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Transforming the Auto Component Industry

Transforming the Auto Component Industry

The huge potential of e-commerce towards retail exports from India will only be feasible through modifications.

In today’s fast-paced world, the transformation that e-commerce is bringing across different industries can’t go unnoticed. Taking into account the kind of opportunities it is offering to a large number of industries, doing e-commerce is not merely an emerging industry but today is an integral part of any business.

Digital link is an essential component of the new age globalisation, and retail e-commerce especially, B2C e-commerce has become the choice for retail trade all over the world. The total global e-commerce transactions in the year 2016 was worth $ 1.9 trillion which accounted for 8.7 per cent of the total retail spending worldwide. This figure is expected to grow above $ 4 trillion by the year 2020, making up to nearly 15 per cent of the total retail spending. Even the number of digital buyers worldwide is anticipated to reach 2.07 billion by the year 2019. The e-commerce sector is expected to form a significant part of the Indian internet market with a value close to $ 100 billion by the year 2020. India’s estimated overall export is $ 302 billion contributed by 93 product categories and exported to 159 countries. Here, $ 53 billion amounts to B2B exports, under approximately 20 product categories exporting to countries such as UAE, USA, Singapore, UK, Japan, EU and South Africa amongst others.

Cross-border e-commerce B2C has given an opportunity to the Indian MSMEs to supply to a larger market ($ 53 billion) and engage with the international consumers directly that will further facilitate MSMEs to assess the international sales structure. With the current internet penetration rate in India to be around 34.4 percent (31st March 2017), the possibility of shifting towards online B2B and B2C is assumed to be high.

The Auto Components Industry in India has witnessed a promising growth over the last few years by contributing 7 per cent to the country’s GDP and generating employment for around 19 million people. Under HS Code 8708, parts and accessories of motor cars, special purpose motor vehicles, tractors and other motor vehicles for the transport of persons, goods, etc., the exports have been made worth Rs. 25,73,663.87 lakhs with major exports routed to the USA amounting to Rs. 6,31,027.13 lakhs. As per the information by ICRA Ltd., the Indian auto components industry is expected to grow by 8-10 per cent in the year 2017-18. These mounting export figures show that Indian MSMEs have tremendous potential, but only a few export via traditional mode.

Thanks to the advent of the digital age and changing customer preferences, technology is reducing barriers as successful small enterprises are not confined to any precise geography and can cater to customers worldwide. Comprehending the supply capacity present in the auto-components industry, it is clear that MSMEs can successfully capitalise on the opportunities available by foraying into the e-commerce sector.

Recently, during the launch of the study “Exploring potential of e-commerce for retail exports of Indian MSMEs in the manufacturing sector”, prepared by the Federation of Indian Chambers of Commerce and Industry (FICCI), Indian Institute of Foreign Trade-Centre (IIFT) and Apex Cluster Development Services, supported by e-commerce platform eBay India, Sanjay Bhatia, President FICCI, said,“There is no way we can undermine the contribution of MSMEs to our economy, and it is, in fact, critical that we continue to explore synergies to integrate this crucial sector with the latest emerging trends. e-commerce is one such trend which is massively changing the mechanism of global businesses”.

According to the study, the total potential for India from digital transformation (B2C e-commerce retail exports) is estimated to be $26 billion, of which MSMEs can unleash $2 billion in revenue from 16 product categories by 2020. To unlock the revenue potential, it is imperative for the MSMEs to expedite their digital transformation and become a part of the e-commerce marketplaces like eBay, Amazon, etc.

Why e-commerce?

E-commerce is a new trend for exports expansion. By e-commerce exports, the geographic limitation gets dissolved, and the whole world becomes the playground. The operating costs of E-business are comparatively lower than the traditional method of doing business. The e-commerce store works round the clock where the buyer can place the order any time from any location, unlike regular store. e-commerce takes a minimal time (few minutes) to complete the entire transaction thereby saving the valuable time of both the market players.

Different e-commerce portals like Amazon, eBay are selling auto-components to the global customers online. In eBay, it is one of the fast moving product categories with its selling period being three minutes; every three minutes, a car or bike accessory is exported to some country. This small trading period indicates that by being present online, how digital selling can help gain orders and generate huge revenues due to this technological revolution in a short span of time.

For all the MSMEs planning to exploit this digital opportunity, getting registered on an e-commerce marketplace and selling through that platform is more viable than running one’s website. A new website entails a substantial investment regarding money and inventory to offer extensive variety to the customers and then the digital marketing to attract customers. An e-commerce marketplace helps list the products without making any massive investment. A buyer base can be formed quickly by being on an e-commerce marketplace like eBay as they already have their customers from across
the world.

A fledgling entrepreneur is bound to face teething issues when jumping into e-commerce battleground like clicking product photographs, writing product specifications, uploading of the product pictures, packaging of goods to avoid any damage during its transportation, how to operate e-payment system and the logistics arrangement. All the nitty-gritty to enter this e-commerce world are taken care of by the e-commerce marketplace. For instance, eBay by its study as mentioned above is doing a project to get the MSMEs in the auto components industry onboard by organising workshops and providing constant handholding to them.

In this hyper-competitive environment, one thing that is constant across different sectors is change. Changes that took years to unfold, now happen in weeks and months. The e-commerce attempt by auto components industry is slower and less developed than the other industries due to its complex products and supply chain. But to get a piece of the e-commerce pie, the MSMEs in the industry need to embrace the digital revolution, change their way of work and evolve business strategies by making e-commerce (which is the ultimate future) a necessity to compete with the rivals and access more and more customers.

Author of this article is
Rajveer Singh, 

Apex Cluster
Development Services.

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