E-Commerce in India Group 5
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E-Commerce in
India
Group 5
Sectorial Description
E-Commerce industry: An introduction
• Ecommerce is the trading in
of products or services using
electronic technologies like
Evolution of Ecommerce
the Internet
• It was first demonstrated by
Michael Aldrich in 1979
Types of Ecommerce
B2C
B2B
Amazon.c
Quill.com
om
fastenal
Ebay.com
C2C
Olx.in
Quikr.com
E-Commerce industry: An introduction
The History of Ecommerce in India
The E-commerce Boom – Quick Facts
• The number of Internet users has increased
from 150 million in 2012 to 213 million in 2013
• There are 130 million mobile internet users as
of 2013 and expected to touch 185 million by
June 2014
• All E-commerce companies offer COD which is
the most preferred mode of payment in India
• E-commerce companies offer good discounts
due to less operational costs
• Wide variety of goods at low prices and home
delivery is a key reason behind people adopting
e-commerce
Source: Users Statistics - IAMAI
Global Context: E-Commerce Industry
Most Popular Buying/Browsing categories
Source: Nielsen Global E-Commerce Report (Aug 2014)Global buying intentions (August 2014 to Feb
2015)
Source: Nielsen Global E-Commerce Report (Aug 2014)PEST Analysis
Economical
Political • Existence of a complex and multiple tax
• Increased government commitment to system
increasing internet penetration • Low entry barriers (Entry costs only
• Government decision to disallow FDI in US$10000-20000)
B2C E-Commerce • Reduction in cost of internet access
• Foreign firms could have invested in • High costs in acquiring new customers
ecosystem
• Inadequate capacity and high cost of
• Lack of dedicated E-Commerce laws logistics in India
Social Technological
• Increasing vigilance of customers (e.g. Big
Billion Day) • Internet penetration is growing in towns
with population of less than 0.5 million.
• Most Indian consumers prefer to sample a
product before making a purchase • Minimal technology integration with
merchants results in e-Tailers seldom
• Almost 85% of the consumers indicated having adequate visibility of the actual
willingness to purchase private labels stock situation
promoted by retailers
• Substandard technology infrastructure in
most logistics companies
Source: Ernst & Young, Re-birth of E-Commerce (2013)Connected Sectors and their impact on E-Commerce
• State of the art Enterprise IT Architecture, Warehouse and
Inventory Management systems, Supply Chain Management
systems, RFID Tagging devices, POS systems etc. help in
Information synchronization and automating processes
Technology Services • Cloud based e-commerce applications help lower costs,
accelerate deployments and respond quickly to changing
opportunities
• Usage of Drones for package delivery and replacing
traditional carriers
Robotics • Acquisition of KIVA Systems by Amazon – To automate
processes like product placement, effective alignment of
rack storage etc. robots are used in warehouses
• India has a user-base of over 243 million internet users and
over 185 million mobile internet users
Telecommunication • Tier 2 and Tier 3 cities opening up rapidly to e-commerce
and data services • To expand coverage in rural markets robust Mobile and
Data Communication Infrastructure with 3G and 4G
connectivity is importantConnected Sectors and their impact on E-Commerce
• Newer mode electronic payment services like
ApplePay(partnered with AMEX, VISA and MasterCard) have
been launched allowing a one-touch payment system making
Electronic Payment shopping easier
Services • Such payment services can be integrated on e-commerce
mobile apps thus making business easier for e-commerce
business owners
• Till date logistics services have better coverage of Tier-1 cities
• 90% of goods being ordered online are delivered by Air
increasing delivery costs by e-tailers
• Models like Cash-On-Delivery, on-time delivery, seamless return
Logistics Services process etc. are flawed; thus requiring e-tailers to increase
supplier bases, setup regional warehouses and be dependent
on third party logistic services to achieve low delivery costs
• Inefficient and costly Logistics, force e-tailers to withdraw free
delivery which could affect their business opportunitiesAdministrative Ministry and Government Policy Framework
Government Rules and Regulations
•Online issues governed by the IT Act. Of 2000
Ministry of
•E-Commerce owners must ensure cyber law due
Commerce
and Industry diligence in India
•Legal requirements for undertaking an e-
commerce venture in India must comply with other
laws like contract law , Indian Penal Code etc.
