How cross-border e-commerce is helping Chinese SMEs lure Indian customers

A party dress for less than Rs 2,000, a wristwatch for Rs 145 or tea infusers for Rs 100, the prices are as enticing as the designs on international online retail websites such as Club Factory, SheIn, Romwe, Jollychic, Wish or AliExpress. These sites attract everyone, from fashionistas to bargain hunters, looking for the best deals on unique pieces.

Cross-border e-commerce, especially for apparel and accessories, can no longer be ignored. Just as Flipkart and Amazon India cater to the demands of Indian online shoppers looking for quick delivery, cross-border e-commerce platforms help customers buy from small and medium enterprises based in China and other geographies. Though these cross-border firms take three-times longer to deliver goods as compared to Indian e-commerce sites, they are able to offer products at cheaper rates due to low production costs and no payouts to middlemen.

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

As part of China’s Opening Up policy, the country has set up 35 cross-border e-commerce zones in the last three years, streamlining approvals, logistics, storage and customs clearance from these zones. This coupled with access to the internet and increased consumption behaviour in India will see these players emerging as a strong contender for Indian dollars spent on online shopping.

The top cross-border e-tailers

Led by the two-year-old entrant Club Factory, which says India is its largest market with 40 million users, cross-border e-commerce platforms account for a significant share of shipments. Though the market is still dominated by Flipkart, Amazon India and Myntra, according to industry experts, Club Factory alone does close to 80,000 orders a day in the country.

According to a recent report released by app market data provider App Annie, the huge population and high potential for economic growth in India have attracted the focus of the top five of the ten best-performing cross-border e-commerce apps—Club Factory, SheIn, Romwe and JollyChic. Apart from India, these apps also count the Middle East as a critical market for growth.

Though it tops the list in the App Annie report, AliExpress, the Alibaba-owned cross-border platform for small merchants, has been unable to dominate in India. Its major market remains the US and Southeast Asia.

In contrast, US-headquartered Wish wants to ramp up its presence in India and is currently in the process of building a team in the country. It manages between 10,000 and 20,000 orders a day.

Neither companies responded to specific queries from TechCircle on their business models and India market.

According to industry experts, the total number of shipments from China and Hong Kong to India stands at close to 1.3 lakh per day. After passing through customs clearance, the shipments are delivered within India by local logistics partners.

“Chinese manufacturers are growing their cross-border sales into the business-to-consumer space as it is more profitable. It cuts down the middlemen including distributors, wholesalers, importers and exporters who are a part of a business-to-business transaction, improving commissions and the price difference is usually 1.5 times between the goods sold,” says Shayak Mazumder, chief executive and founder at Eunimart, an India-based cross-border e-commerce services provider.

Eunimart partners with companies like Alibaba-owned branded goods seller Daraz operational in Pakistan, Bangladesh, Sri Lanka, Nepal and Myanmar; Amazon’s global selling division, eBay; Etsy and others. It provides plug-and-play solutions for cross-border logistics, payments, e-commerce technology and digital cataloguing.  

Mazumder adds that international cross-border platforms have been eyeing the India market, with the result that these companies have been building local teams and partners for better customer experience. But who are these users willing to wait for 15 days for their orders?

“The demographic includes both men and women in the age group of 18-35 years. We have a healthy mix of demand coming from both metros and non-metros,” says Vincent Lou, founder and CEO of Club Factory. He adds that the top-selling categories in India are apparel, accessories, jewellery and household products.

Localisation is key

Building a store for local audiences in a familiar language with ease-of-payment options are critical to running the cross-border commerce business, says Eunimart’s Mazumder.

To this effect, companies such as Club Factory, which are focused on India, have come up with multiple tweaks. It, along with SheIn, introduced cash-on-delivery earlier this year, an important mode of payment in the country. However, AliExpress continues to be a prepaid portal.

“We have drastically reduced delivery time to under 12 days, on an average. Customers can also return the products with easy return policies. They can either ship the returned goods to the warehouses or can use a reverse pick-up service to send the product back. Refund is processed at its earliest and we are continuously working with payment gateways to shorten the time,” Club Factory's Lou explained.

Tracing the delivery pipeline

Driving this demand is a variety of choices at prices which give the dominant e-commerce platforms in India like Flipkart, Amazon India and Myntra a run for their discount-dollars. Unlike them, Club Factory is a pure play marketplace which works with merchants in China. When a customer places an order on Club Factory, it is directed to the merchant who has the inventory at the best price. It is a fine balance between just-in-time and a marketplace model. The orders are collected and aggregated through freight forwarders such as Fafalux Global Pvt. Ltd, AllJoy Supply Chain and others for shipping to India.

Once the shipment reaches India, the Club Factory branch in the country, which operates as the importer on record who is responsible for the goods received from abroad, breaks them down into individual orders which are despatched through local delivery partners such as Gati, Delhivery and Ecom Express among others. According to Lou, the company has partnered with five Indian logistics players.

“For us, Club Factory is one of our top customers and others form the mid-tail segment for orders originating through cross-border e-commerce. We have been talking to multiple players in the space and they are extremely bullish about India and have their teams parked here,” says Dipanjan Banerjee, national sales head at logistics provider Ecom Express.

The last step varies across different businesses. Being an importer on record makes it easier for Club Factory to accept returns and store the goods in a warehouse, which can be resold or liquidated, as the case may be, says Lou.

A company like SheIn partners with Indian merchants that act as the importer on record. These merchants get a commission of 2-3% on each order consignment and are responsible for disputes that may arise in India. The shipments are sent out to consumers from the warehousing facility. In the case of AliExpress, where a customer buys from the merchant directly, each order is shipped separately, and free delivery through China Post can take up to 45 days.

Despite the long wait, the after-sales process of returns and refunds remains an issue to be resolved.