CHAPTER 1

INTRODUCTION

1.1 INTRODUCTION

In recent years, it is evident and visible that the remarkable changes are taking place

in worldwide shopping trend and trade. E-commerce has taken the world in its hands with e -

retailing becoming the back bone of today’s business world. With the explosive growth and

innovation in e-commerce activities, numerous business and commercial models have been

emerging with the new entrepreneurs entering the online market. E-

commerce or electronic commerce, a subset of e-business, is the purchasing, selling, and

exchanging of goods and services over computer networks (such as the Internet) through

which transactions or terms of sale are performed electronically. “E-commerce uses a website

to transact or facilitate the sale of products and services online” says Philip Kotler (2013) 1.

Yet, E-commerce is not just on the Web. In fact, e-commerce was alive and well in business

to business transactions before the Web back in the 70s via EDI (Electronic Data

Interchange) through VANs (Value-Added Networks). E-commerce can be broken into four

main categories: business-to-business (B2B), business-to-consumer (B2C), consumer-to-

consumer (C2C) and consumer-to-business (C2B). There are also other categories of e-

commerce, such as B2E, G2G, G2E, G2B, B2G, G2C and C2G, but they tend to be

superfluous. According to analysts, factors like growing Internet penetration, increasing

spending power, availability of multiple payment methods like credit/debit cards, cash on

delivery, combined with faster adoption of smartphones and tablets are contributing to the

growth of the sector. With the development of e-commerce, various e-commerce activities

aroused viz., e-retailing, e-servicing, e-publishing and e-supply chain management, among

which, e-retailing (or e-tailing) is focused in this research.

1
Kotler, P., Keller, K. L., Koshy, A., & Jha, M. (2013). Marketing Managemnt: A South Indian Perspective (Vol. 14). Pearson Education
1.2 THE E-TAIL INDUSTRY

1.2.1 MEANING OF E-TAILING

The word E-tail has its root in the word retail. The letter E stands for ‘Electronic’ as

the shopping process involves and happens through the electronic media- Internet. E-tailing

is the Electronic commerce used specifically for retail purchases, including grocery

and supermarket items. The e-retailing (also known as e-Tailing) is the concept of selling of

retail goods using electronic media, in particular, the internet (D.P.Sharma, 2009)2. Electronic

retailing, or e-tailing, can include business-to-business and business-to-consumer sales. E-

tailing revenue can come from the sale of products and services, through subscriptions to

website content, or through advertising. E-tailers are not solely restricted to online sales but

also do a brick and mortar business to reach the consumers. E-tailing is synonymous with

business-to-consumer (B2C) transaction. E-tailing includes a sequential process that starts

with the way the products are displayed in the virtual space provided in the web shop (virtual

store) along with its features and price details. The consumer visits the shopping site,

evaluates the choice of products, selects the product based on his/her needs and expectations,

orders and pays through any of the available online payment systems or through cash-on-

delivery, gets the product delivered at the door-step and sends back the feedback to the web

store.

1.2.2 HISTORY AND GROWTH OF E-TAILING IN THE WORLD

At first, the term e-commerce meant the process of execution of commercial

transactions electronically with the help of the leading technologies such as Electronic Data

Interchange (EDI) and Electronic Funds Transfer (EFT) which gave an opportunity for users

to exchange business information and do electronic transactions. The ability to use these

technologies appeared in the late 1970s and allowed business companies and organizations to

2
D.P.Sharma. (2009). E-Retailing: Principles & Practise. Himalaya Publishing House

!
send commercial documentation electronically. E-commerce became possible in 1991 when

the Internet was opened for commercial use. Since that date thousands of businesses have

taken up dwelling at web sites. As early as in 1995, the term was used in many Internet

discussions that e-tailing seems to be an almost inevitable addition to e-mail, e-business,

and e-commerce. It began to work for some major corporations and smaller entrepreneurs as

early as in 1997, when Dell Computer reported multimillion dollar orders taken at its Web

site. Dell Inc., is an American company located in Texas, which ranks third in computer sales

within the industry next to Hewlett-Packard and Acer. Dell was launched in 1994 as a static

page and has made rapid strides, and by the end of 1997 was the first company to record a

million dollars in online sales.

