribers in India, indicating a strong mobile commerce trend from major cities to rural areas. Connectors has compiled a guidebook based on stories from sellers who have experienced e-commerce business in India. It covers market opportunities and penetration strategies in India, as well as considerations for sales and logistics, starting with an introduction for beginners.
- Recent analysis shows that the growth of the Indian e-commerce market is driven by the lower-income groups rather than the middle class, especially in Tier 2 and 3 cities, which are classified as rural areas, rather than Tier 1 cities, the economic and industrial centers of India. Consequently, e-commerce platforms and sellers are focusing on low-cost product marketing targeting these cities. Particularly, foreign sellers are establishing business operation strategies that align with India's unique culture. This content provides related insights.
- India, with its vast territory, faces challenges in connecting smooth logistics services. For example, shipping by truck from Chennai, a logistics hub in South India, to major hubs in North India, including Delhi, covers a distance of 2200 km and takes about 7 days. This highlights the difficulties in local logistics hub operations and last-mile delivery faced by sellers entering India. The article summarizes the characteristics of Indian e-commerce logistics based on real cases.
- The Indian e-commerce market is dominated by Flipkart, acquired by Walmart, and Amazon, which together hold about 65% of the total market share. Both are technically owned by foreign entities. In response, the Indian government launched an open platform called ONDC to support domestic small and medium-sized e-commerce platforms. It's a service where multiple Indian e-commerce platforms and logistics companies participate, allowing sellers and buyers to sell, search, and purchase products on a single platform. Can Korean sellers effectively utilize this? Are there any prerequisites? The article reveals emerging 'allies' aiming to connect global marketing and logistics to India.
The Indian Commerce Market is Rising
India, with its vast territory, is competing with China for the world's largest population, approximately 1.4 billion people. Despite being one country, the diversity in lifestyles and cultures across different regions is evident.
Recently, as IT infrastructure rapidly expands within India, the market is emerging as a new battleground for e-commerce, rivaling China. According to a report by KOTRA in July last year, India has 700 million internet users, with about 350 million using online payment systems and an estimated 220 million e-commerce users.
The volume of e-commerce transactions has increased about 7 times since 2019. As per the Telecom Regulatory Authority of India (TRAI), as of June 2023, there are 1.14358 billion smartphone wireless data service subscribers in India.
The rapid increase in wireless subscribers in rural areas, distant from urban centers, is significantly contributing to the expansion of mobile infrastructure and e-commerce market growth in India. This growth is attributed to the Indian government's digital transformation initiatives and affordable data usage policies, as assessed by sellers residing in India for an extended period.
Currently, two platforms dominate over 65% of the Indian e-commerce market share: 'Flipkart' and 'Amazon'. According to Nimbus Post, an Indian e-commerce and logistics solutions company, as of 2021, Flipkart holds 48% of the market share, while Amazon has 26%. Flipkart has recently widened its lead as the market leader after intense competition with Amazon.
To counter these foreign-dominated platforms, the Indian government, led by the Ministry of Commerce and Industry, has been operating a non-profit commerce platform called ONDC (Open Network for Digital Commerce) since 2021. This can be likened to a public delivery app concept in Korea.
ONDC is an open platform that connects sellers and buyers without any restrictions on the types of online markets in which commerce sellers are enlisted to sell. When searching for products on ONDC, users can view search results from various markets at once. This enables commerce sellers to reduce their dependence on specific markets, including Amazon and Flipkart. This development is seen as an opportunity for global sellers from Korea who wish to enter the Indian e-commerce market.
Against this backdrop, on the 12th, the global fulfillment company 'Qxpress' and the solution and education service provider for global e-commerce market entry 'Globalizing' joined hands to host a seminar on pioneering the Indian e-commerce market. Connectors was invited to the event and listened to stories from sellers taking on the Indian market. In this content, we have compiled a guidebook for sellers aspiring to enter the Indian e-commerce market, covering everything from international expansion, market penetration strategies, to e-commerce logistics, tailored for beginners.
E-commerce Chosen by the Low-Income Group in India
According to S&P, India exhibited an economic growth rate of 7.2% in the fiscal year 2022-2023. The IMF predicts that India's economic growth rate will remain in the 6% range even in 2024. This is in stark contrast to South Korea, where the economic growth rate has been lingering around 1-2% in recent years. Like many other countries worldwide, India's e-commerce market grew rapidly through the COVID-19 pandemic and maintained its momentum even in the post-pandemic economic downturn.
