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From our store to your door: E-Commerce in BRICS

E-commerce plays a critical role in empowering and establishing small and medium businesses.

E-Commerce

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  12 May 2022 4:40 AM GMT

Dr B K Mukhopadhyay

(The author is a Professor of Management and Economics, formerly at IIBM (RBI) Guwahati. He can be contacted at m.bibhas@gmail.com)

Dr. Boidurjo Rick Mukhopadhyay

(The author, international award-winning development and management economist, formerly a Gold Medalist in Economics at Gauhati University)

E-commerce plays a critical role in empowering and establishing small and medium businesses. One of the distinctions that Jack Ma pointed out about Alibaba is that his e-tail giant, when compared with Amazon, supports small business owners and logistics companies pioneering a new B2B2C model that was not seen on such a scale before. Globally, the e-commerce volume amounted to 29 trillion USD in 2017, and increasing applications of ICT and industry 4.0 (automation, intelligent systems, agile, cloud) transformed the nature, scale, and formation of businesses engaged in e-commerce.

The Leap of Fa..err…Sales of

E-commerce in BRICS

The emerging nations [Brazil, Russia, India, China and South Africa, i.e., BRICS] have leveraged e-commerce to facilitate rapid, inclusive and sustainable economic growth. It boosts small businesses and creates gig work to generate additional income for many. Both public and private initiatives have supported e-commerce development in rural and remote areas in each of the BRICS countries. Clearly, Indian and Chinese e-tails have raced ahead of others. However, the impact of e-commerce had been rather limited in rural areas or at least evidenced so (far). Disproportionate development of infrastructure in rural and remote regions, limited awareness and education of ICTs, the concept of consumer protection, and the facilities of online dispute resolution are some of the aspects that require some understanding. In addition, how countries represent themselves in the Digital Services Trade Restrictiveness Index (STRI) also matters going forward.

According to UNCTAD figures, the combined volume of e-commerce amounted to 29 trillion dollars in 2017 of which the share of e-commerce in global retail sales had reached 12.2% in 2018. In 2019, e-commerce comprised 14.1% of the global merchandise trade. And in 2023, projections show that this share is forecasted to rise to 22%. When it comes to BRICs, in 2019 Brazil has shown 16% growth in e-commerce, whereas Russia held 18.7%, India with 31.9%, China shared 27.3% and South Africa experienced 25–20% growth in e-commerce in 2017 and 2018 respectively. These came with additional growth opportunities for small and medium businesses as well as transforming logistics operations in these markets and also countries which they trade with. Several studies show that e-commerce also promoted inclusive and sustainable economic growth over time, in particular empowering rural areas. Of the BRICS, China maintains the highest valuable e-commerce market in the group, with a forecast to generate nearly 840 billion US in e-commerce sales revenue by 2021, a significant increase from the previous years. In 2016, China generated 376.2 billion US dollars in revenue from e-commerce sales. That year, the number of digital buyers in China stood at an estimated 468 million.

Delivery and Returns Management

During the pandemic, statistics show that e-commerce brands shipped over 3200 packages per second in 2020. So, for firms who were in the e-mail or any other forms of e-commerce business, it was a good business period albeit with suppliers and logistics pressure. The logistics strategy, therefore, for the e-tails is as important as growth and portfolio diversification strategies that are in place. Most e-tails that are global, of course, manage international e-commerce channels and cross-border shipping – this includes clearing customs, and classifying under the right import fees and taxes categories, all while ensuring customers find a product priced at a competitive level if not entirely at a cost advantage. Warehousing and delivery security management are essential components in this context.

Unitization: It is not only the transportation and warehousing, but the shopping behaviour of customers that can be categorized under 'Unitisation' (simply refers to consumers buying products in small quantities) and therefore packaging of the same has to ensure that the products are easy to handle in logistics terms, do not cost a fortune to pack or handle responsibly (handling charges can surpass shipping charges at times). All while ensuring the products retain the appeal and maintain the saleability aspect.