History of e-commerce is impossible without Amazon and EBay which are the first

Internet companies to allow electronic transactions. Amazon, founded by Jeff Bezos, was

registered at first as ‘cadabra.com’ in July 5th, 1994 and went online as Amazon.com as early

as in 1995. Amazon Inc., is the first American electronic commerce company to sell products

over the Internet with headquarters in Seattle, Washington. Amazon.com started as an online

bookstore, but soon diversified, selling DVDs, VHSs, CDs, video and

MP3downloads/streaming, software, video games, electronics, apparel, furniture, food, toys,

and jewelry. Amazon has separate retail websites for United States, United Kingdom &

Ireland, France, Canada, Germany, The Netherlands, Italy, Spain, Australia, Brazil, Japan,

China, India and Mexico. EBay Inc., an American Multinational corporation and e-commerce

company was on track as a C2C auction website, in the same year September 3 rd, 1995 under

the name ‘echobay.com’ by Pierre Omidyar with its headquarters in San Jose, United States.

One of the first items sold on Auction web was a broken laser pointer for 14.83USD. It used

regular mail, express mail or courier service for the delivery of items to the customer. EBay

charged its users an invoice seller fee on the basis of if they have sold or listed any items in

"
the website. On October 3, 2002, PayPal became a wholly owned subsidiary of eBay and all

the transactions are to be made through PayPal. In September 30, 2014, eBay announced it

would split into independent public companies-eBay and PayPal- by the end of 2015.

Impressed by the success of Amazon and eBay, the Barnes and Noble, the largest retail

bookseller in the United States, founded by Charles Barnes, William Barnes, G. Clifford

Noble and Leonard Riggio in 1917, launched its website in May 1997, and succeeded to

become one of the biggest online booksellers in America. In March 1999, Amazon launched

amazon.com Auctions, a web auctions service, but, failed to chip away at the large market

share of the industry pioneer, eBay. Though Amazon was sued by Barnes and Noble and

Wal-Mart, it proved them to be false and succeeded in its goal. It acquired Planetall, Junglee,

Bookpages.co.uk, telebook and so many small online companies till date including Zappos

(an online shoe and apparel retailer), Stanza (a rival e-book reader), and Twitch.

1.2.3 HISTORY AND GROWTH OF E-TAILING IN INDIA

India Plaza, an e-commerce portal that started life in 1999 as Fabmall.com, is India's

first pureplay e-retailer. In June 1999 K. Vaitheeswaran (along with a group of five friends)

founded Fabmall.com, India’s first pure-play online retailer and was launched in September

1999. Fabmall first offered only music CDs for sale and then expanded its product categories

including books, movies, watches, and groceries in 2000. In February 2002, Fabmall.com

launched its offline grocery store in Bangalore, India. Fabmall acquired Indiaplaza.com in

2007 and was subsequently acquired by the Aditya Birla Group. With this acquisition,

Fabmall.com was re-branded itself and henceforth named as Indiaplaza.in in India and

Indiaplaza.com in the U.S. Cash-on-delivery system was introduced by Fabmall, currently

known as Indiaplaza in 2002. Thereafter, it was successful for around a period of ten years. In

2012-2013, Indiaplaza struggled to make funding for the capital investments and is currently

inactive.

#
 By the time, a great number of business companies started to rush into online world

with no proper aim, the whole system got collapsed and the dot-com bubble busted in 2000.

Many online companies failed to survive. Pets.com, a website selling pet products online,

failed. Having customers shop for pet products online and wait for delivery proved to be

impractical when those same customers could get what they needed at any local supermarket.

Boo.com was selling branded fashion apparel in 1999, ended up burning through in 2 years.

A delayed launch, bad user experience and even worse timing led to a complete failure.

Webvan.com, an online grocery store, launched in 1999 also liquidated in two years. In

addition to these, some other websites such as iBeauty.com, Beautyjungle.com, Beauty.com,

Reflect.com and Eve.com who were all selling beauty products online, Broadband sports (a

sports content website), etoys.com, Flooz.com (e-currency), zap.com (a fish protein

company) and Ritmoteca.com (online music store), also failed in the bubble burst era. The

factors responsible for this bubble burst may include: delayed delivery of products, no clear

plan for investments, poor user experience, over valuations, unsustainable business models,

lack of necessity, lack of customer acceptance and so on. "I remember in the year 2000 I got

a single cheque for 243 crore from an investor in Indya.com without even a business plan,"

says Pradeep Kar, founder of networking firm Microland and one of India's earliest internet

entrepreneurs. This made many companies to focus on a hybrid approach i.e., traditional sales

outlets with an online store.

Even though the dot-com collapse in 2000 led to unfortunate results and many of e-

commerce companies disappeared, the giant e-tailers such as Amazon, eBay, Indiaplaza were

able to succeed even during the bubble burst period. The advantages of electronic commerce

were acknowledged by the "brick and mortar" retailers and began to add such capabilities to

their web sites. For example, after the online grocery store Webvan came to ruin, two

$
supermarket chains, Albertsons and Safeway, began to use e-commerce
commerce to enable their

customers to buy groceries online

online.

