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eCommerce in India-
Fueling a billion digital dreams
Scope of the Report – To understand the evolution of eCommerce landscape,
trends, drivers and business segments emerging in India
1
Global
eCommerce
Industry
landscape
and trends
eCommerce eCommerce
6 and 2
in India
the future
Scope of
the Report
Key enablers,
M&As, VC/ PE Evolution of
5 3
Investment the Industry
Trends Emerging
trends,
drivers and
business
segments
Ø
The global eCommerce industry generated revenues of USD 1.5 Trillion, growing at 20 per cent; the US being the world’s largest market,
followed by China
Ø
The Indian ecommerce industry today is worth USD 14 Billion, growing at a CAGR of over 30 per cent
Ø
Growing internet penetration, entry of global majors, rise in smartphones adoption, innovations in mobile technology, security, and
payments, and access to funding helping accelerate the growth of eCommerce
Ø
eCommerce is reinvigorating demand and catalyzing growth in the Indian retail industry, in addition to unlocking value in India’s economy
by tapping untapped customer segments, driving innovation and fostering entrepreneurship
Ø
The industry is moving from eCommerce 1.0 model which focused on price, to the eCommerce 2.0 model which focuses on high quality,
intuitive, curated and personalized, omni channel user experiences
Ø
Diverse demographics and inadequate infrastructure will catalyze the transformation of the eCommerce sector into a hyper local, on
demand market
Ø
The Indian eCommerce industry can grow 20X, and cross USD 200 billion in gross merchandize value by 2030, driven by augmented
transaction values, increased data usage and higher online shopping penetration
The global eCommerce industry continues to evolve rapidly, and is experiencing speedy growth in addition to driving technology adoption across the
world. With revenue of USD 1.5 trillion in 2014, the worldwide eCommerce industry is growing annually at 20 per cent. Among the regions, while the
Americas currently have the biggest share, APAC is expected to become the biggest market with one-third share by the end of 2015.
Global retail business trends suggest that brands are taking a similar view of eCommerce markets all around the world. As the ecosystem is maturing,
the emerging markets tend to become more lucrative and hence, pushing the providers to extend their capabilities further.
Ø
China and the US remains the world’s leading ecommerce markets in terms of revenues, combining for more than 55% of global internet
retail sales in 2014
Ø
The $14 billion Indian ecommerce market promises to be extremely massive in the near future, but remains early-stage today
Ø
Increasingly hitting the radar of global brands selling online. In 2014, US-based retailers Costco, Home Depot, and Lowe’s all launched
eCommerce sites in Mexico, while other brands such as Nikon and Calvin Klein launched eCommerce in Brazil
eCommerce eCommerce: US remains the main market; Asia Pacific fueling growth
Growth ~20 per cent
Norh America,
USD
33%
1,250 Bn
Western Europe,
2013 25%
• Uptick in emerging markets; >15 per cent • eCommerce companies launching mobile
growth in Brazil, Mexico, South Africa etc. websites and innovative mobile apps
• Growing internet penetration, • Developers are finding opportunities
smartphones adoption, mobile rich towards fast-growing Asian markets such
interface, enabling infrastructure as India
• ~21-34 years active age group; ~60 per cent • Mobile traffic and sales to climb-up
shopping online • Growing adoption across emerging
• Millennials as highest purchase intenders regions
Brazil 19%
94
Russia 17%
Canada 14%
Top 3 countries by retail eCommerce sales, FY2015E
United States** 12%
as on Dec 2014 (in $ billions)
UK 12%
• The disruptive growth in China’s eCommerce market is slowly widening
South Korea 7% the gap between the top two countries and China will likely to exceed US$
1 trillion in retail eCommerce sales by 2018 (accounting for more than 40%
Japan 7%
of the total revenues worldwide). The US will continue to maintain its
Australia 6% position as the second-largest eCommerce market in 2018, totaling nearly
$500 billion in revenues
• Channel flexibility
• Hyper-personalization
eCommerce in India has experienced remarkable growth, radically altering the way people live. Today, the industry accounts for revenue of USD 14
billion growing at a CAGR >30 per cent (last 5 years). India’s mobile penetration is estimated at >75 per cent of its population. Consequently,
consumers expect and are able to get anything and everything via the internet –from books, toys, Jewellery to electronics/consumer products,
apparels, local groceries, etc. The 2014 annual Great Online Shopping festival saw 7 million unique visitors vis-à-vis 2 million in 2013 which is a clear
demonstration of rapid adoption of eCommerce in India.
