E-Commerce Industry

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Facts & Trends

SOME TRENDS

India’s Growth Potential

Factors that will fuel growth in the E-Commerce Industry

1. Internet Penetration

2. Favourable Demographic profile

3. Growing Orders per month (in million)

Latest Investments in the E-Commerce Industry

KEY DEVELOPMENTS

Mobile to be the most influential aspect of e-Commerce

E-Commerce is increasingly attracting customers from Tier-2 and Tier-3

cities

Enhanced shopping experience – Customers are also shopping online for

weddings and festivals because of wider range of available products and

aggressive advertisements.

Exclusive Partnership with leading brands – In 2014, Jabong added

information fashion brands like Dorothy Perkins, River Island. Myntra

benefited from exclusive tie-ups with Harvard Lifestyle, Desigual and

WROGN.

Expanding the Product Basket – Newer products such as grocery,

healthcare products being purchased online .

KEY MARKET FACTORS TO BE EVALUATED BEFORE ENTERING A

NEW ECOMMERCE BUSINESS

Market Size – How sizeable the overall opportunity is

eCommerce readiness – Fully understanding the payment and logistical

infrastructure, consumer behaviour, retail opportunity and technological

developments

Scope of Growth - It is also important to look at the internet penetration,

demographics of the online buying population and understand which phase

of development each market is in

Barriers to entry - Players should understand the regulatory environment

and connect with solution providers, content distribution networks, and

digital agencies

Competition - There is also a need to do an in-depth assessment of what

competitors are doing, their online strategy and the nature of each offering.

EXTERNAL CHALLENGES

Product and Market Strategy

Customer and Digital Experience

Payments and Transactions

Fulfilment

INTERNAL CHALLENGES

Organization Scaling

Tax and Regulatory Structuring

Risk, Fraud and Cyber Security

Compliance Framework

HIGHLIGHTS OF E-COMMERCE INDUSTRY IN 2015

Major e-commerce companies are expected to together spend Rs 2,000

crore in the four months around Diwali to try and wean away more

consumers from traditional stores to online marketplaces during the all-

important festival season.

The e-commerce market in the country will be about USD 70 billion by 2020

and players will be investing around USD 1-2 billion over the next few years,

largely in tier II cities and towns according to Myntra

E-commerce boost: Manufacturing companies may get to sell products

directly online. The Union Cabinet is likely to take a decision in some days

on allowing foreign and domestic companies with manufacturing units in

India to sell their products through online portals

Cash-rich e-commerce logistics companies target India’s heartland for

growth

Tier II cities catching up with metros in e-commerce

E-COMMERCE SUPPLY CHAIN MODELS

There are basically two models which are being used by the e-commerce players.

These are namely:

Inventory Model

Marketplace model

OMNI CHANNEL

The retail market in India will primarily be driven by omni-channel as brick-and-

mortar retailers enter e-commerce to support their stores. Customers do not

distinguish between online and physical channels while shopping, but they want

to get a seamless experience. There is a need for the brick and mortar store to

start an omni-channel to provide the consumers with a better experience where

they can order the products sitting at their homes. Comparing the omni-channel

and e retailers we can see that there are a few benefits of each which can be

listed as under.

LAST MILE DELIVERY

Amazon Transportation Services Private Limited, a subsidiary of US-based

Amazon, will ship goods from sellers who transact on the company's online

marketplace in India. Such a service is already on offer from Flipkart through

logistics company eKart, and Snapdeal, which bought a stake in delivery firm

Gojavas. The companies will continue to work with other partners including India

Post and courier companies like Gati, Blue Dart and DHL.

Startups specializing in providing third-party delivery logistics to e-tailers have

emerged across the country, but in recent months, the top online marketplaces

are strengthening their own inhouse logistics fleets. All large marketplaces have

opened their own last-mile logistics arms in India as the capability to deliver

goods next day doesn't exist in India's logistics sector.

POPULAR ONLINE CATEGORIES

From the survey below we can see that electronic goods, apparels and books are

among the most popular online categories. In India the trend is similar with the

popular categories being Electronics, apparels, tickets and services.

SOME INTERESTING FACTS

Singles' Day sale was originally named because the date Nov. 11.

Alibaba came close to generating double digit sales on Singles Day, clocking

an impressive $9 billion (Rs. 55,000 crore)

India’s entire e-commerce industry was worth only $11 billion in 2013. Of

this, a mere $2 billion was from sales of physical goods, whereas most of

Alibaba’s $9 billion in sales came from actual goods rather than services

Travel is where the real money in India’s e-commerce is. Online travel

accounts for nearly 71% of e-commerce business in India.

This business has grown at a compounded annual growth rate (CAGR) of

32% over 2009-13. E-tailing, on the other hand, accounts for only 8.7% of

organised retail and a minuscule 0.3% of total retail sales.

Even within sales of physical goods, books are a mere 7% of total book

sales, mobile phones are 2% of all handsets sold, and fashion goods sold

online are just 1%

Alibaba is an outlier when it comes to margins and making money in the e-

commerce ecosystem.

The Chinese company makes an operating profit of 40% compared to

industry standard (US and China) of 8-10%.

Travel sites typically make 2.3%.

Indian players, are not even thinking of profitability yet. Presently,

aggressive pricing in India is leading to e-tailers making losses on every

segment.

For a Rs 100 sale of a book, the e-tailer incurs a loss of Rs 24, a loss of Rs 13

in mobiles, and Rs 8 in apparel.