'Yes, you can return your product within 30 days. No questions asked. 'Product Returns' have a certain USP (unique selling point) appeal in the online shopping experience. Whether the shoes that were delivered happen to be of the wrong size damaged or/ and the wrong item sent, online buyers feel a lot more comfortable shopping freely and 'buy now' when there is an option of easy returns and fully-refundable shopping. Research by the AMA (American Marketing Association) shows that 56% of online shoppers make a choice between 'add to cart' and 'buy now' based on the ease of return policy in place. For certain urgent goods and services, however, this might actually create a lot more hassle than convenience for customers.

'Same-day delivery' gives an e-tail a greater competitive advantage over the rest, e.g., for a conventional physical store/ supermarket – 'location' is a critical factor, similarly for an e-tail, 'delivery time' and 'convenience' are factors that are of primary significance. Delivery time is critical. Therefore, maintaining a strong network and relationship with fulfilment centres in regional hubs would mean faster delivery while also having to pay minimal shipping costs. The other thing to factor in would be the facility location which should ideally be considered in proximity to air and ground small-parcel shipping hubs for speedy delivery. These factors show how instant, reliable shipping with a cost advantage will bid farewell to full truckload shipping.

Customer satisfaction doesn't end when the product or service is returned, but also the following steps – i.e., returns management, returning payments, and acknowledging the steps involved one at a time to ensure transparency and goodwill. 'Returns management' or reverse logistics pose complex challenges at times as well as calls for resource recalibration. Research shows that around 25-30 per cent of all goods purchased online are returned, hence the ability to handle returns can improve customer retention. Research also shows that despite lower incomes, consumers in small and midsized cities spend almost as much online as those in larger, more prosperous cities. Apparel, household products, and recreation and education are the categories where price discounts are greatest. They are also the three largest online retail segments.

Artificial Intelligence (AI)-powered automation is helping firms use data more efficiently and effectively than ever before. AI helps disparate sections of the business communicate and cooperate as one, previously these sections acted in silos. This helps in inventory management, improves warehousing efficiency, and coordinates with modes of transportation much faster with increased predictability (e.g., the warehousing system talks to ships that are arriving early or delayed – and calculates the exact ETA of a delivery).

E-Tail leapfrogging in India

India's e-commerce market is projected to reach the US $111 billion by 2024 and US $ 200 billion by 2026. At its current pace, the Indian e-commerce industry has been on an upward growth trajectory and is expected to surpass the US to become the second-largest E-commerce market in the world by 2034. In 2022, the Indian e-commerce market is predicted to increase by 21.5%, reaching the US $74.8 billion. Additional policy support of allowing 100% FDI is B2B e-commerce tops up the overall potential significantly.

The combined effect of the complexities of store expansion, managing, costing and low returns at shopping malls combined with a distinctive model of e-tailing could lead to a different retail dynamic. Projections show that the e-tail industry in India may leapfrog the second stage, passing directly from the regional to the multichannel one surfeiting newer target demographics and innovative product offerings and delivery models. What's more, e-tailing is not just replacing traditional retail transactions but also stimulating consumption that would not otherwise take place. Finally, e-tailing may catalyse a 'leapfrog' move by the broader retail sector, putting it on a fast track to a more digital future.

Most e-tails aim to be cost leaders rather than differentiators, however, the last mile delivery is still carried out by human labour (and a tiny percentage of these deliveries are by drones in some markets) and this needs continuous attention to ensure staff (largely self-employed, freelancers) are trained regularly and stays motivated. It is essential, therefore, that they are not ignored as they still represent the company's image directly since customers are ultimately asked to 'rate your delivery experience' alongside 'rate your order/ item'. Leading e-tails at this time of history entails embracing an open leadership style where managers are more accessible to employees. Managers are increasingly tech-savvy and need to ensure proper training and development is provided to employees to keep them updated with the latest advancement in deep learning, machine learning, remote sensing, and AI to better streamline workplace productivity and faster response turnover.


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