E-commerce in India
What is e-commerce?


E-commerce (electronic commerce or
EC) is the buying and selling of goods and
services, or the transmitting of funds or data,
over an electronic network, primarily the
Internet.
These business transactions occur either
business-to-business, business-to-consumer,
consumer-to-consumer or consumer-to-business.
The term e-tail is also sometimes used in
reference to transactional processes around
online retail.
E-commerce ecosystem
Online travel, ticketing etc.
 Online Retail
 Online marketplace
 Online portals classifieds

Indian e-commerce
In terms of size, India’s online retail industry
is very small compared with both organised
and overall (organised + unorganised) retail
in the country.
 It is expected the industry’s revenues to go
more than double to around 18 per cent of
organised retail by 2016 from around 8 per
cent in 2013. Yet, its share of the overall retail
(organised + unorganised) pie will be just
over 1 per cent.

Offline Vs Online Retail Markets

India’s online retail industry has grown at
a swift pace in the last 5 years from
around Rs 15 billion revenues in
2007-08 to Rs 139 billion in 2012-13,
translating into a compounded annual
growth rate (CAGR) of over 56 per
cent.
Growth of E-retail in India?
Growing Internet Penetration
 Rising middle class with disposable
income
 Payment gateways & logistics
 Smooth User Experience

Online Business Model
Marketplace
 Self-owned inventory
 Private Label
 White label

Recent Innovation

Mobile to be the most influential
aspect.
Myntra’s move...
Business Strategies
Exclusive partnership with leading brands
 Expanding Product Basket
 Aggressive Pricing
 CoD (Cash on Delivery)
 Quicker delivery options
 Return policies
 Social Media

Concerns In India
Generation and sustenance of traffic
 CoD
 Last mile Delivery
 Low profitability
 Lack of skilled human resource
 Tax structuring and regulatory barriers
 Cyber security
 Customer loyalty

How to maintain visitors to
websites?
Work on data from google analytics. Find
reasons to improve your weak area
through data analysis.
 Be active on social media brings a positive
outcome
 Smooth transition through website plays a
significant role.

LARGER REVENUE
CONTRIBUTION FROM TIER I, II
AND III CITIES


According to a study , Tier II and III cities
accounted for almost 57.0 per cent of the
total revenue derived from the various ecommerce product sites, while the remaining
43.0 per cent came from the eight metro
cities.
Similarly, for the service sites as well, tier II
and tier III cities accounted for 54.0 per cent
as against 46.0 per cent by the eight
metropolises.
Comparison
The Indian online retailing market is still
evolving and certainly has room for
growth; e-commerce accounts for just 0.1
per cent of total retail sales vis-à-vis more
than 2.9 per cent in China.
 This number is quite low compared to
the online retail penetration enjoyed by
developed markets such as the US (7.0
per cent).


Geographically, southern India leads
with 41.0 per cent share of the entire
Indian e-commerce landscape, followed by
western India (27.0 per cent), as per 2011
numbers. This can be attributed to the
high literacy rate in the south compared
to the rest of India.
States with least e-commerce
penetration
Despite the potential of these markets,
certain bigger states like the below generate
less than 1% online sales each, either due to
connectivity issues, laws and restrictions, or even
cheating customers:
 Kerala
 Bihar
 Orissa
 Madhya Pradesh
 Assam
Effect of E-commerce on
traditional market
Online vs offline
Online stores are projected to account
for only 3% of India's total retail market
by 2020, PwC said in its report
'eCommerce in India Accelerating
growth'.
 Issues such as poor last-mile connectivity,
high payment cost, low profitability,
regulatory barriers and a dearth of skilled
manpower are weighing on online
retailers in India, PwC said.


Cash on delivery (CoD) services impose
substantial financial cost for online
retailers, as unlike in developed markets,
this continues to be a preferred mode of
payment in India. PwC said profitability for
online retailers in the country was
affected by free shipping offered to
customers and a high rejection rate on
CoD orders. Moreover, customer
acquisition costs are rising due to
competition by companies with more
funds, it said.
Traditional market on backfoot

Over the past 4-5 years, competition
from online retailers such as Flipkart (in
books, music and electronics), Myntra and
Jabong (in apparel) has eaten into the
revenues of physical retailers. Specifically,
competition in the last three years has
been intense compelling many to go
online even as their net store additions
slowed.