Clearly, supporting enablers, ease of access, multiple funding avenues, adoption by tier II/III regions and fundamental revolution of new opportunities
are the pillars behind the cerebral growth of the industry:
• The rise in smartphones adoption, availability of and growing penetration of internet services at affordable rates remain the key enablers
• Connectivity has enabled easy access to consumer-centric services – train/hotel bookings, taxi services, movie tickets booking, mobile payments
etc.
• Growing ease to a digital enabled financial system; 400mn people in India have bank accounts and “Jan Dhan Yojna” scheme embarking easy
access to unbanked
• Globally, interest of VCs turning towards India as evident by 10X growth of home grown companies like Flipkart and Snapdeal to enter the club of
billion dollar Unicorns
• eCommerce is broadening across cities with Tier II/III cities gradually emerging as mainstream revenue generators, unlocking value in India’s
economy by tapping untapped markets/regions and customer segments
• The past few years have experienced a fundamental revolution with the entry of online giants like Amazon. There is increased consolidation and
emergence of different models like marketplaces with pure-play businesses expanding to becoming one-stop-shop for everything
A secure online transaction environment, Cash On Delivery (COD), low pricing and strong focus on customer service has instilled trust of consumers in
online shopping. Further, the addition of deep discounts, coupons, referral systems, better logistics, shorter delivery timelines, zero delivery prices,
reverse logistics, etc. are seen as a clear reflection of transformation in the industry
eCommerce is reinvigorating demand and catalyzing growth in the Indian retail industry, in addition to unlocking value in India’s economy by tapping
untapped customer segments and markets. According to the Morgan Stanley survey research 2015, 73% of the online shoppers are found to be
shopping more than once a month, with almost ~20 transactions in a year on an average, with higher income groups shopping online as many as upto
27 times a year. Lower price and convenience are the primary benefits cited by current online shoppers.
Apparel and fashion (including footwear, eyewear, personal care and lingerie) has emerged as the top category within eCommerce followed by
electronics (both mobile and tablets and other consumer electronics) as the next largest category. Both categories constitute about 65% of total
eCommerce sales currently and the proportion is likely to remain static in the near future.
Online activity for niche categories (such as furniture & home décor, jewelry and groceries etc.) is still under penetrated because the level of
standardization is low for such products, however, the growing advent of differentiation and consumerisation will definitely foresee a shift in the
demand.
KEY TRENDS
Fastest growth segment in India
Growing base: ~300 million internet users – 2nd largest • Advancements in technology enable access to untapped consumer markets:
base; Rapid internet penetration: ~173 million mobile users
Easy access: Digital enabled financial system; “Jan Dhan • New business models and industry dynamics (due to entry of online majors like
Yojna” scheme embarking access to unbanked Amazon):
Improving landscape-
Funding/ VC investments crosses USD 3 bn Better logistics, COD
Consolidation between Pure-play businesses shorter delivery timeliness,
Access to funding: 91 deals worth USD 3.9 billion in 2014
existing players expanding to one-stop-shop zero delivery prices,
(Source: Venture Intelligence)
reverse logistics
Funds from multiple sources including individuals,
corporates and private equity firms • Evolving models: Inventory-led/ marketplace model (E.g., Flipkart growing its
logistics arm E-Kart vs. Amazon practicing marketplace model and strengthening
SoftBank, Japan (largest investor in Indian eCommerce) to its delivery network)
invest ~ USD 10 billion over the next few years
• New avenues of growth: While metros continue to lead, Tier II/III cities seeing
Big Indian businessmen betting high on the market –E.g., greater traction; for e.g., Jaipur, Ahmedabad, Chandigarh along with emerging
Ratan Tata invested in 5 eCommerce ventures till date areas like Guntur and Tada (AP), Karthikappally (Kerala), Ghattia (MP), Chorayasi
(Gujarat), etc.