As briefly mentioned earlier, the proliferation of smartphones in India's rural population is particularly noteworthy. Forbes even reported that Indian e-commerce is growing, primarily driven by the low-income group. This is due to the increasing e-commerce sales share in smaller cities, where access to and diversity of offline stores fall short compared to large cities.
According to a report by Unicommerce, an Indian e-commerce solutions company, the e-commerce sales share in the populous and wealthier capital region and Tier 1 cities of India was 38.7% in the fiscal year 2022, securing the first place, but it decreased by 7.5 percentage points compared to the previous year. In contrast, during the same period, Tier 2 cities saw an increase of 3.5 percentage points to 23.7%, and Tier 3 cities increased by 4 percentage points to 37.6%. The gap in e-commerce sales between Tier 1 cities and Tier 2-3 cities is gradually narrowing. This trend is expected to accelerate further with the spread of smartphones in smaller cities.
“If you visit India, you'll notice that QR code-based payments through smartphones are available everywhere. Mobile payments are so prevalent that there is hardly any need for cash or payment cards.
Department stores, supermarkets, franchise restaurants, and even small local shops support QR payments. Just as many street vendors in Korea display their bank account numbers, Indian vendors display QR codes. Even people begging on the streets have QR codes. Mobile payment is highly widespread, and this naturally leads to the convenience of mobile shopping.” - Noh Hyun-jong, CEO of RARIEN COSMETIC INDIA, at an Indian E-commerce Seminar.
This market characteristic is being actively leveraged by Flipkart, the leading e-commerce platform in India. To capture price-sensitive consumers, Flipkart launched 'Shopsy', a commerce app focused on low-cost products, in 2021. This app has been credited with pioneering niche markets in small towns and rural areas. Additionally, 'Myntra', a fashion vertical commerce app acquired by Flipkart in 2014, is targeting the rural population with its affordable clothing lines and large-scale discount events.
Indian Patriotism in Commerce
A significant characteristic of Indian consumers in the realm of commerce is the influence of 'Indian-style patriotism'. This sentiment aligns with the broader sense of patriotism prevalent across Indian society. Indians, known for their special love for their culture and economy, tend to prioritize domestic companies and products when it comes to consumption. This preference reflects a deep-rooted national pride and a desire to support and grow the local economy.
"Looking at the success stories of various global companies that have entered the Indian market, one common pattern emerges in their approach. These companies have either entered through M&A with existing Indian firms or have at least established a local subsidiary in India, accompanying it with local hiring and product manufacturing.
For instance, both Samsung Electronics and LG Electronics set up manufacturing plants in India in the late '90s, producing key products such as smartphones and refrigerators. Similarly, Hyundai Motor Company owns both a subsidiary and manufacturing plants in India. They have strategically placed service centers in major cities, adopting consumer-friendly strategies and taking a lead over other manufacturers. They also actively promote their love for India to local consumers.
This approach aligns with the policies of the Indian government and the patriotic culture of Indian consumers. Firstly, as India is a chronic trade deficit nation, the government significantly restricts foreign companies from entering the Indian market solely through trade. Therefore, sellers without their own brand, who only handle foreign sales, find it difficult to enter the Indian market. Without directly deploying local representatives for communication, doing business in India is almost impossible.
Furthermore, Indian consumers strongly believe in supporting companies and products that benefit their country. Hence, using marketing copies like ‘Customized Products for Indians’, ‘Our Products Made in India with Indian Ingredients’ or conveying such nuances almost necessitates operating local subsidiaries and factories." - Noh Hyun-jong, CEO of RARIEN COSMETIC INDIA, at an Indian E-commerce Seminar.
This formula is equally applicable to e-commerce platforms. In 2019, when Qoo10 entered the Indian market, it acquired 'ShopClues', then the third-largest open market in India, through a 100% stock exchange. Similarly, Walmart's entry into India in 2018 involved acquiring a 77% stake in Flipkart, the leading commerce platform, for $16 billion. As a result, India became one of the few countries where Walmart is ahead of Amazon in e-commerce.
