E-Commerce in India

E-Commerce in IndiaGroup 5Sectorial DescriptionEcommerce is the trading in of products or services using electronic technologies like the InternetIt was first demonstrated by Michael Aldrich in 1979B2BQuill.comfastenalB2CAmazon.comEbay.comC2COlx.inQuikr.comTypes of EcommerceEvolution of EcommerceE-Commerce industry: An introductionThe E-commerce Boom Quick FactsThe number of Internet users has increased from 150 million in 2012 to 213 million in 2013There 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 IndiaE-commerce companies offer good discounts due to less operational costsWide variety of goods at low prices and home delivery is a key reason behind people adopting e-commerce

The History of Ecommerce in India

E-Commerce industry: An introductionSource: Users Statistics - IAMAIUsers Statistics - IAMAI4Global Context: E-Commerce Industry

Most Popular Buying/Browsing categoriesSource: Nielsen Global E-Commerce Report (Aug 2014)Global buying intentions (August 2014 to Feb 2015)

Source: Nielsen Global E-Commerce Report (Aug 2014)6PEST AnalysisPoliticalIncreased government commitment to increasing internet penetrationGovernment decision to disallow FDI in B2C E-CommerceForeign firms could have invested in ecosystemLack of dedicated E-Commerce laws

EconomicalExistence of a complex and multiple tax systemLow entry barriers (Entry costs only US$10000-20000)Reduction in cost of internet accessHigh costs in acquiring new customersInadequate capacity and high cost of logistics in India

SocialIncreasing vigilance of customers (e.g. Big Billion Day)Most Indian consumers prefer to sample a product before making a purchaseAlmost 85% of the consumers indicated willingness to purchase private labels promoted by retailers

TechnologicalInternet penetration is growing in towns with population of less than 0.5 million.Minimal technology integration with merchants results in e-Tailers seldom having adequate visibility of the actual stock situationSubstandard technology infrastructure in most logistics companiesSource: Ernst & Young, Re-birth of E-Commerce (2013)Connected Sectors and their impact on E-CommerceState of the art Enterprise IT Architecture, Warehouse and Inventory Management systems, Supply Chain Management systems, RFID Tagging devices, POS systems etc. help in synchronization and automating processesCloud based e-commerce applications help lower costs, accelerate deployments and respond quickly to changing opportunities Information Technology ServicesUsage of Drones for package delivery and replacing traditional carriersAcquisition of KIVA Systems by Amazon To automate processes like product placement, effective alignment of rack storage etc. robots are used in warehousesRoboticsIndia has a user-base of over 243 million internet users and over 185 million mobile internet usersTier 2 and Tier 3 cities opening up rapidly to e-commerceTo expand coverage in rural markets robust Mobile and Data Communication Infrastructure with 3G and 4G connectivity is importantTelecommunication and data servicesConnected Sectors and their impact on E-CommerceNewer mode electronic payment services like ApplePay(partnered with AMEX, VISA and MasterCard) have been launched allowing a one-touch payment system making shopping easierSuch payment services can be integrated on e-commerce mobile apps thus making business easier for e-commerce business ownersElectronic Payment ServicesTill date logistics services have better coverage of Tier-1 cities90% of goods being ordered online are delivered by Air increasing delivery costs by e-tailersModels like Cash-On-Delivery, on-time delivery, seamless return 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 costsInefficient and costly Logistics, force e-tailers to withdraw free delivery which could affect their business opportunitiesLogistics ServicesAdministrative Ministry and Government Policy FrameworkGovernment Rules and RegulationsOnline issues governed by the IT Act. Of 2000E-Commerce owners must ensure cyber law due diligence in IndiaLegal requirements for undertaking an e-commerce venture in India must comply with other laws like contract law , Indian Penal Code etc.Perry4Law and Perry4Law Techno Legal Base recommend e-commerce owners must do proper Techno Legal Due Diligence before starting a venture