Source: eBay Census 2014, IAMAI, Press articles, PwC Analysis, NASSCOM
Growing penetration by tapping large domestic market across regions and customer segments; rise in transactions volume
Location
All Respondents 20
Location
Respondents (in %) Top & Cities 29%
Online shoppers Top 8 Cities
Internet users (n=3,900) 26
28% Other Cities 27%
Other Cities 13
Monthly HH Income
Upto 15000 21% Upto 15000
Monthly HH Income
11
Consumers with > 5 years of internet usage shop ~5X more than consumers with 1-3 years of experience Key Benefits of online shopping
1 Lower Price
2 Convenience
Movie Jewelry Groceries Food Baby Travel Furniture Consumer Mobile/ Books Apparels/
tickets takeaway products & Home electronics Tablet Fashion
/ Delivery furnishings
1-3 Years of internet usage >5 Years of usage
Source: Morgan Stanley (AlphaWise survey Dec 2014), NASSCOM
Apparel / Fashion 1 2 1
Mobile 2 1 2 65 Apparels/Fashion 73
57 Mobile, Tablets 51
Consumer
Consumer Electronics 3 3 3 41 33
Electronics
26 Books 42
18 Baby Products 22
17 Groceries 18
Movie / Entertainment 5 4
Food
14 20
takeaway/delivery
16 Home Furnishings 15
Baby Products NEW
10 Jewelry 20
The evolution of eCommerce in India started with the advent of various online matrimonial portals which further extended with a boom in online
travel and eTailing segments.
• While entry of online travel sites such as IRCTC and MakemyTrip changed the way Indians booked their travel tickets and later hotel
reservations and tour packages, the acceptance of eCommerce on a larger scale gained popularity with the opening-up of eRetail segment,
offering wide category of options to shoppers.
• Online retailing has taken the centrestage and is now experiencing a faster growth with emergence of several start-ups in vertical focused
categories along with newer areas e.g., online financial services, utility bill payments and recharge, discount coupons, online grocery, home
furnishing etc.
The fast evolving eCommerce market in India is set to close $20 billion mark soon – driven by hyper growth in affordable smartphones, improving
infrastructure, evolving payment landscape with a propensity to transact online. The market dimensions collectively enumerates the key levers
supporting the dynamic shift in eCommerce:
• A key enabler for the internet economy - Launch of 4G services in India and development of telecom infrastructure at a rapid pace
• 2014 has been a seminal year for eCommerce industry – The segment has seen funding to the tune of above USD 3 billion and growing
significantly since then. It is also attracting global interest as is evident from SoftBank’s (Japan) investment of USD 10 billion in India over the
next few years. The growing valuations of Flipkart, Snapdeal, Quicker, Olacabs and Zomato is a clear testimony to the mounting fortitude of
Indian eCommerce sector to demonstrate its continued existence in the ‘Billion dollar elite club’.
• Payments landscape is evolving across channels - innovations in mobile technology and security is facilitating digital payments
• The industry has also seen creation of niche/ new job roles in the ecommerce domain. The thrust behind building core-edge technology
platforms is driving eCommerce companies to bet high on international talent with proven tech record along with substantial hiring of skilled
candidates at different positions.