Department •Perry4Law and Perry4Law Techno Legal Base
Department
of Industrial recommend e-commerce owners must do proper
of
Policy and Techno Legal Due Diligence before starting a
Commerce
Promotion venture
No existing policy framework
governing E-Commerce in India ; FDI
rules clubbed under general rules for
Retail Industry
Source: Ernst & Young, Re-birth of E-Commerce (2013)FDI Rules in E-Commerce in India
Foreign companies or investors cannot directly engage in retail business in
India in B2C; engaging in only B2B trading is allowed
• Flipkart was accused in 2012 of
• Companies like Snapdeal and violating FDI norms by directly
Amazon have adopted the market- engaging in B2C activities
place model in India •Flipkart although being
•Through this, the online agency headquartered in India, is
offers a platform to 3rd party registered in Singapore and funded
retailers to sell their products and by foreign investors
offerings to the customer •WS Retail was setup in 2009 by
•Maintaining inventories, images, Flipkart itself, to act as the frontal
product descriptions and pricing interface of transactions with
are left to the seller customers
•The Online agency receives •Investigations by Enforcement
commissions from the sellers Directorate have indicated no
Can be looked at as an exploitation of a
influence of Flipkart over WS Retail,
loophole in FDI Regulations in India
as it has divested from WS Retail
Source: Ernst & Young, Re-birth of E-Commerce (2013)Industry Structure, Composition and Market-
share
• E-commerce Industry in India valued at $12.3 billion in
2013 ; 70% of the share is from online travel sector and
30% from e-retail sector
• E-retail market worth $2.3 billion with Electronics and
Apparel having highest sales constituting almost 64%
• Entry of Amazon creates scope for other foreign players
in the future and is likely to improve the landscape in
terms of logistics, buyer protection and consolidation
Major Players Revenue ($)
Flipkart 1 billion
Amazon 74.45 billion
Snapdeal 97 million
Ebay 16.05 billion
MakeMyTrip 228.82 million
Jabong 80-100 million
Infibeam 166 millionExisting Business Models
Marketplace Model Inventory e-Retailing Extended Marketplace
• E-commerce player • E-commerce player • E-Commerce player
doesn’t sell any goods controls the entire value provides a platform for
chain from procurement to large number of buyers
• Provides platforms for inventory to logistics and sellers including
third party sellers to sell brands, merchants and
products • Employs warehouse and
an inventory based system civilians
• Some players offer and requires • Some players also employ
discount coupons on infrastructure investment auction based transactions
merchant products
• Higher probability of • Provides a good market
• Low cost and easy to set repeat business place for used goods as
up operations well.
• Profitable if huge volumes • Less capital intensive as
can be committed to inventory and logistics are
merchants burden of sellersKey Demand Drivers, Barriers and Innovation
Demand Drivers
• Rise in the usage of Internet and Smart-phones
• Rise in investments by Venture Capitalists, Angel
Investors and Private Equity Players
• Increase in share of online retail
Barriers
• Lower prices compared to brick and mortar
models due to reduced intermediaries, reduced
real estate costs etc. • Trust issues of provision of fake addresses and
customers sometimes not willing to pay on Cash-
On-Delivery
• High dependence on commercial airlines for
Innovation transport of products
• 90% of goods moved by air because of under-
developed road and railway infrastructure thus
• Platforms allowing second hand sales increasing operating costs for e-commerce
• Cash-On-Delivery which contributes to more than companies
50% of online sales • No FDI investment is allowed in multi-brand retail
• Product availability check, same day delivery , and hence there is very limited scope of B2C
models retail by foreign funded companies
• End to end delivery tracking through internet, sms • Online shopper and internet penetration is still
etc. weak in rural areas due to poor infrastructure
• Easy return of goods issues
• Use of petrol pumps and grocery stores for • Low margins due to higher competition require
delivery players to improvise their business modelsBases of Competition and Varying Strategies
•To maintain a competitive advantage companies must
improvise their business strategies
•Flipkart has launched its own product line of tabs under the
brand name DigiFlip and Amazon sells Kindle reader and Fire
tabs and smartphone
Competitive Landscape of Indian
•Amazon also earns profits from its cloud services. E-commerce Sector
•Xarato operates in a niche area of apaprel, jewellery and home
décor and implements a Pinterest+Ebay model thus allowing
customers to engage in social shopping with high demand
coming from US, UK and MalaysiaEmployment Potential and Skill Requirement
1.45 Million Jobs Projected by 2021
Blend of both technical & business understanding essential !