The logistics market, growing in tandem with the trade and distribution markets, is no exception. Hyundai Glovis has been operating its Indian subsidiary 'Glovis India' since 2006. CJ Logistics acquired a 50% stake in the Indian logistics company 'Darcl' in 2017, renaming it 'CJ Darcl'. They provide comprehensive logistics services, including ground, rail, and sea transportation, as well as warehousing, to over 3,000 local clients.
Characteristics and Limitations of Indian E-commerce Logistics
In 2023, the World Bank announced the rankings of countries based on their Logistics Performance Index (LPI). This index comprises six components: 1) efficiency of customs procedures, 2) quality of trade and transport infrastructure, 3) ease of arranging shipments, 4) quality of logistics services, 5) ability to track shipments, and 6) timeliness of shipments reaching their destination.
In this ranking, South Korea was jointly ranked 7th, while India was placed 38th. Although India's logistics competitiveness might seem somewhat low relative to its economic and population size, it is a 17-step improvement compared to its 2014 ranking. This improvement signifies the Indian government's substantial investment in national logistics.
The Indian government is implementing various projects to exploit the country's geographical advantages and become a logistics hub connecting Asia and Africa. India's major logistics hubs are Kolkata, Mumbai, Chennai, and Delhi, located in the east, west, south, and north of the country, respectively. The country's logistics primarily rely on land transportation. Particularly, moving goods from South India's Chennai to North India, including Delhi, takes more than seven days overland, making effective intermediate hub operations and cargo tracking essential.
Therefore, the Indian government is actively promoting incentives to attract superior foreign logistics companies as part of its logistics digital transformation. CJ Darcl’s infrastructure connecting India's four major logistics hubs and Amazon's operation of a large fulfillment center of 46,450 square meters in Mumbai are in line with this context. However, logistics costs in India remain high, and there are still shortcomings in operating logistics centers and last-mile delivery for e-commerce businesses.
“In the past, I had an experience of entering the Indian market with cosmetics, including mask packs. At that time, a Korean home shopping company had already expanded into India, so we made significant investments, including appearances on their platform. But ultimately, it was a failure.
One of the reasons was the expensive yet low-quality logistics services. Most local logistics partners in India are small-scale. The processes are very complicated and sensitive due to excessive government regulations and reliance on physical documentation. Naturally, the time and cost involved were substantial. Additionally, frequent staff turnover led to repeated mistakes due to negligence.
Especially challenging was inventory management. It was common for products to go missing, and for cosmetics requiring cold chain storage, the disposal rate due to temperature deviation exceeded 20%. There were also many instances where products were discarded because rats had gnawed on them.
Last-mile delivery was no less challenging. If you live in India and order e-commerce deliveries, you'll find that damages due to mishandling are too frequent. For instance, when I ordered a TV, it arrived with a broken screen, and it took two and a half months to return. Therefore, most delivery companies in India offer COD (Cash On Delivery) service, a postpaid system where the consumer pays for the product upon receipt.
In particular, 'Ecom Express' provides doorstep quality check service. It's basically a postpaid delivery system, where the delivery person and the customer can jointly open the package and check the product quality. If a defect is found, they can immediately request an exchange or return, and the delivery person takes it back. This can be seen as a strategy at the last mile to compensate for the weaknesses of Indian e-commerce logistics and increase their own volume” - Kim Boyeon, CEO of Gxl SOFTECH and Indian E-commerce Seller / Indian E-commerce Seminar.
What Do Korean Sellers Need First?
In the rapidly growing but complex Indian e-commerce market, the previously introduced ONDC can be a helpful tool for creating opportunities. ONDC not only involves participation from various commerce platforms along with Indian state governments but also includes logistics companies. Similar to the Naver Fulfillment Alliance in the Korean commerce market, ONDC in India is moving towards offering integrated support for e-commerce logistics for sellers. This integrated approach can provide a more streamlined and efficient entry point for Korean sellers looking to navigate the complexities of the Indian market.
However, there are still several barriers for Korean global sellers aiming to enter the Indian market using ONDC. Among these, sellers who have attempted or are currently trying to penetrate the Indian market commonly highlight two major challenges.
"India operates a stringent certification system for the distribution of imported products within the country. This certification system includes some conditions that are quite unique and not seen in other countries.