No existing policy framework governing E-Commerce in India ; FDI rules clubbed under general rules for Retail IndustrySource: Ernst & Young, Re-birth of E-Commerce (2013)FDI Rules in E-Commerce in IndiaForeign companies or investors cannot directly engage in retail business in India in B2C; engaging in only B2B trading is allowed Companies like Snapdeal and Amazon have adopted the market-place model in IndiaThrough this, the online agency offers a platform to 3rd party retailers to sell their products and offerings to the customerMaintaining inventories, images, product descriptions and pricing are left to the sellerThe Online agency receives commissions from the sellers Flipkart was accused in 2012 of violating FDI norms by directly engaging in B2C activitiesFlipkart although being headquartered in India, is registered in Singapore and funded by foreign investorsWS Retail was setup in 2009 by Flipkart itself, to act as the frontal interface of transactions with customersInvestigations by Enforcement Directorate have indicated no influence of Flipkart over WS Retail, as it has divested from WS RetailCan be looked at as an exploitation of a loophole in FDI Regulations in IndiaSource: 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 sectorE-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 PlayersRevenue ($)Flipkart1 billionAmazon74.45 billionSnapdeal97 millionEbay16.05 billionMakeMyTrip228.82 millionJabong80-100 millionInfibeam166 million

Existing Business ModelsMarketplace ModelE-commerce player doesnt sell any goodsProvides platforms for third party sellers to sell productsSome players offer discount coupons on merchant productsLow cost and easy to set up operationsProfitable if huge volumes can be committed to merchants

Inventory e-RetailingE-commerce player controls the entire value chain from procurement to inventory to logisticsEmploys warehouse and an inventory based system and requires infrastructure investmentHigher probability of repeat businessExtended MarketplaceE-Commerce player provides a platform for large number of buyers and sellers including brands, merchants and civiliansSome players also employ auction based transactionsProvides a good market place for used goods as well.Less capital intensive as inventory and logistics are burden of sellersKey Demand Drivers, Barriers and InnovationDemand DriversRise in the usage of Internet and Smart-phonesRise in investments by Venture Capitalists, Angel Investors and Private Equity PlayersIncrease in share of online retailLower prices compared to brick and mortar models due to reduced intermediaries, reduced real estate costs etc.InnovationPlatforms allowing second hand salesCash-On-Delivery which contributes to more than 50% of online salesProduct availability check, same day delivery modelsEnd to end delivery tracking through internet, sms etc.Easy return of goodsUse of petrol pumps and grocery stores for deliveryBases of Competition and Varying Strategies

Competitive Landscape of Indian E-commerce SectorTo maintain a competitive advantage companies must improvise their business strategiesFlipkart has launched its own product line of tabs under the brand name DigiFlip and Amazon sells Kindle reader and Fire tabs and smartphoneAmazon also earns profits from its cloud services.Xarato operates in a niche area of apaprel, jewellery and home dcor 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 RequirementHighly Skilled Technology JobsCreative - Web Design and DevelopmentContent and PhotographyTechnology - Web Design and DevelopmentSearch Engine Optimization (SEO)Online MerchandisingOthers*Merchandising /Vendor ManagementCustomer SupportWebstore ManagementAccountingHRMBA/B.Tech8 -12 lpaBlend of both technical & business understanding essential !Job ProfilesProduct ManagersConsultantsUsability specialistsOnline Marketing specialistsSoftware developersProcess ArchitectsCommunity managersMulti-channel project managersSales and customer support roles

Shopping in the Silicon Valley

1.45 Million Jobs Projected by 2021Sr. Mgmt50-75 lpa

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 StructureVAT IssueChallenges in E-CommerceSource: Ernst & Young, Re-birth of E-Commerce (2013)New Insights (Qualitative)Starting on the Web - Available OptionsINR 600 Crore per annum segment, growing at 50% a yearEx - Ecom Express, DotZot by DTDC

Revenue rise as much as 500% per annumEx Groupon, Coupon Dunia

Booming Supporting Service SectorsSource: Refer NotesGabriel Bitran, Rene Caldentey, (December, 2002). An Overview of Pricing Models for Revenue

Management. . (), pp.

Ruth N. Bolton, Venkatesh Shankar and Detra Y. Montoya, (). Recent Trends and Emerging Practices in

Retailer Pricing. . (), pp.