Job Profiles
• Product Managers
• Consultants Shoppi
• Usability specialists
•
ng in
Online Marketing
specialists the
• Software developers Silicon
• Process Architects Valley MBA/B.Te
• Community ch
managers 8 -12 lpa
• Multi-channel Sr. Mgmt
project managers
50-75 lpa
• Sales and customer
support roles
Others*
Highly Skilled Technology Jobs
• Merchandising
Creative - Web Design and Content and Photography /Vendor
Development Management
Technology - Web Design and Search Engine Optimization • Customer
Development (SEO) Support
Online Merchandising • Webstore
Management
• AccountingChallenges in E-Commerce
• Internet Infrastructure Issues
• Trust
• Predatory Pricing (CAIT)
• Raising Funds
• FEMA Violations
• COD delays
• No questions return policy
(Reverse Logistics Issues)
• Shortage of Skilled Manpower
• Tax Structure
• VAT Issue
Source: Ernst & Young, Re-birth of E-Commerce (2013)New Insights (Qualitative)
Deal buying
E-
and
commerce
couponing
logistics
websites
INR 600 Crore per Revenue rise as
annum segment, much as 500%
growing at 50% a per annum
year Ex – Groupon,
Ex - Ecom Express, Coupon Dunia
DotZot by DTDC
Starting on the Booming
Web - Available Supporting
Options Service Sectors
Source: Refer NotesIndia’s e-commerce market is at a critical inflection point
Around 100 single category Websites were shut down in past 12
months
E-commerce companies have gradually shifted from inventory
based to marketplace-based model
The customer buying sentiment has moved from need-based to
deal-based
Same day delivery is the next big battle in E-commerce Industry
Operational break-even for most of India’s e-commerce start-ups
is expected to happen in 2018
By 2020, the labor reduction effect of digitization will lead to new
economic models as per Gartner
Source: Refer NotesKey Trends & Direction of E-Commerce Growth
Indian consumer
behavior-
Need for
Increasing
convenience, security
broadband
Internet
(20% MoM)
Customer
and 3G
experience
penetration
;
decreasing
tariffs Increase in
Increasing payment
online gateways,
tenure of average
Indian
customer transaction
value
Source: Refer NotesEcommerce- Growth Prospects
Annual disposable income per household expected to increase at a
CAGR of 5.1% from 2005 to 2025.7
Number of Internet
users (mn) transacting
Number of Internet online
users (mn)
Source: Ernst & Young, Re-birth of E-Commerce (2013)Annual B2C e-commerce sales growth in India from 2012 to 2017 (Figures in %) Indian e-commerce- compounded annual growth rate ~30% since
40
35.9 34.9
35 31.5 30.3
30
24.5
25
20
20
Growth in percent
15
10
5
0
2012 2013 2014 2015 2016 2017
YearB2B & C2C
INDIAN C2C GROWTH B2B GROWTH
India’s C2C market, though currently small, is set B2B largely different from B2C in terms of transacGrowth Prospects- Online Travel
Key Growth Projections
Travel portals to focus
on hotel bookings,
travel packages.
• Online penetration (of hotel
bookings) ~7%
• Commissions paid by hotels ~3x
of that in air ticketing
Emphasis on
smartphone traffic and
applications
• Provide real value to the
customer
• Create higher engagement by
enabling easy travel-booking
Segment
experience seeing early
signs of consolidation
Source: SapientNitroGrowth Prospects- Online Classifieds
Expected job growth bodes well for the segment; 87.37 million jobs to be created by
2015- ASSOCHAM
Online matrimonial classified players augmenting traditional sources of revenue by
widening umbrella of services
Real estate classifieds — growth dependent on ability to piggyback on that of real
estate
Auto-classifieds- Rising disposable incomes, increased buying power of people;
Differentiation on quality assurance
Lack of vernacular content; Credibility of information; Preference of offline agents
Source: SapientNitroTechnology Forecasts
Advent of Big Data & Cloud technologies, SaaS
Complete/cross device support
Multi/Cross/Omni Channel Strategies
The Internet-of-Things
Personalized recommendations & targeted content
Less importance to conversion ratio over customer engagements
Rise of Wallets of e-commerce players, PaisaPay, Bitcoin
Mobile POS and showcase using iPad or Android
Technology Innovations- Drones, TouchID
Source: SapientNitroInnovation & the Game Changers
THE NEXT GAME CHANGER OF
INDIAN E-COMMERCE
Personali
zed
commerc
e
Mobile e-
commerce
• Better internet
connectivity
• Online payment
options
• Last mile problem
Source: SapientNitroIndustry Forecast
Estimated Warehousing Requirements (in million sq. ft.)
