The Importance of Supply Chain in Cross Border Ecommerce – Part I

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Anyone who has been an e-commerce seller in India, recognises the importance of supply chain in enabling ecommerce. A good supply chain, especially in India where e-commerce is so highly fragmented, is paramount to making the difference that makes the customer choose you over others. Customers routinely leave the kart without completing the transaction when they are not satisfied with either the supply chain partner or the model. In India, more so than most other developed countries supply chain has been the differentiator between a good marketplace and an average one. The fact has remained that supply chain continues to be a challenge in terms of delivery timelines and customer satisfaction when it comes to Tier II and lower cities in the absence of a good logistics partner. A lot of new age logistics start-ups are striving to fill the void. However, they mostly operate in Tier I cities where their operational models make sense because operating in Tier II and lower cities requires significant investment in terms of money and time before any reasonable returns can be expected.

When it comes to Cross Border Ecommerce, supply chain plays a much more important role. In fact, unlike in domestic e-commerce, the right supply chain model is literally the enabler between your product reaching the end customer or not. This is because your product needs to cross several barriers before it can reach the end customer. In this day and age of an inter-connected world, it is fairly easy to forget that real world operational difficulties still need to be navigated. Let us understand what it takes to deliver your product to the end customer in a satisfactory way:

  • International research carried out by multiple agencies such as Paypal, Pyments, etc. are clear that you have to be able to display the accurate final price to your customer without too many different components confusing her. This means that all your small cost components should be built into your final price being displayed on the marketplace. You should not show customs and duties payable, payment fees, etc. unless you want to lose customers.
  • You have to be able to clear outbound customs from India without hassle, spending time or adding extra costs to your price.
  • Your product needs to be able to clear customs scrutiny, pay the customs and duties applicable and also pay local taxes and VAT in your destination market without involving your customer. This implies a very sophisticated logistics model that is able to understand your product in detail, prevent restricted products from being shipped, pay such dues as are applicable and deliver the product to the end customer.
  • In many European countries, customers are protected by the local laws and are able to return your products within 14 days without requiring to state a reason for return. This implies a higher rate of return when the products are not satisfactory. It also implies that you need to be able to build the cost of returns into your product price and be able to create a pipeline for returning the products back to India.
  • Returns back to India are more complicated than is normally assumed. E-commerce products do not pay outgoing duties and no customs note is generated on its way out of the country. This lack of a customs note makes it impossible to get the product back into India without paying import duties in India.

In our next article we will discuss how to tackle the challenges described above and the various supply chain models which we can normally employ.

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