The border tensions between India and China have caused India to delay the custom clearance for components, goods, and raw materials that are imported from China. This step taken will negatively impact companies like Amazon, Flipkart, Paytm, and Snapdeal. More than 50% of sales of these eCommerce platforms are dependent on Chinese imports.
Smartphones are the largest sales driver for online retailers in India, and besides that, products for personal care, consumer electronics, toys, home and furnishing also rely on supply chains from China and will be wedged.
According to the 2019 GMV or Gross Merchandise Value data, that was provided by a sectoral analyst, these categories made up 51% of the sales for the Indian eCommerce industry. Smartphones make up about 35%, consumer electronics is 7%, home, and furniture 4% while toys form 2% of the online GMV. The analyst also mentioned that these restrictions will not remove the Chinese products under these categories entirely.
Several social commerce startup companies like Bulbul, Meesho, Simsim, Shop101, etc. have products that are cheap and pocket-friendly items from China.
The same analyst also said that the hindrance in supply will not just affect the eCommerce but the overall retail chain. But the dependence of eCommerce on certain categories, explicitly the smartphones, to boost sales is higher compared to the offline retail.
An investor for a social commerce startup revealed that between 60 to 70% of the products that are available for below Rs. 300 in these companies are imported from China. India does not have the setup or capabilities to manufacture these items at such low costs.
Some senior executives from eCommerce platforms say that this movement to limit Chinese supplies will affect the local retailers because most raw materials or components cannot be brought locally either because there is a lack of scale production or they are not available at all.
The pandemic has already drained the Indian economy and with this curb on Chinese products, both big and small startups and eCommerce platforms would suffer.