Sourcing India

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Sourcing India

Indian exports have been on the rise since the early 1990s, both as a share of GDP and as a share of world exports- as a share of India’s GDP, and as a share of world exports. By 2013, the total exports as a share of GDP had reached 25%, compared to 10% in 1995 (Source: World Bank). By the same token, Indian goods exports as a share of world exports had also tripled during the same time period to 1.7%. Likewise, India’s service exports had also tripped to over 3%.  In 2021, India’s share of world exports for products and services is estimated to be 2.1% and 3.8% respectively, showing a steady increase 2013 onwards as well. 

The increase in trade over the years, and more specifically, the increase in the quantum of export has led to structural transformation of the Indian economy- diversification across destinations, products and services, composition of the export basket measured by technological content and level of complexity of exports, deviation or realignment of the locally produced goods and services to globally traded goods and services. 

While these structural changes have opened the doors for companies all over the world to source products and services from Indian manufacturers for the obvious cost benefits that they provide, lack of proper understanding of these structural changes and local expertise has often discouraged overseas manufacturers to source from India. Despite advancements in technology and increased globalization, companies lacking a good understanding of the indian supplier landscape or a local sourcing company in India, are often left confused and end up investing disproportionate amounts or financial and social capital to come up with jaded and biased solutions. Working with local sourcing and procurement service providers like Redeure can help companies navigate sourcing complexities, especially in India and APAC region. 

Mentioned below are some of the benefits of Sourcing from India and Indian Manufacturers in 2021 and beyond as opposed to their Chinese counterparts:

#1. Unique Products

One of the key reasons you should look at India is because there are a lot of unique products available in India that are not available in other countries. A lot of the products are hand crafted and high-end. This leads to attractive and eye-catching products, which are especially great for e-commerce. You find a lot of these “thumb stopping” products that are very colourful, attractive, and great for e-commerce. Along with that you see a lot of local indigenous styles that are not found in other countries. For example, many different types of fabrics that you find all across the country are very special and unique to India. Similarly for metal handicrafts, there are a lot of local designs that you won’t find in other countries.

Some of these products can command higher prices, because they are hand-made and tend to be of higher quality; for similar products from China that are mass produced, these products tend to be poor in the quality department. When you source from India, many product categories would be smaller volumes with slightly higher prices, as opposed to their Chinese counterparts when you have to order multiple thousands of pieces.This however, does not necessarily mean that these products cannot be mass-produced because they are hand-crafted. India is a great market to source high-quality products irrespective of quantities.

#2. Low MOQs

Another advantage of sourcing from India is the low MOQs, when your product is just starting out, or if you want to test a category. It’s hard to swallow the idea of buying literally 1000s of something when instead you can get 200-500 to start. A lot of production facilities, typically those for hand-made items, can accommodate lower MOQs. Whereas for mass-produced items, it’s usually difficult for chinese suppliers to adjust their production capabilities, and it’s not really economical for them to produce in lower volumes. 

For handmade items the MOQs in India may be between 300-500 units. Although most manufacturers do have a minimum invoice value that they will work off of. Other textiles, including garments, may be higher. Sometimes you can order as few as 100 units for a trial order, depending on if it is an existing design or not; if you have a relationship with a supplier they are usually very accommodating.

#3. Abundant Raw Materials

India is a huge country and there are a lot of local raw materials available which makes prices of products made from these raw materials very competitive, for example cotton, silk, jute, marble, metal, wood, bamboo, leather, etc. All these products are locally available whereas in other countries or alternative markets like vietnam or Indonesia, many of these materials have to first be imported from china and that increases the overall production cost. India, on the other hand, has local production of these raw materials. In fact, India is the second largest producer of cotton in the world.

#4. Your IP is Safer(er)

Indian suppliers typically have a bit more respect for IP than Chinese suppliers; one of the reasons being that they themselves invest a lot in RnD and design development and it’s also the culture and the democratic nature of society. If you have your own designs, they are less likely to be copied by your suppliers in India, and infact most suppliers don’t sell directly on amazon or other marketplaces, at least not yet! So your supplier won’t be your competition on Amazon, which is very likely to happen in China. 

#5. English Speaking

Most suppliers in India would be English speaking, and most people in India would be English speaking. There are about 22 official languages in India and each state has it’s own different language with a different script. People from different states typically communicate in English as they cannot understand the regional languages and dialects. So English is the second official language of India and it helps Indians communicate with each other. Hence, you don’t need translators when you go to visit trade shows or to communicate with suppliers. Another very important advantage is that the contracts can all be in English. Not to say that this is a hindrance in China; there are a lot of people that speak English, but it’s a smoother flow of information as opposed to China. 

#6. No “Trump Tariff”

Another advantage of sourcing from India is that there is no 25%  tariff on Indian made products, yet. So if your product is hit by tariffs, you could consider sourcing those products from India. There is some trade tension between India and the US, but as of now, it should not affect most trade categories, especially eCommerce. 

Some Differences Between India and China

As mentioned above, it’s not like India is going to replace China; China is still the main manufacturing hub for most manufacturing categories. But it seems like a good idea to diversify your sourcing markets and not to put all your eggs in one basket.

In China, of course, there is a lot of automated large scale production and high-volume production. You’ll find less of that in India, specifically for products that eCommerce sellers are looking to source. There are large scale manufacturing facilities for things like automotive parts, cars, machinery, electrical pumps, and agricultural equipment, etc. But for the products that eCommerce sellers would source, most of the factories would be smaller scale, about 100-150 workers. There will be some machines involved, but most of the processes would be done manually. 

One of the disadvantages of sourcing from india is that there are fewer product categories, whereas you can source pretty much anything and everything in China – from a needle to an aircraft. In India, there are certain product categories that are more competitive.

Also, in India there is not very much information available online. Whereas for China there are so many blogs and youtube channels and experts. It’s a lot easier to source or import from China as opposed to India. This could, however, very easily be turned into a strategic advantage for people that are willing to invest the time to get this information and look for these suppliers.

In addition to the above points, some logistics providers in India are not familiar with FBA requirements compared to China where there are a lot of service providers that are familiar with it. In most cases your supplier in China will just manage the shipment for you and they’ll do DDP. Whereas in India, you’ll most likely have to work with a separate freight forwarder. The supplier will rarely be able to manage your shipments. And you’ll have to be a lot more careful in choosing a freight forwarder and other service providers given that not all of them are familiar with FBA.

India could be described as being where China used to be 3-4 years ago. A time when Amazon FBA sellers were just starting to source from China and at that time when none of the Chinese sellers were familiar with these requirements. The same trend will occur in India over the next few years, where eventually all the suppliers and freight forwarders will be accustomed to FBA requirements, but right now they are just starting out.

Another thing you will find is that the infrastructure is not as developed in India as compared to China – things like roads and the ports. In China, all of these things are very efficient. There are the areas where India is currently focusing, and there have been significant improvements over the past few years but there is still a long way to go.

Labour costs are lower in India as compared to China as well. In China labour costs are higher and increasing, especially in cities like Shenzhen and Guangzhou that are the main production hubs. This is one of the reasons why a lot of larger retailers and importers have been looking at alternative markets over the last five years or so. For instance, a lot of the low-end garment production has already moved out of China and has gone to Bangladesh, Vietnam, Indonesia and India. And one of the key drivers is the continuously increasing production costs in China.

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