Logistics in India

Shipping

Getting your goods to your prospective Indian customer is something of a challenge. In practice this is also the attitude taken by many Indian customers themselves. Although accurate data is, for obvious reasons, rather difficult to come by, it is believed that around 25% of Indian ecommerce sales are in practice shipped to addresses outside India (to friends or relatives) and then “informally imported”. This hidden potential in India consumers may make targeting them more attractive than is initially apparent.

There are 25,000 postal code regions (known as PIN codes) in India. Only India Post covers most of them (Figure 25). In practice this is less of a restriction than might at first appear, because most prospective customers will live in the major cities.

In practice, you therefore have three (or four) main options:

1. Use a point-to-point shipper with an Indian presence, such as DHL or Fedex, which is expensive but reliable; it may not cover the whole of India, but in practice will probably cover 98% of likely sales. You may need to modify your checkout to validate PIN-code coverage. Expensive but reliable.

2. Use a specialist parcel forwarder with a partnership with a local Indian delivery company, such as wnDirect, P2P logistics, or Spring. Mid-price, mid-service.

3. Rely on accessing India Post, usually by using your local national postal service e.g. Royal Mail as local the access point. Lowest price. Unfortunately also accompanied by far the highest chance of the parcel getting lost. Again statistics are difficult to come by, but anecdotes are not. If your items are of high value, probably not the best choice.

4. Don’t ship to India, but still target Indian customers and hope they’ll manage to get the stuff there by themselves.

The alternative, particularly if you are using marketplace channels, is of course to ship in bulk to India, and have a local partner organise the delivery. A local partner will be mandatory if you are at any useful scale: more rules on foreign ownership apply here, most especially a requirement to partner (or have) a local legal entity.

Offering free returns from India back to your home country is prohibitively expensive. Even Asos, normally major enthusiasts of free or subsidised fully-managed returns don’t attempt them from India, instead directing the customer to their nearest Indian Post Office.

Using the marketplaces

Both Flipkart - plus its subsidiaries Jabong and Myntra – and Snapdeal aim to own the relationship with the end-consumer. Obviously there’s a possible downside to this: disintermediation from your customers. However there is a much larger corresponding upside: owning the relationship with the end consumer means they also take ownership of last-mile delivery… and returns.

Flipkart/Jabong/Myntra especially offers a variety of models for getting your goods to the final purchaser, including:

• Fully “stocked” model in India

• Consignment model, where you ship wholesale to India to their warehouse(s)

• Parcel-by-parcel model managed by a third-party specialising in purchasing at wholesale prices in the UK, and selling on the marketplaces in India on your behalf

There are pros and cons to each, but in general, having someone else shepherd your items through importation, customs, and last mile is worth serious consideration.

Taxes & Duties

There is no De Minimis for shipping into India, so customs duties will apply. There’s a lot of variation in rates, from 0% to 150%, although in practice the overall results tends to be somewhere between 20% and 30% for most likely categories of interest for cross-border ecommerce. Their structure is complex, and includes various additional levies, such as the disturbingly named CEX and CESS. Calculations are not straightforward.

The Indian central board of excise and customs provides a website which allows you to calculate duties and tariffs, although be warned that it’s fairly maddening to use66: www.icegate.gov.in/Webappl . You will need the standard HS code for the product (which this website refers to as CTH, India’s flavour of HS, although for most purposes they are identical).

In practice, excluding VAT (e.g. British VAT at 20%) and then applying local taxes and duties, will tend to make your items about 10-15% more expensive overall than they are to domestic customers. A few relevant examples follow. (Figure 26)

Offering DDP (delivery and duty-paid in advance) shipping on your website is strongly recommended for India, unless you want your parcels to become enmeshed in Indian bureaucracy not famed for its speed.

Summary

Logistics is a major barrier to Indian ecommerce.

   »» Many Indian customers work around this by having parcels delivered by websites to overseas addresses of friends or relatives

   »» Returns to home-country are likely to be prohibitively expensive, and few are attempting it

• Flipkark, Jabong, Myntra and Snapdeal all insist on taking care of last-mile delivery themselves; it may well be worth taking advantage of this, shipping wholesale to their warehouses, or going further and working with them to collect from you in the UK

• Fedex and DHL have extensive coverage of India for premium parcel shipping; DHL has a controlling stake in local player Blue Dart

• Solutions relying primarily on India Post enjoy a rather variable reputation, especially for higher value goods

• Semi-managed solutions offer a good balance between value and reliability for shipping into India.

• DDP (delivery and duty paid) shipping is strongly recommended into India

• Customs duties levels are generally high enough to ensure your products will be 10-15% more expensive in India than at home (once sales taxes are taken into account), but are not impossibly prohibitive