India’s position in the global e-commerce industry and what needs to prioritise moving forward
By Sainath Gandewar, Sr. Director Of India Finance, Avalara
From the establishment of the first e-commerce company in 1982 to the concept of integrating AI and ML into e-commerce strategies in 2024, the evolution has been remarkable. Initially, e-commerce was just about online buying and selling, but now it has moved beyond basics to leveraging digital tech, changing how global producers, suppliers, and retailers connect and transact.
In this scenario, many companies underestimate the impact of customs and trade regulations on cross-border movements, often neglecting compliance and tax optimization planning. This oversight can lead to penalties and overpaid duties. While managing the pressures to keep the business afloat, organizations need to ensure compliance with numerous international trade rules and regulations in the e-commerce market.
Even though e-commerce is slowly going back to how it was before COVID, things have definitely changed for good. The industry also saw a significant uptick during the pandemic and is now steadily growing, with global e-commerce growth expected to increase at a CAGR of 9% through 2027.
However, the question that lies here is where does India stand in this revolution?
Today, the global retail supply chain is accessible to businesses of all sizes, not just large corporations, allowing entrepreneurs across sizes to tap into this profitable market. International markets have been providing a golden chance for Indian B2B start-ups to expand and enhance India’s export potential. In fact, a report by Export-Import Bank of India predicted that India’s total merchandise exports will reach $116.7 billion in the ongoing first financial quarter, growing 12.3% year-on-year. India’s strengths in high-demand products and higher profit margins per unit of export position it well to benefit from this trend. Currently, e-commerce exports from India account for $2 billion, but there is significant potential to capture a larger share of the projected $8 trillion global B2C e-commerce market by 2030.
Notably, a key factor to this growth is the growing mid-market segment, especially in the US growing eager for new suppliers and products, thus offering compelling reasons for founders to consider international ventures. In addition to this, as social media platforms like Instagram and Facebook are taking significant steps to become major channels for e-commerce, with features like in-app purchases gaining traction – B2C business have also received a seamless pathway for businesses to transcend geographical boundaries and connect with consumers across the globe.
Technology leading the path of e-commerce evolution
While India has excelled in services exports, growing at an annual rate of 14%, accounting for about 4.4% of global services exports, its performance in goods exports has been comparatively modest, holding just a 1.9% global share. To improve this number, businesses are heavily investing in technology-driven solutions across logistics infrastructure, financial assistance, and especially tax compliance.
Businesses are uniquely positioned to leverage these technological advancements by integrating them into their operations, thereby enhancing their supply chain management capabilities. For instance, harnessing AI and IoT can improve efficiency, reduce costs, and lead to faster decision- making.
Moreover, businesses are also starting to adopt advanced technological solutions and establish robust tax compliance mechanisms from the very beginning of their international expansion efforts. It is no longer also only about exports, but the e-commerce post-purchase experience is crucial as an unprepared retailer can face significant complexities in international commerce.
One common hurdle is navigating international customs and accurately charging customs duties to customers. Here, investing in automated software, implementing AI-driven analytics, and adopting cloud-based ERP systems can ensure tax compliance, keep businesses updated with regular tax changes, and help understand tax obligations.
Potential path
Indian businesses are revolutionising the retail supply chain and shaping the future of retail itself. Their innovations are laying the groundwork for a more efficient, transparent, and sustainable industry, advancing one breakthrough at a time. With a keen eye on emerging trends like customisation, robotics, automation, blockchain, and AI, they’re pushing the boundaries of what’s possible.
While India is all set to become an e-commerce hub, the next crucial step for the country is to focus on the complexities of building a robust international business. With the hypergrowth experienced by many companies expanding abroad, tax and compliance issues often get overlooked, posing significant risks. To ensure sustainable growth, Indian e-commerce businesses must prioritize tax regulations from the outset to avoid legal and financial pitfalls.
Additionally, implementing advanced technology and developing strategies that support long- term success is crucial for efficient management and compliance. By doing so, Indian businesses can navigate the challenges of global trade and truly capitalize on the expanding international e- commerce market.
