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
the Internet
It was first demonstrated by
Michael Aldrich in 1979

Types of Ecommerce
B2C
Amazon.c
om
Ebay.com

B2B
Quill.com
fastenal

C2C
Olx.in
Quikr.com

Evolution of Ecommerce

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
Political

Increased government commitment to

increasing internet penetration
Government decision to disallow FDI in
B2C E-Commerce
Foreign firms could have invested in
ecosystem
Lack of dedicated E-Commerce laws

Economical

Social

Increasing vigilance of customers (e.g. Big

Billion Day)
Most Indian consumers prefer to sample a
product before making a purchase
Almost 85% of the consumers indicated
willingness to purchase private labels
promoted by retailers

Existence of a complex and multiple tax

system
Low entry barriers (Entry costs only
US$10000-20000)
Reduction in cost of internet access
High costs in acquiring new customers
Inadequate capacity and high cost of
logistics in India

Technological

Internet 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 situation
Substandard technology infrastructure in
most logistics companies

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

Connected Sectors and their impact on E-Commerce

Information
Technology Services

Robotics

Telecommunication
and data services

State 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 processes
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
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
Tier 2 and Tier 3 cities opening up rapidly to e-commerce
To expand coverage in rural markets robust Mobile and
Data Communication Infrastructure with 3G and 4G
connectivity is important

Connected Sectors and their impact on E-Commerce

Electronic Payment
Services

Logistics Services

Newer mode electronic payment services like

ApplePay(partnered with AMEX, VISA and MasterCard) have
been launched allowing a one-touch payment system making
shopping easier
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
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 opportunities

Administrative Ministry and Government Policy Framework

Government Rules and Regulations

Ministry of
Commerce
and Industry

Department
of
Commerce

Department
of Industrial
Policy and
Promotion

Online issues governed by the IT Act. Of 2000

E-Commerce owners must ensure cyber law due
diligence in India
Legal requirements for undertaking an ecommerce 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 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

Companies like Snapdeal and

Amazon have adopted the marketplace model in India
Through this, the online agency
offers a platform to 3rd party
retailers to sell their products and
offerings to the customer
Maintaining inventories, images,
product descriptions and pricing
are left to the seller
The Online agency receives
commissions from the sellers

Flipkart was accused in 2012 of

violating FDI norms by directly
engaging in B2C activities
Flipkart although being
headquartered in India, is
registered in Singapore and funded
by foreign investors
WS Retail was setup in 2009 by
Flipkart itself, to act as the frontal
interface of transactions with
customers
Investigations by Enforcement
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 Marketshare

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 million

Existing Business Models

Marketplace Model

E-commerce player
doesnt sell any goods
Provides platforms for
third party sellers to sell
products
Some players offer
discount coupons on
merchant products
Low cost and easy to set
up operations
Profitable if huge volumes
can be committed to
merchants

Inventory e-Retailing

E-commerce player
controls the entire value
chain from procurement to
inventory to logistics
Employs warehouse and
an inventory based system
and requires
infrastructure investment
Higher probability of
repeat business

Extended Marketplace

E-Commerce player
provides a platform for
large number of buyers
and sellers including
brands, merchants and
civilians
Some players also employ
auction based transactions
Provides a good market
place for used goods as
well.
Less capital intensive as
inventory and logistics are
burden of sellers

Key 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
Lower prices compared to brick and mortar
models due to reduced intermediaries, reduced
real estate costs etc.

Innovation
Platforms allowing second hand sales
Cash-On-Delivery which contributes to more than
50% of online sales
Product availability check, same day delivery
models
End to end delivery tracking through internet, sms
etc.
Easy return of goods
Use of petrol pumps and grocery stores for
delivery

Barriers
Trust issues of provision of fake addresses and
customers sometimes not willing to pay on CashOn-Delivery
High dependence on commercial airlines for
transport of products
90% of goods moved by air because of underdeveloped road and railway infrastructure thus
increasing operating costs for e-commerce
companies
No FDI investment is allowed in multi-brand retail
, and hence there is very limited scope of B2C
retail by foreign funded companies
Online shopper and internet penetration is still
weak in rural areas due to poor infrastructure
issues
Low margins due to higher competition require
players to improvise their business models

Bases 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
Amazon 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 Malaysia

Competitive Landscape of Indian

E-commerce Sector

Employment Potential and Skill Requirement

1.45 Million Jobs Projected by 2021
Blend of both technical & business understanding essential !

Job Profiles
Product Managers
Consultants
Usability specialists
Online Marketing
specialists
Software developers
Process Architects
Community
managers
Multi-channel
project managers
Sales and customer
support roles

Shoppi
ng in
the
Silicon
Valley

MBA/B.Te
ch
8 -12 lpa

Highly Skilled Technology Jobs

Creative - Web Design and
Development

Content and Photography

Technology - Web Design and

Development

Search Engine Optimization

(SEO)

Online Merchandising

Sr. Mgmt
50-75 lpa

Others*
Merchandising
/Vendor
Management
Customer
Support
Webstore
Management
Accounting

Challenges 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)

Ecommerce
logistics

INR 600 Crore per

annum segment,
growing at 50% a
year
Ex - Ecom Express,
DotZot by DTDC

Starting on the
Web - Available
Options

Deal buying
and
couponing
websites

Revenue rise as
much as 500%
per annum
Ex Groupon,
Coupon Dunia

Booming
Supporting
Service Sectors
Source: Refer Notes

Indias 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 Indias 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 Notes