For example, EPR (Extended Producer Responsibility) certification is essential for products manufactured from plastics or packaged in plastic. Additionally, there's a separate certification system for cosmetics. Identifying the necessary certifications for your product, navigating through months of certification procedures, dealing with various challenges in a society with a relatively high corruption index, and paying additional costs often lead to thoughts like 'Should I just give up?'
Even if you enter the market without the required certifications, the Indian government turns a blind eye until the company starts generating significant revenue. After about 5-6 years, they then issue an order to retrospectively pay back the 'illegally generated profits'. There have been several cases where companies had to pay tens to hundreds of billions of won." - Seller A, operating a cosmetics business in India.
The first major challenge is the complex import certification system in India. As indicated in the table, India operates a complicated system for importing products. E-commerce sellers who want to sell products requiring certification must invest time and money to obtain the necessary approvals. Opting to conduct business without these certifications can lead to significant risks and potential legal issues later on. This makes navigating the import certification process a critical and often daunting aspect for global sellers entering the Indian market.
금속이 포함된 모든 제품
BIS(Bureau of Indian Standards)
약 60만 루피
(한화 약 950만원)
CDSCO(Central Drugs Standard Control Organisation)
약 30만 루피
(한화 약 480만원)
모든 식품 / 건강기능
식품류 및 식품 유통업자
FSSAI(Food Safety and Standards Authority of India)
약 1개월 이내
약 10만 루피
(한화 약 160만원)
특정 원료가 포함된 건강
기능식품류 또는 인도 내
미소비 원료로 된 식품류
FDA(Food and Drug Administration)
약 50만 루피
(한화 약 800만원)
플라스틱류로 제조된 제품 또는 포장된 제품
EPR(Extended Producer Resonsibility)
약 20만 루피
(한화 약 320만원)
CRS(Compulsory, Registration Scheme)
약 50~80만 루피
(한화 약 800~1300만원)
Certification system for imported products required for entry into India ⓒRARIEN COSMETIC INDIA
Another challenge lies in the e-commerce platform management solutions. Although the Indian government operates the integrated e-commerce platform ONDC, managing the numerous sales channels and logistics services that participate in it falls on the sellers. This is due to the lack of a market integration management solution in India, which would allow handling multiple sales networks and logistics services simultaneously, as is common in Korea. As a result, sellers often need to find a local partner agency in India to manage these aspects or establish a subsidiary. However, both approaches are not easy for small-capital e-commerce sellers to undertake.
On the other hand, efforts are being made to develop an integrated cross-border e-commerce support system to assist Korean sellers in entering the Indian market. Kim Boyeon, CEO of Gxl SOFTECH, who participated as a speaker at the seminar, is preparing such a system. Having lived in India for her college education and with experience as an Indian e-commerce seller, CEO Kim currently operates Gxl SOFTECH and has been involved in developing solutions for the Indian factories of Samsung Electronics and LG Electronics.
She is now working on creating a system tailored for the Indian market that can manage the entire spectrum of e-commerce operations, from logistics center operations and shopping mall management to last-mile delivery integration with courier services. For the initial stages of Indian market localization, product certification, and international logistics, Gxl SOFTECH is collaborating with Globalizing and Qxpress.
The challenge of pioneering new global e-commerce markets continues, following efforts in China, Japan, and Southeast Asia. Amid these endeavors, a kind of global fulfillment alliance is being formed to support e-commerce penetration, marketing, and logistics integration for consumers in unfamiliar countries. While it’s still early to judge the outcomes, the changes these initiatives will bring about are worth paying attention to, especially as they are just beginning. This development could mark a significant shift in how global e-commerce is approached and managed, particularly in challenging markets like India.
In the midst of challenges where nothing seems easy, a comforting thought is that the demand for Korean music and dramas transcends borders, even in regions where the lifestyle and culture may feel unfamiliar and exotic. In India, there has been a consistent increase in the popularity of Korean food, cosmetics, and kitchenware, as shared by sellers who have ventured into the market. It's intriguing to consider what outcomes their endeavors will bring. In subsequent content, we plan to return with more detailed success and failure stories of Indian e-commerce market entry. Before that, it would be beneficial to also explore our content on entering the Singapore market and other seller case studies.
Written by Shin seungyoon. He is currently working as an e-commerce logistics specialist journalist at BEYONDX(CONNECTUS).
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