(January 2001). Understanding and Applying an Effective Strategy for the Retail Industry. . (), pp.

Ancarani, Fabio and Venkatesh Shankar (2004): Price Levels and Price Dispersion Within and Across

Multiple Retailer Types: Further Evidence and Extension, Journal of Academy of Marketing Science, 32

(2), 176-187.

Pan, Xing, Brian T. Ratchford and Venkatesh Shankar (2004): Price Dispersion on the Internet: A Review

and Directions for Future Research, Special Issue on Online Pricing, Journal of Interactive Marketing, 18

(4).

Eliashberg, J., A.P. Jeuland. 1986. The Impact of Competitive Entry in a Developing Market Upon

Dynamic Pricing Strategies. Marketing Sci. 5, 20-36.

Serguei Netessine, Sergei Savin, Wenqiang Xiao, (2006) Revenue Management Through Dynamic Cross

Selling in E-Commerce Retailing. Operations Research 54(5):893-913

E. Andrew Boyd, Ioana C. Bilegan, (2003) Revenue Management and E-Commerce. Management Science

49(10):1363-1386.18Source: Refer NotesGabriel Bitran, Rene Caldentey, (December, 2002). An Overview of Pricing Models for Revenue

Management. . (), pp.

Ruth N. Bolton, Venkatesh Shankar and Detra Y. Montoya, (). Recent Trends and Emerging Practices in

Retailer Pricing. . (), pp.

(January 2001). Understanding and Applying an Effective Strategy for the Retail Industry. . (), pp.

Ancarani, Fabio and Venkatesh Shankar (2004): Price Levels and Price Dispersion Within and Across

Multiple Retailer Types: Further Evidence and Extension, Journal of Academy of Marketing Science, 32

(2), 176-187.

Pan, Xing, Brian T. Ratchford and Venkatesh Shankar (2004): Price Dispersion on the Internet: A Review

and Directions for Future Research, Special Issue on Online Pricing, Journal of Interactive Marketing, 18

(4).

Eliashberg, J., A.P. Jeuland. 1986. The Impact of Competitive Entry in a Developing Market Upon

Dynamic Pricing Strategies. Marketing Sci. 5, 20-36.

Serguei Netessine, Sergei Savin, Wenqiang Xiao, (2006) Revenue Management Through Dynamic Cross

Selling in E-Commerce Retailing. Operations Research 54(5):893-913

E. Andrew Boyd, Ioana C. Bilegan, (2003) Revenue Management and E-Commerce. Management Science

49(10):1363-1386.

19Key Trends & Direction of E-Commerce GrowthSource: Refer Notes

Indian consumer behavior-Need for convenience, securityResearch Online, Purchase offline (increasing trust with )retail.economictimes.indiatimes.com/news/e-commerce/e-tailing/8-e-commerce-trends-for-2014/34074708http://www.nextbigwhat.com/ecommerce-market-trends-india-297/http://www.iamwire.com/2014/04/evolving-trends-in-ecommerce-2014/26589

Paid premium delivery servicesSame day shippingMidnight delivery20Ecommerce- Growth ProspectsAnnual disposable income per household expected to increase at a CAGR of 5.1% from 2005 to 2025.7

Number of Internet users (mn)Number of Internet users (mn) transacting onlineSource: Ernst & Young, Re-birth of E-Commerce (2013)EY report