Key Trends & Direction of E-Commerce Growth

Indian consumer
behaviorNeed 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
transaction
customer
value

Source: Refer Notes

Ecommerce- 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)

Number of Internet
users (mn) transacting
online

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

Annual B2C e-commerce sales growth in India from 2012 to 2017 (Figures in %)
40

35.9

35

34.9
31.5

30

30.3
24.5

25
Growth in percent

20

20
15
10
5
0
2012

2013

2014
Year

2015

2016

2017

Indian e-commerce- compounded annual growth rate ~30% since

B2B & C2C

INDIAN C2C GROWTH
Indias C2C market, though currently small, is set

B2B GROWTH

B2B largely different from B2C in terms of transac

Growth 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
seeing early
experience
signs of consolidation

Source: SapientNitro

Growth 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: SapientNitro

Technology 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: SapientNitro

Innovation & the Game Changers

THE NEXT GAME CHANGER OF
INDIAN E-COMMERCE

Personali
zed
commerc
e

Mobile ecommerce
Better internet
connectivity
Online payment
options
Last mile problem

Source: SapientNitro

Industry 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-in

Employment 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
Remaining in technology, management and
1.5 lakh jobs
customer service
Sources: http://timesofindia.indiatimes.com/tech/jobs/E-commerce-may-create-1-5-lakh-jobs-in-India-in-3years/articleshow/44399219.cms , http://www.iamwire.com/2014/06/employment-ecommerce/27403

Integration

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

Major Trends

General Overview

Indias ecommerce is in a very nascent stage

Major players include flipkart, snapdeal, amazon,
myntra, jabong etc
Increased penetration of Internet and Mobile aiding
the industry
It 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 2013

Extensive funding from VCs due to high

potential of the market
Cash On Delivery Key Driver behind the
ecommerce market
Certain brands are not listed in ecommerce
sites while most brands have taken both the
routes to sell
Customer loyalty programs and heavy
discounts attract customers
Mobile Apps act as driver for impulsive
Structure
of Ecommerce Firms
purchase
Data analytics extensively used to sell to
customers

Supplier

Ecommer
ce firm

Final
custom
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

Started as an online
book store
Its now present across
many categories
Pioneered COD and One
Day Delivery in the
Indian Ecommerce
space
Extensive customer
analytics and discounts
Ekart, logistics firm of
flipkart takes care of
reverse logistics and is
now a third party
logistics provider
It has one of the most
successful affiliate
marketing programmes
in the country owing to
high traffic. Commission
payout is 4-20% of the
sale

Amazon

Amazon India started

operations only in 2013
Rapidly expanding
across product
categories using
marketplace model
Introduced COD for the
first time in Indian
market
Huge Capital
investment because it is
cash rich
Extensive affiliate
marketing, email
marketing
Owns and operates
sister site junglee.com
just as a price
comparison portal
Has a subscription fee
for listing and
commission payout is 515% for affiliates

Quikr
Quikr is an C2C online
classifieds website
unlike other Ecommerce
sites
It provides a platform
for people to buy and
sell their things
The main source of
revenue is the paid
listing which users do to
sell their items
Main source of reach is
the mobile app and they
reach out to people
even without Internet
Other source of money
is the ads posted on the
site through Ad sense
It serves as a medium
for small time
businesses

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-ecommerce-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
christmas

Key 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
Dynaflex

Services 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

Whats 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
Snapdeals 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 Snapdeals case it has off late received close
to $ 1 billion worth funding from investors like Ratan Tata, SoftBank Japan, etc.

Snapdeals Communication Mix

Print Media

Branded Content

Facebook Page

TV Commercial
Search Engine
Optimization

Snapdeal Distribution System

Partnership with over 30,000 odd sellers across
the country
All courier companies pick up from one location
but all dont pick up from multiple locations
Fulfillment centers have been set up across the
country

Launched Snapdeal
Plus service

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

JV with DEN Networks to launch a Homeshopping TV Channel

DEN 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 Management

Service Process
ACT
1

ACT
2

Line of
interaction

FRONTSTAGE
BACK
STAG
E

Line of
Service
Process
visibility

Line of
internal
interaction
Support
Processes

Order 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.htm

Customer Lifetime Value

Customer Lifetime Value (CLV) describes the amount of revenue or profit a
customer generates over his or her entire lifetime
Paretos 80/20 Principle
Calculating CLV
Historic CLV
Gross Profit from historic
purchases
Needs time
Gives true profitability picture
Cumbersome
CLV = ( Transaction *
Transacn N ) *
AGM

Predictive CLV
NPV of sum of all future
revenues from a customer
minus the costs associated
Complex Algorithms to
calculate
Used for new customer
acquisition
More Accurate
Based on Transaction nos,
Avg. order value, customer
lifespan and AGM of similar
profiled existing customers

Uses of CLV and Recommendations

Present in
snapdeal ?

Customer segmentation

Yes

Up selling and cross selling

Yes

Tailored discounts for new customers

No

Private access to new products

No

Discounts based on past purchases

No

Subscribe and save programs for frequently

used common items

No

Coupons for referrals

No

Marketing strategy at Snapdeal

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

THANK YOU