Is India the new sourcing hub for Amazon sellers?

Posted by Jimi Patel | December 18, 2023

Amazon sellers have been constantly seeking new horizons for sourcing their products. While China has long been regarded as the world’s factory, recent shifts in the economic and geopolitical landscape have led to an increased interest in alternative sourcing destinations. One such rising star in the world of international trade is India. In this blog, we’ll explore why Amazon sellers are turning their attention to India and how this dynamic market is poised for explosive growth.

The changing landscape

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For decades, China has stood as an unrivaled manufacturing hub, supplying a vast array of products to businesses worldwide. However, recent developments in the global economy and changing geopolitical dynamics are reshaping the landscape of international trade. Rising production costs in China, driven by factors such as increasing labor wages and stricter environmental regulations, have been a key catalyst for this shift.

A prominent example of this transition is Walmart, one of the world’s largest retail giants. In 2018, approximately 80% of Walmart’s imports were sourced from China. Fast forward to the same period in 2023, and this figure has decreased significantly to just 60%. This substantial reduction underscores Walmart’s strategic move to diversify its supply chains and mitigate the impact of rising production costs.

Walmart’s decision to reduce its reliance on Chinese imports is driven by the pursuit of cost reduction and supply chain diversification. China’s growing production costs have been a concern for many businesses, as higher expenses can erode profit margins. By exploring other sourcing destinations, companies like Walmart aim to maintain competitive pricing for their products.

India’s growing appeal

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While China remains a manufacturing giant with a well-established infrastructure, India’s rise as an alternative sourcing destination is evident. Companies seeking to diversify their supply chains, access cost-effective production, and explore new growth markets are increasingly turning to India as a compelling option for their sourcing needs.

India’s manufacturing sector has witnessed phenomenal growth over the last two years, reaching a staggering $418 billion in manufacturing exports in the fiscal year 2022 (FY22). Despite contributing 3.1% of its GDP, India’s export share to the world has only been 1.6%. However, this is changing rapidly, with immense potential for further growth. By 2028, experts predict that India’s manufacturing exports could hit the $1 trillion mark.

Several factors contribute to India’s growing appeal as a sourcing option:

#1: Cost efficiency
India offers competitive production costs, including lower labor expenses, which can translate into cost savings for businesses. This cost advantage has become increasingly attractive, especially as production costs in China have been on the rise.

#2: Diverse manufacturing capabilities
Indian manufacturers have diversified their production capabilities across various industries, ranging from textiles and electronics to pharmaceuticals and automotive components. This diversity allows businesses to find suitable suppliers for a wide array of products and components.

#3: Government initiatives
The Indian government’s “Make in India” campaign and other initiatives aim to promote domestic manufacturing and export activities. These programs provide incentives, support, and a favorable business environment for both local and international companies.

#4: Skilled workforce
India boasts a large and rapidly growing workforce, particularly in the technology and engineering sectors. This skilled labor pool can meet the demands of various industries and contribute to product quality and innovation.

#5: Geographical advantage
India’s strategic location offers easy access to markets in South Asia, the Middle East, and Africa. This geographic proximity can be advantageous for businesses looking to serve these regions efficiently.

#6: Economic growth
India’s robust economic growth and the expansion of its middle class have created a growing consumer market. This presents opportunities for businesses not only to source products but also to target the increasingly affluent Indian consumer base.

#7: Ease of doing business
India has made efforts to improve its ease of doing business rankings by streamlining administrative processes and reducing bureaucratic hurdles. These improvements contribute to a more attractive business environment.

#8: Diversification and risk mitigation
Recent geopolitical tensions and supply chain disruptions have underscored the importance of diversifying supply sources. India offers an opportunity for businesses to reduce their dependence on a single sourcing location.

Amazon’s ambitious goals

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Amazon too has set its sights on India as a pivotal sourcing hub, underlining the country’s increasing significance in the global supply chain. The company has unveiled an ambitious objective to import a staggering $20 billion worth of products from India by the year 2025. This substantial commitment demonstrates Amazon’s growing confidence in India’s capabilities and its pivotal role in its international sourcing strategy.

Walmart’s strategic shift away from China in favor of India is indicative of a broader trend that extends beyond a single corporation. It reflects a calculated response by businesses worldwide to adapt to the evolving dynamics of global trade. With production costs in China on the rise and geopolitical tensions creating uncertainties, diversifying supply chains has become an imperative strategy. By sourcing products from multiple countries, companies like Walmart aim to reduce their exposure to vulnerabilities and disruptions while simultaneously ensuring a competitive edge in the ever-competitive market.

What does it mean for Amazon sellers?

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The growing recognition of India as a sourcing hub by major players like Amazon and Walmart holds significant implications for Amazon sellers and Amazon management agency. It enables them to access a wider range of products, reduce costs, diversify their supply chains, and potentially tap into the growing Indian consumer market.

#1: Increased sourcing opportunities
As India gains prominence as a sourcing destination, Amazon sellers can tap into a wider range of product categories and suppliers. This expanded sourcing pool allows sellers to explore new product lines and diversify their offerings, potentially increasing their revenue streams.

#2: Cost efficiency
India’s competitive production costs, including lower labor expenses, can translate into cost savings for Amazon sellers. This cost-efficiency can boost profit margins and allow for competitive pricing in the marketplace.

#3: Supply chain diversification
Just as major corporations are diversifying their supply chains, Amazon sellers can follow suit. By sourcing products from India in addition to other countries, sellers can reduce their dependence on any single sourcing location, making their supply chain more resilient to disruptions.

#4: Market expansion
India’s growing middle class and consumer market provide opportunities for Amazon sellers to expand their customer base. Sellers can target the Indian market directly or source products that cater to the preferences and demands of Indian consumers.

#5: Government initiatives
Amazon sellers may benefit from the Indian government’s initiatives to promote manufacturing and exports, such as the “Make in India” campaign. These initiatives can create a more favorable business environment and potentially lead to incentives for sellers.

#6: Global competitiveness
Access to products from India allows Amazon sellers to stay competitive on a global scale. Diversified sourcing and competitive pricing can enhance their position in the international marketplace.

Conclusion

As Amazon sellers seek to diversify their supply chains and explore new sourcing opportunities, India is emerging as a compelling choice. With its remarkable growth in manufacturing exports, cost-competitive environment, and government support, India is poised to become a prominent player in the global supply chain. For Amazon sellers looking to secure reliable and diverse sources for their products, India is an exciting destination to consider. It’s time to explore the immense potential that India has to offer in the world of e-commerce and international trade.

How can eStore Factory help?

At eStore Factory, we’re here to help you navigate the changing tides of product sourcing. Our team of Amazon consulting experts specializes in international sourcing and can guide you in exploring the vast opportunities that India offers. From identifying reliable suppliers to optimizing your supply chain, our Amazon consultants provide comprehensive solutions tailored to your specific requirements. Partner with us to harness the potential of India as a sourcing destination.

Published by Jimi Patel

Jimi Patel, is a Co-founder and CEO at eStore Factory, an Amazon SPN certified agency that serves as a one-stop solution for all your Amazon business needs. Having helped countless brands increase sales and grow their footprint on Amazon, Jimi provides the most practical and effective solutions for your business. He is highly skilled in developing and executing plans that align with your specific business goals and objectives. When not working, Jimi enjoys practicing yoga and traveling to new places. He is an avid reader and enjoys staying up-to-date on the latest trends and developments in the e-commerce industry.