It recently came to light that the Indonesia based online marketplace brand Shopee had to close operations in India, one of the largest potential markets for ecommerce. This sudden exit has a lot of customers confused and fellow competitors at the edge of their seat.
Shopee entered the Indian market and commenced operation in the November of 2021. It wasn’t exactly a perfect sail as it had a lot of oppositions from politicians and trade bodies. In spite of the high tides, Shopee rowed its way to customers by offering them way too many goods especially low value electronics like headphones, chargers or accessories like mobile phone cases at throwaway prices. This did attract a certain crowd of customers, but was it a sustainable means to growth? Orders were pooling, revenue was rising slowly despite the heavy losses incurred in the name of marketing. Right when we expected the offers to cool down and Shopee to actually start optimising their user experience and growth, it knocked them out cold. What was it? Let me break it down to you.
The fall of Shopee is mainly due to China and its indirect interference. Let us see the troubles it had point by point:
1. Large unrealistic offers especially while pooling Chinese products in the market lead to retailers get a feeling of unfair competitiveness. Antinational feelings and concern of low quality of Chinese goods distributed in the markets were not only a concern to retailers as well as consumers. Trade bodies have even appealed to the government and Competition commission of India (CCI)
2. In spite Shopee being owned by its parent company SEA, an Indonesian entity. There was news that Tencent, a Chinese company was a stake holder in it. There was also news last year that a considerable portion of data of SEA were stored in Tencent’s cloud servers. This was not a good thing as the government of India has been pushing out Chinese apps and games accusing them of data pirating since 2019. One of the most notable bans were Tencent powered PUBG game, Chinese fashion brand Shien and SEA’s Free fire which was the most recent. Moreover, the fact that the founder of SEA, Mr. Forrest Xiaodong Li is of Chinese origin made matters worse.
3. Several trade bodies were against Shopee’s entry. Most notable was CAIT; its general secretory Mr. Praveen Khandelwal wrote in his letter to the Finance minister Mrs. Nirmala Sitharaman and to the commerce minister Mr. Piyush Goyal regarding their grievance. One of the important points quoted was, “the company is Chinese and has violated the foreign direct investment (FDI) policy of 2020, which mandates prior Union government approval in the case of any investment is made by an entity of a country sharing land border with India, or where the beneficial owner of an investment in India is situated in a land bordering country”. The amended policy was launched in April 2020 amid fears over Chinese takeover of Indian firms. CAIT has also claimed that Shopee began operations under a complex corporate structure across Singapore and the Cayman Islands to hoodwink the Indian government and infuse Chinese funds into India.
All these factors taken into consideration and the governments firm stand against, when SEA petitioned against the ban of Free fire claiming they were of Indonesian origin lead to Shopee rethink its future. They did not want to pour capital into a market where their future was uncertain. They feel better about focusing on other markets such as Brazil where the potential is as high as it is here but with lesser geopolitical tensions. It is always important for a business to research thoroughly not just about its consumer market but also on the law and governments stand. It is also the responsibility of a company to keep the goodness of its consumers and environment in mind while exhibiting fair play throughout its business cycle. This incidence would have cost the firm millions but the lesson learnt is surely worth it.
Another major question is that is this a move by the government and other bodies to push out China based entities or is this a step to curb out all major ecommerce players that are foreign without any ties to China. Also, what would be the fate of other ecommerce players like Shoppymore etc when they set foot in the Indian soil. Do tell us what you feel in the comments.
Reference: https://theprint.in/economy/e-retail-firm-shopee-is-chinese-entered-india-illegally-traders-body-wants-action-from-govt/782572/
https://economictimes.indiatimes.com/news/morning-brief-podcast/morning-brief-shoppees-choice-the-questions-that-arise-as-shoppee-shuts-shop-in-india/podcast/90581275.cms?from=mdr
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