Online Boom Emergence of new segments e.g., online Entry of Global MNCs like Amazon; proposed entry
retail, classifieds, web aggregators, financial of E-commerce giant, Alibaba
Upto 2000 firms, real estate
No. of firms: >1,000 firms
Online job portals No. of firms: ~150-250
Delivery & logistics Consumer marketing intelligence Real time analytics & tracking
Rise in online consumers – Offering scalability Mobile ready Infrastructure – Helping gain adoption
online buyers (million nos.) eCommerce sales via mobile medium (% share)
65
40
<20
75%
89%
2013 2014 2015E
Desktop medium
4 5
Mobile medium
Enabling infrastructure
Indian telecom infrastructure ecosystem is evolving fast, creating a launch pad for higher internet penetration in India
Capital infusion
Big ticket investments by active global investors; US$2bn commitment by Amazon Inc. into its Indian e-commerce arm;
large amounts of capital commitment from Softbank ($10bn) and Alibaba (through Ant financials), besides other global
firms to support and mentor thereby building the ecosystem
Government initiatives
Digital India initiative; financial inclusion; FDI in eCommerce
Indian telecom infrastructure ecosystem is evolving fast, creating a launch pad for higher internet penetration in India
Devices Tariffs
Telecom
- Cheapest 3G/4G handsets are available Infrastructure - Data tariffs have reduced by c.20% in
for US$40/150 the past 2 years
- 4G ecosystem in China will provide - Introduction of 4G by RJio/ telcos could
enough supply of 4G handsets in India reduce data tariff further in the next 3
years
VC funding maturing – Flow of venture capital investments turning into a flood High value VC funding deals in Q1 2015
59
3.3
1.5
21
0.8
0.4
0.1 0.6 0.7
0.2
Jan - Apr 2014 Jan -Dec 2014 Jan - Apr 2015
India’s attractive demographics – the youngest population in the world – should lead to 300mn+
new online shoppers in the next 15 years Within these bottlenecks, lies
an opportunity for eCommerce
# people per Hyper market ('000) 2,974 Traditional logistic providers offered
1 added ecommerce solutions, E.g., India
Post, Blue dart, Aramex, DTDC, Fedex
Emergence of specialized
2 e-commerce logistics start-ups, E.g.,
425 Delhivery, E-Com express, e-kart etc
74 233
43
Emergence of logistics aggregators,
3 E.g., Kart Rocket and Zepo
UK USA China Brazil India
Online payment landscape – Easy installments and payment options Mobile based payments fast evolving – Enabling
online transactions by mode of payment, 2014 (in %) digital inclusion
Payment approach Providers
EMI/3rd party 1%
10% Cash on delivery (COD) Aramex, FedEx, Blue Dart,
wallets JAVAS, Delhivery etc.
9%
Credit/debit card/net Visa, MasterCard, American
12% banking express, Diners club, etc.
Netbanking 18%
34% Payment gateways - CCAvenue, Billdesk, PayU,
card linked Citrus, Zaakpay etc.
FDI in eCommerce
• Mobile phone & Bank accounts - • 100% in B2B e-commerce • High speed internet - Connect 250k
Enabling participation in digital & • 100% in single brand retail (offline) village councils to broadband via
financial space National optical fiber network; 400k
• 51% in multi-brand retail (offline) internet access points
• Micro-ATM programs; CSCs/ Post
Offices • Complete restriction on foreign online • e-governance & e-services across
retailers to sell products sourced by government – Easy access to common
themselves - should rely on services via cloud
marketplace model (100% allowed)
• Leader in IT adoption - Across health,
education, banking
Indian Government owned IRCTC runs one of the India Post with over 1.5 lakh post offices has
largest online ticketing portal Adopting channels to emerged as a best friend for the Indian Internet
accelerate the penetration retailers
“Recently, collaborated with Amazon as an official “Set to launch its own e-commerce portal in a
of internet and
eCommerce partner for the next 2 years. Added a marketplace model. Its infrastructure reach could
e-commerce
‘shop on Amazon’ tab on its homepage which help deepen the e-commerce penetration further"
redirects to a separate landing page on Amazon.in”
Source: DeiTy, Goldman Sachs Global Investment Research, Press articles, NASSCOM
Deal size has more than tripled over last year; growing focus on the Indian eCommerce M&A deals: 48 deals worth
domestic market USD >1.4 billion since Jan 2014
612
16 Domestic,
369 77%
404
7 360
• Inbound: Alibaba – One97 Communications, Global
60 Fashion Group – Jabong.com
5 9
Jan - Apr 2014 Jan - Dec 2014 Jan - Apr 2015 • Outbound: MakemyTrip – EasyToBook.com, Zomato –
MenuMania, Zomato – Lunchtime, Zomato –
Outbound Inbound Domestic Deals (Nos) Urbanspoon
• Domestic: Flipkart – Myntra, Ola cabs – TaxiForSure,
Snapdeal – Freecharge,
#4 acquisitions in mobile payments #7 outbound acquisitions by Zomato Organic growth supported by niche
space – Growing access to digital - Demonstrating a clear 'market tuck-in acquisitions
payments leadership'
Source: Venture Intelligence, Yourstory, NASSCOM
India has experienced a large shift towards online, potentially the biggest in the world of this kind. The advent of eCommerce has seen various
dimensions at the same time. In today’s era, the Consumer is the ‘real king’ here and significant pricing and discounting mechanism acts as the pillars
of competition among companies to acquire customer’s time, loyalty and wallet share.