21

http://www.gartner.com/newsroom/id/2876517http://www.business-standard.com/article/companies/indian-e-commerce-expected-to-be-18bn-by-fy15-report-114020700626_1.htmlCrisil report Feb 201422B2B & C2CINDIAN C2C GROWTHB2B GROWTHNote: Number of stores includes the Shoppers Stop Department stores and Speciality Stores (viz Home Stop,Mothercare, Crossword Bookstores, Arcelia, Mac, Clinique, Estee Lauder & Airport Business). It also includes storesof Trent and the ones operated by JV Inditex Trent Retail India Private Limited.Source: Company reports, CRISIL Research23Growth Prospects- Online TravelSource: SapientNitroKey Growth Projectionshttp://www.medianama.com/2014/01/223-outlook14-what-indian-online-travel-companies-plan-to-do/http://www.thehindu.com/features/education/careers/ecommerce-beckons/article5538322.ecehttp://articles.economictimes.indiatimes.com/2014-08-21/news/53073057_1_travel-portals-yepme-dressberry24Growth Prospects- Online ClassifiedsSource: SapientNitroEY report25Technology ForecastsSource: SapientNitrohttp://sapientnitroblog.com/post/63066688463/8-emerging-trends-in-ecommerce-technologyhttp://www.nextbigwhat.com/ecommerce-market-trends-india-297/26Innovation & the Game ChangersSource: SapientNitro THE NEXT GAME CHANGER OF INDIAN E-COMMERCEhttp://www.entrepreneur.com/article/237014https://econsultancy.com/blog/64491-21-examples-of-user-experience-innovation-in-ecommerce#i.ntzid3a9d0jzl2

27Industry ForecastSource: http://www.pwc.in/assets/pdfs/publications/2014/evolution-of-e-commerce-in-india.pdf Employment Prospects

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/27403Categorization of Skill Sets Major Functions of an E-Commerce Business29IntegrationCompany DescriptionIndias ecommerce is in a very nascent stageMajor players include flipkart, snapdeal, amazon, myntra, jabong etcIncreased penetration of Internet and Mobile aiding the industryIt was worth $2.5 billion in 2009 and has grown to $16 billion in 2013 (Assocham)Total FDI in this sector has been $1.3 billion from 2010 to 2013General Overview

Service ConceptExtensive funding from VCs due to high potential of the marketCash On Delivery Key Driver behind the ecommerce marketCertain brands are not listed in ecommerce sites while most brands have taken both the routes to sellCustomer loyalty programs and heavy discounts attract customersMobile Apps act as driver for impulsive purchaseData analytics extensively used to sell to customers Major TrendsSupplierFulfillment centreEcommerce firmFinal customerStructure of Ecommerce FirmsOverview, Trends and ConceptsSource: IBEF, Rise and rise of E-commerce in India (Jan 2013)The major competitors of snapdeal are flipkart, amazon and quikrFlipkartStarted as an online book storeIts now present across many categoriesPioneered COD and One Day Delivery in the Indian Ecommerce spaceExtensive customer analytics and discountsEkart, logistics firm of flipkart takes care of reverse logistics and is now a third party logistics providerIt has one of the most successful affiliate marketing programmes in the country owing to high traffic. Commission payout is 4-20% of the sale

AmazonAmazon India started operations only in 2013Rapidly expanding across product categories using marketplace modelIntroduced COD for the first time in Indian marketHuge Capital investment because it is cash richExtensive affiliate marketing, email marketingOwns and operates sister site junglee.com just as a price comparison portalHas a subscription fee for listing and commission payout is 5-15% for affiliates

QuikrQuikr is an C2C online classifieds website unlike other Ecommerce sitesIt provides a platform for people to buy and sell their thingsThe main source of revenue is the paid listing which users do to sell their itemsMain source of reach is the mobile app and they reach out to people even without InternetOther source of money is the ads posted on the site through Ad sense It serves as a medium for small time businesses

Major CompetitorsSource: Ernst & Young, Re-birth of E-Commerce (2013)

Market SegmentsSource: 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-snapdeal-seeks-to-break-the-clutter-114092201175_1.html

Latest Product Categories on SnapdealOnline Behaviour SegmentationData analytics is used to refine segmentation and create a personalized shopping experienceSource: http://blog.ometria.com/customer-segmentation-how-ecommerce-retailers-can-slice-up-christmasCompounded & Combinational Snap-Deal : Typically referring to North American usage of Snap as Easy and Deal as an offerWordmark type logo with a unique font indicating the distinction of the company name; Also apt. for a company at an initial growth stageYoung actors like Pulkit Samrat and Rana Daggubati ; A youth centric approach targeting young internet usersBachatey Raho ; emphasizing the availability of discount coupons and offers thus allowing more savings for customersPolymer based packaging with the company logo sourced from packaging company DynaflexKey brand elementsServices offered by SnapdealAllows sellers to be affiliate partnersFor content partners 10% commission on maximum sale of Rs.1250 for electronic categories and 20% on other categoriesFor shopping partners, 1% on commission on maximum sale of Rs.2500 for electronic categories and 10% on maximum sale of Rs.400Snapdeal Launchpad