15
7.5
1.7
2013 2017-20 (Estimated)
700% Increase 335% Increase
Source:
http://www.pwc.in/assets/pdfs/publications/2014/evolution-of-e-commerce-in-inEmployment Prospects
Major Functions of an E-Commerce
Business Categorization of Skill Sets
• By 2017 - 75,000 jobs in warehousing and
Forecasted to grow logistics
at 20-25% over the • Similarly, 50,000-strong workforce for data
next 3-4 years,
analytics
creating almost
1.5 lakh jobs • Remaining in technology, management and
customer service
Sources: http://timesofindia.indiatimes.com/tech/jobs/E-commerce-may-create-1-5-lakh-jobs-in-India-in-3-
years/articleshow/44399219.cms , http://www.iamwire.com/2014/06/employment-ecommerce/27403Integration Identifying the supply chain and logistical requirements for different product categories Inventory-led e-commerce businesses forecast demand for products. Insights can be obtained through tracking and analysis of buyer browsing and purchasing behaviour on the site.
Company Description
Overview, Trends and Concepts
General Overview Major Trends
Extensive funding from VC’s due to high
• India’s ecommerce is in a very nascent stage potential of the market
• Major players include flipkart, snapdeal, amazon, Cash On Delivery – Key Driver behind the
myntra, jabong etc ecommerce market
• Increased penetration of Internet and Mobile aiding Certain brands are not listed in ecommerce
the industry sites while most brands have taken both the
• It was worth $2.5 billion in 2009 and has grown to routes to sell
$16 billion in 2013 (Assocham) Customer loyalty programs and heavy
• Total FDI in this sector has been $1.3 billion from discounts attract customers
2010 to 2013 Mobile Apps act as driver for impulsive
Structure
purchase
of Ecommerce Firms
Data analytics extensively used to sell to
customers
Supplier
Final
Ecommer
custom
ce firm
er
Fulfillmen
t centre
Service Concept
Source: IBEF, Rise and rise of E-commerce in India (Jan 2013)Major Competitors
The major competitors of snapdeal are flipkart, amazon and quikr
Flipkart Amazon
• Amazon India started
• Started as an online Quikr
operations only in 2013
book store • Quikr is an C2C online
• Rapidly expanding
• Its now present across classifieds website
across product
many categories unlike other Ecommerce
• categories using
Pioneered COD and One sites
marketplace model
Day Delivery in the • It provides a platform
• Introduced COD for the
Indian Ecommerce for people to buy and
first time in Indian
space sell their things
• market
Extensive customer • The main source of
• Huge Capital
analytics and discounts revenue is the paid
• investment because it is
Ekart, logistics firm of listing which users do to
cash rich
flipkart takes care of sell their items
• Extensive affiliate
reverse logistics and is • Main source of reach is
marketing, email
now a third party the mobile app and they
marketing
logistics provider reach out to people
• Owns and operates
• It has one of the most even without Internet
sister site junglee.com
successful affiliate • Other source of money
just as a price
marketing programmes is the ads posted on the
comparison portal
in the country owing to site through Ad sense
• Has a subscription fee
high traffic. Commission • It serves as a medium
for listing and
payout is 4-20% of the for small time
commission payout is 5-
sale businesses
15% for affiliates
Source: Ernst & Young, Re-birth of E-Commerce (2013)Market Segments
Latest Product Categories on
Snapdeal
Source: http://www.business-standard.com/article/companies/small-towns-drive-india-s-e-
commerce-114102101520_1.html, http://www.business-standard.com/article/management/how-Online Behaviour Segmentation
Data analytics is used to refine segmentation and
create a personalized shopping experience
Source: http://blog.ometria.com/customer-segmentation-how-ecommerce-retailers-can
christmasKey brand elements
Compounded & Combinational “Snap-Deal” :
Typically referring to North American usage of
“Snap” as Easy and “Deal” as an offer
Wordmark type logo with a unique font
indicating the distinction of the company
name; Also apt. for a company at an initial
growth stage
Young actors like Pulkit Samrat and Rana
Daggubati ; A youth centric approach
targeting young internet users
“Bachatey Raho” ; emphasizing the
availability of discount coupons and offers
thus allowing more savings for customers
Polymer based packaging with the company
logo sourced from packaging company
DynaflexServices offered by Snapdeal •Allows sellers to be affiliate partners •For content partners 10% commission on maximum sale of Rs.1250 for electronic categories and 20% on other categories •For shopping partners, 1% on commission on maximum sale of Rs.2500 for electronic categories and 10% on maximum sale of Rs.400
Snapdeal Launchpad •Platform for all innovators and inventors to develop and build their own innovative ideas •Initial screening carried out by Snapdeal team from which teams will be listed on a catalog •Customers purchase products and vote for the winning team
What’s in Launchpad for the winners ?