eCommerce is leading to the emergence of different business models – while horizontal eCommerce is standardizing, at the sametime, verticals are
personalizing as every company is trying to capture the limited time of an online consumer. For e.g., MakemyTrip, Yatra etc are standardizing and
integrating their offerings, at the same time, new travel start-ups are creating niche markets. App-only strategy is one such move by fashion portal
Myntra.com
Source: IAMAI, IMRB,A SSOCHAM, PWC Analysis, DINODIA Capital Advisors, Company website, NASSCOM
Godrej Group's premium food retail chain Natures Basket revamping itself
• Recently tied up with online retailers Snapdeal and Amazon India to take its gourmet food basket of over 400
products to 8,500 cities. Planning to tie-up with other online marketplaces to widen the reach of its retail entity
SHIFT TO EXTENSIVE • Has also revamped its own e-commerce platform promising doorstep delivery within three hours. Earlier, the
ONLINE COMMERCE company catered to only five cities - Mumbai, Pune, Delhi, Bangalore and Hyderabad - through its brick-and-mortar
stores
"We expect an exponential rise in traffic and conversion rates that can lead to about 10 times growth in our online
business revenues," says Mohit Khattar, CEO, Godrej Natures Basket.
Source: ASSOCHAM, Deloitte, Ericson, Goldman Sachs, Morgan Stanley, Press releases, NASSCOM
eCommerce market size to grow 20X by 2030 eCommerce market to grow to 2% of GDP by FY30E
~13%
2030P
100% = $1,641 bn CAGR 8%
GDP
3% $11,250 Offline retail
2015 13%
Retail, $1,641
100% = $463 bn CAGR ~20% 15%
2030P
Offline Retail
2030P eCommerce,$216
eCommerce 2%
KEY TRENDS
• Growth in Data penetration 71% by FY2030E • Average transaction value Inflation at about Robotics, Drones
(19% in FY15) from Rs1,800-2,000 to 6%
almost Rs4,300 by FY30E • Innovation in
• Online shopper penetration Reach 25% by • Incremental capital in next logistics and delivery
US$20bn Capital
(4% in FY15) FY2030E 5 years • ‘High speed’ supply
chain
The evolution of eCommerce till date was majorly centered around the pillars of competitive pricing, deep offers and discounts, wide range of
selection, and convenience – aptly described as ecommerce 1.0 model. With a remarkable growth story in more ways than one, this segment, which
had its humble beginnings in online job portals and matrimonial sites, today stands graciously at 14 billion USD, and growing annually well above 33
per cent.
And now, the times are changing! The growing complexity is giving a way to the new era – the futuristic eCommerce 2.0 model, that includes hyper-
local commerce with innovative platforms, payment solutions and omni-channels retail experience.. Ecommerce 2.0 will surface with new pillars
replacing the old ones - quality (of product, platform, service) replacing discounts and low price war; rich user experience replacing convenience and
ease of shopping; curation replacing selection and enabling discovery of right products; personalization replacing availability of everything “online”
and digital payments replacing COD model.