Platform for all innovators and inventors to develop and build their own innovative ideasInitial screening carried out by Snapdeal team from which teams will be listed on a catalogCustomers purchase products and vote for the winning teamWhats 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 retailersSnapdeals pricing model is primarily driven by the fact that India as a country is money drivenCost of the discount is borne mostly by Snapdeal by allocating more funds towards discounts than TV ads and other marketing campaignsIncremental funding on subsequent rounds allow companies to focus more towards building up a larger consumer base than revenues ; In Snapdeals case it has off late received close to $ 1 billion worth funding from investors like Ratan Tata, SoftBank Japan, etc. Snapdeals Communication Mix

Branded ContentFacebook PageTV CommercialPrint MediaSearch Engine OptimizationSnapdeal Distribution SystemPartnership with over 30,000 odd sellers across the countryAll courier companies pick up from one location but all dont pick up from multiple locationsFulfillment centers have been set up across the countryLaunched Snapdeal Plus serviceSellers can store products at 40 fulfillment centers in 15 cities at no additional costsShipping time is reduced by 2 hoursAlready 1000 sellers are members

JV with DEN Networks to launch a Home-shopping TV ChannelDEN Networks has 13 million viewers across 200 cities

Snapdeal Plus is also providing sellers with Analytics and reports based on past sales thus enabling easier prediction of inventory level needed to maintain at fulfillment centres Snapdeal Distribution System

Opportunities for Revenue ManagementDynamic system responsive to product availability Based on competiton, availability on other e- retailers to be consideredAddress Cross-Channel Price Sensitivity Consumers Sensitivity online is different for certain products then it is in offlineDynamic Cross Selling Personalization - Designed to maximize probability of buying a package

44Service Process

BACK-STAGEFRONT-STAGELine of interactionLine of internal interactionLine of Service Process visibilityACT 1ACT 2Support ProcessesFront-Stage

45Order Fulfillment ProcessSource:http://www.quora.com/What-is-the-work-flow-at-Flipkart-after-the-order-is-placed-onlineCommunicate to customerCommunicate to customerCommunicate to customerHYBRID CONSIGNMENT- AND INVENTORY-HOLDING MODELhttp://www.quora.com/What-is-the-work-flow-at-Flipkart-after-the-order-is-placed-online46Service Process ImplicationsSource: http://indiaadvisoryboard.com/e-commerce-in-india-trends-opportunities-and-challenges/http://indiaadvisoryboard.com/e-commerce-in-india-trends-opportunities-and-challenges/

47BottlenecksSource: http://www.thirdeyesight.in/articles/last-mile-advantage.htmhttp://indiaadvisoryboard.com/e-commerce-in-india-trends-opportunities-and-challenges/http://www.thirdeyesight.in/articles/last-mile-advantage.htm

48Customer Lifetime Value (CLV) describes the amount of revenue or profit a customer generates over his or her entire lifetime

Paretos 80/20 Principle Calculating CLVHistoric CLVGross Profit from historic purchasesNeeds timeGives true profitability pictureCumbersomeCLV = ( Transaction * Transacn N ) * AGMPredictive CLVNPV of sum of all future revenues from a customer minus the costs associatedComplex Algorithms to calculateUsed for new customer acquisitionMore AccurateBased on Transaction nos, Avg. order value, customer lifespan and AGM of similar profiled existing customersUses of CLV and RecommendationsPresent in snapdeal ?Customer segmentationYesUp selling and cross sellingYesTailored discounts for new customersNoPrivate access to new productsNoDiscounts based on past purchasesNoSubscribe and save programs for frequently used common itemsNoCoupons for referralsNo

Customer Lifetime ValueMarketing strategy at Snapdeal

Source: Snapdeal Blog; IamWire.com-Interview with Kunal BahlTHANK YOU