Pricing Strategy •A Predatory Pricing Model is followed here where products are sold at highly discounted rates compared to brick and mortar retailers •Snapdeal’s pricing model is primarily driven by the fact that India as a country is money driven •Cost of the discount is borne mostly by Snapdeal by allocating more funds towards discounts than TV ads and other marketing campaigns •Incremental funding on subsequent rounds allow companies to focus more towards building up a larger consumer base than revenues ; In Snapdeal’s case it has off late received close to $ 1 billion worth funding from investors like Ratan Tata, SoftBank Japan, etc.
Snapdeal’s Communication Mix
Print Media
Branded Content Facebook Page
TV Commercial
Search Engine
OptimizationSnapdeal Distribution System
•Partnership with over 30,000 odd sellers across
the country Launched Snapdeal
•All courier companies pick up from one location Plus service
but all don’t pick up from multiple locations
•Fulfillment centers have been set up across the
country
•Sellers can store products at 40 fulfillment
centers in 15 cities at no additional costs
•Shipping time is reduced by 2 hours
•Already 1000 sellers are members
Snapdeal Plus is also
providing sellers with
Analytics and reports
• JV with DEN Networks to launch a Home- based on past sales
thus enabling easier
shopping TV Channel
•DEN Networks has 13 million viewers across 200 prediction of
inventory level
cities
needed to maintain
at fulfillment centresSnapdeal Distribution System
Opportunities for Revenue Management
Service Process
ACT ACT
1 2
Line of
interaction
FRONT-
Line of
STAGE
Service
Process
BACK visibility
-
STAG
E
Line of
internal
interaction
Support
ProcessesOrder Fulfillment Process
Communicate to
customer
Communicate to
customer
Communicate to
customer
HYBRID
CONSIGNMENT- AND
INVENTORY-HOLDING
MODEL
Source:http://www.quora.com/What-is-the-work-flow-at-Flipkart-after-the-order-Service Process Implications
Source: http://indiaadvisoryboard.com/e-commerce-in-india-trends-Bottlenecks
Source: http://www.thirdeyesight.in/articles/last-mile-advantage.htmCustomer Lifetime Value
Customer Lifetime Value (CLV) describes the amount of revenue or profit a
customer generates over his or her entire lifetime
Pareto’s 80/20 Principle
Calculating CLV
Historic CLV
• Gross Profit from historic
purchases
• Needs time
• Gives true profitability picture Uses of CLV and Recommendations Present in
• Cumbersome snapdeal ?
CLV = ( Transaction …* Customer segmentation Yes
Transacn N ) * AGM
Up selling and cross selling Yes
Predictive CLV Tailored discounts for new customers No
• NPV of sum of all future
revenues from a customer Private access to new products No
minus the costs associated
• Complex Algorithms to Discounts based on past purchases No
calculate
• Used for new customer Subscribe and save programs for frequently No
acquisition used common items
• More Accurate Coupons for referrals No
• Based on Transaction nos,
Avg. order value, customer
lifespan and AGM of similar
profiled existing customersMarketing strategy at Snapdeal
Source: Snapdeal Blog; IamWire.com-Interview with Kunal BahlTHANK YOU
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