The new trends emerging in this model will rely heavily on technology enabled differentiation along with exploring new ways of dealing with growing
expectations of customers -
• June 2013, Amazon launched its online marketplace in India offering books, movies and television shows for sale. And later
expanded to more categories
• Domestic presence – Gurgaon (HO) with presence in ~50 cities including Mumbai, Bangalore, Delhi-NCR and Pune
• Recent funding – USD 2 billion investment for expansion plans in India
Amazon • No. of warehouses/ fulfilment centres – #11 (recently announced its 11th and largest fulfillment centre on the outskirts of
In India Hyderabad)
• Pioneered in India – premium delivery (same release day - delivery)
• Amazon pick-up – 1000+ pick-up points, coverage of ~50 cities
• Easy ship model – 78% of the demand is fulfilled by Easy ship
• March 2015 – A pilot launch in Bengaluru covering 5 pin-codes currently; available only via mobile
KiranaNow – • DnA - Combining it’s core strength in technology, Innovation and extensive delivery mechanism with Kirana stores products
A new and local belongingness
experience • Delivery model –Easyship model (25 kms proximity with a promise to deliver the goods "within 2-4 hours“) using its own
logistics OR the neighborhood store's staff OR logistics partners)
• Offering customers an instant and convenient access to the ecosystem of local stores for their everyday needs via mobile
phones
• Express delivery platform, better service offering, continued innovation and customer engagement
Benefits
Achieved • Kirana Now is an India-specific innovation built particularly for the local market. This is a by-India, for-India service. "We
want to provide maximum convenience to customers when shopping for their everyday needs and enable them to shop from
the ecosystem of their local stores on their mobile phones and get things delivered when they really need it” said, Amit
Agarwal Country head, Amazon India
• Mar 2010, Chumbak started with an initial amount of INR 45 lakh to offer design-focused quirky Indian themed souvenirs,
following both online and offline format together as a differentiated strategy
• Domestic Presence – Bangalore (HO) with flagship stores in Delhi and Bangalore
• No. of offline stores – Approx. 40 Pop Up stores (top 8-9 cities across the country) along with exclusive partnership
Chumbak (offline/online) to retail out a wide range of products categories
In India • Pioneered in 2012 –With additional funding, Chumbak initiated a kiosk model in different malls (adding 20 to 25 in another
year and a half). Last year onwards, it introduced the concept of larger formats with home products (furniture, lighting, wall
art etc.) added to its portfolio
• Chumbak overseas - Two years ago, tied-up with retail stores in Japan and have close to 70 stores. Initiated online retail in
Middle east as well
• Founded in 2012, OYO Rooms currently offers a chain of branded budget rooms with “standardized experiences”
• Network of technology-enabled budget hotels (Almost 350 hotels in 15 cities)
Oyo Rooms • Inventory of almost 4,000 rooms
• Latest funding - USD 20 million from Greenoaks Capital along with existing investors (Sequoia Capital India and Lightspeed
Ventures)
Launch of mobile app platform for hotel booking as well as booking stay experiences
• Allow customers to not only book rooms in less than 30 seconds, but also order room service directly from the app
Trending mobile
platform • App enables customers to search for the nearest available OYO Room; Search options available for specific location in a city
and explore available rooms on the map
• Also provide details of all the amenities available with the pictures
• Started in April 2013, CashKaro is one of the largest and funded cashback site growing at 30-40% per month
• 3X – 10X times larger than other cashback sites
• Driven over Rs 150 crores of sales to its partners and offered over Rs 10 Crores of real cash as Cashback to its members
CashKaro
• Free coupons via 500+ partner sites in India with over 2 crores products
• Raised $750,000 funding in August 2013 by a group of angel investors.
In 2015, launched new website with a product discovery & price comparison search engine
“Product
• Facilitate users curate deals by products, brands and retailers and help earn ‘Extra’ cashback on every transaction
discovery”
and “price • Offering a combination of “more shopping, more earning”
comparison”
• Combines consumer’s buying pattern and changing consumer behavior and offer better comparison across products
feature
• Started in June 2012 as a rental service finder in Mumbai, Housing.com has expanded its presence to 60 major cities in India
• Offers an online real estate platform which allows customers to search for housing based on geography, number of rooms
and various other filters
Housing
• Nearly 4,000 listings in a day
• Latest funding - USD 90 million in Series C from SoftBank along with existing investors
In November 2014, Housing launched a 3D interactive home booking platform called “Slice View”
• Enables users to take a virtual walk through houses, by providing 3-D renderings of apartments
“Slice View”-
An interactive • Provide details of floor plans, possession, facilities, and various payment options
platform
• Further, it allows customers to book their homes online
• Plans to launch Slice View across multiple platforms on Web and Mobile