At an aggregate level, operating and net
margins of companies such as Shoppers Stop,
Cantabil, Kewal Kiran, Provogue, and Trent
have all shown a declining trend. Even Net
Store Additions CRISIL Opinion parameters
such as same-store sales growth, conversion
ratio and sales per square feet have been on
a decline. For example, in the case of
Shoppers Stop, sales per square feet have
declined from Rs 8,518 in 2010-11 to Rs
7,837 in 2012-13, while the conversion ratio
has come down from 24 per cent to 22 per
cent over the same period.

To be sure, the surge in online retailing is
not the only reason for the weak
performance of traditional retailers. There
are other factors such as economic
slowdown and local competition, but
what’s irrefutable is that the online
upstarts are chomping away business.

The fact that online discounts and sales
have come to dictate pricing in India is
widely known. While customers benefit
from reduced pricing and increased
convenience, the extent of the impact
that online retailers like Flipkart and
Amazon are having on the day-to-day
operations of brick-and-mortar stores is
something very few have paused to think
about.
Traditional retailers being forced to
move online

To stay in the game, traditional retailers have been
working on their internet strategy. For instance,
Shoppers Stop, which started its online store in
2008, has boosted presence and improved
features and user interface to bring its online
visage on a par with leading e-commerce
websites. The company is also trying to leverage
its physical network by giving customers the
option to return products at its stores. Apart
from Shoppers Stop, Croma has an online store
with options such as store pickup and cash on
delivery.
Info from USA

What we are witnessing in India today
played out in the US about a decade-anda-half back. That was when today’s big
daddies such as eBay and Amazon
debuted. In the next 4-5 years, by the turn
of the century, they had become big
enough to pose a threat to traditional
retailers such as Wal-Mart, forcing them
to come up with online strategies of their
own.

Similarly, physical retailers in India will
have to establish their presence online
quickly. And, with the right strategies, they
can even compete effectively. For instance,
to tackle the queue problem at its stores,
WalMart allows customers to shop online
and opt for either home delivery or store
pick-up. Today, Wal-Mart is among the top
5 online retailers in the US with
estimated revenues of USD 10 billion in
2013 from the online segment alone.
Things to look out before entering
the Market
Market Size
 E-commerce readiness
 Scope of growth
 Barriers to entry
 Competition
 Technical issues

FDI : How it matters?

In September 2012, the Indian government
allowed 51% FDI in multi-brand retail,
subject to certain conditions.

However the Department of Industrial
Policy and Promotion (“DIPP”) of the
Ministry of Commerce and Industry later
clarified that this mandate did not apply to
B2C e-retail and would apply only to
retailers with brick-and-mortar operations.
Disadvantages

there will be loss of jobs and creation of a
monopoly by multinational companies.

Allowing the entry of inventory-based
large foreign e-retailers like Amazon and
e-Bay may shrink Indian entrepreneurship
and the Micro, Small and Medium
Enterprises (“MSMEs”) sector.

It is apprehended that organized retailers
would source their goods from cheaper
markets abroad, which will adversely
affect the Indian manufacturing sector.
Favouring FDI

creation of infrastructure, more jobs and
better consumer service.

The move will reduce the need for
middlemen, lower transaction costs,
reduce overhead charges, and reduce
inventory and labour costs.

the spread of e-commerce in the rural
and suburban India will provide choices to
the growing number of customers there
who have disposable income and are
willing to spend for their choices. It will
also help the rural economies integrate
faster with the national economy.

The government‘s discussion paper
observes that e-commerce has the
potential to contribute more than 4% to
India‘s GDP by 2020.

If and when the new government
introduces FDI in B2C e-retail, it will be
interesting to see the entry routes, FDI
caps and limits on the percentage of
sourcing from domestic manufacturers.
Supportive foreign investment regulations
will help in easing capital constraint and
building a constructive growth
environment for the e-retail industry.
Thanks
MADE BY :
 Ayush
 Tarun
 Rafshan