As we enter the 21st century, we are seeing the beginning of a new revolution
revolution, namely

the network revolution. In 2001, there were approximately 7 million Internet users in India

(IAMAI) 3 which paved way for the rejuvenation of the e-commerce

commerce sector. By the end of

e-commerce, Business-to-Business
2001, the largest form of e-commerce Business (B2B) model, had around $700

billion in transactions and the second generation of ee-commerce

commerce came into existence.

ding to the data available, e-commerce sales continued to grow in the next few years
According

and, by the end of 2007, e-commerce sales accounted for 3.4 percent of total sales.

Figure: 1.1 Statistics on the number of Internet users

250,000,000 internet users

200,000,000

150,000,000

100,000,000

50,000,000

Source: www.Internetlivestats.com

According to Digital E-
E-commerce
commerce report (2013) by IAMAI and IMRB, the Indian e-

commerce market size was INR19,249 crore in 2009, INR26,263crore in 2010, INR35,142

crore in 2011, INR47,349 crore in 2012 and INR62,967 crore in 2013. Online travel industry

contributes maximum to this market size and growth every year. The non
non-travel online

3
Internet in India,2014. Internet and Mobile Association of India.

%
industries that contribute to Indian e-commerce market are e-tailing, online financial services,

online classifieds and other online services (Rebirth of e-commercein India, 2013)4.

Figure: 1.2 Growth of Indian e-commerce market size

70000
60000 62967
50000 47349
40000
35142
30000
26263
20000 19249
10000
0
2009 2010 2011 2012 2013

INR(IN CRORE)

Source: Digital e-commerce report (2013)

According to Digital E-commerce report (2013) by IAMAI and IMRB, the Indian e-

tail market size accounts to INR1550 crore in 2009, INR2,372 crore in 2010, INR3,842 crore

in 2011 and INR6,454 crore in 2012.

Figure: 1.3 Indian e-tail market size

7,000
6,454
6,000
5,000
4,000 3,842
3,000
2,000 2,372
1,550
1,000
0
2009 2010 2011 2012

INR(IN CRORE)

Source: Digital e-commerce report (2013) by IAMAI and IMRB

4
Re-birth of E-commerce. 2013. Ernst & Young.

&
 On an average, every year there is a growth rate of 34% and more from 2009 till today

in Indian e-commerce sector, as reported by IAMAI. It also states that customers are more on

online to search information about the products than purchasing them. Still, in 2010,

7.4million customers were able to shop through the Internet i.e., about 43% of the 17.5

million internet users that year. In 2012, among 19.6 million internet users, 14.3 million

turned to be shop online which is around 73% of the actual internet users that year. With

various technology developments, changing lifestyles and increasing use of laptops and

smartphones, there are about 159 million internet users in 2014. This extra-ordinary growth

in the Internet world and internet penetrations, lead to the rapid growth in online shopping

environment, which in turn facilitated many online retailers to enter the market again.

Figure: 1.4 Internet users Vs Internet shoppers

40
33.8
35
30
internet users (in million)
25
20 17.5
14.3 internet shoppers (in
15 million)
10 7.4 percentage
5 73%
54%
0
2010 2012

Source: IAMAI

Some of today’s biggest and most popular Indian retail shopping websites are:

Flipkart, Snapdeal, Myntra, Jabong, Homeshop18, Shoppersstop, Fashionandyou, Yepme,

Junglee, Fashionara, Craftsvilla and so many other online retailers have jumped into the

online business war. Flipkart was launched on September 5th 2007 by Sachin Bansal and

Binny Bansal, Snapdeal in February 2010 by Kunal Bahl and Rohit Bansal, Homeshop18 in

18th January 2011, Yepme in April 2011 by Vivek Gaur, Sandeep Sharma and Anand Jadhav
'
and Jabong in 2012 by Arun Chandra Mohan and Praveena Sinha. There are many other

websites also existing in the online market. Comparison sites are the next innovation in e-

tailing. Even the largest shopping site Amazon launched a comparison website- Junglee.com

in 2012. Junglee.com enables customers to find and discover the products from both online

and offline retailers in India. When Amazon entered the market after acquiring the Indian

price comparison site Junglee.com, the consumer-to-consumer firm eBay invested in Indian

competitor Snapdeal. In 2013, Amazon launched its site in India, amazon.in. It has started

with electronic goods and plans to expand into fashion apparel, beauty, home essentials, and

healthcare categories by the end of 2013. Though both the companies started its operations in

India, they could not lead the market because of the strong competencies from Flipkart and

Snapdeal-the two leading online retailers in India.

The sector has grown three times in four years which accounts to nearly 12.6 billion

US Dollars in the year 2013 (Sharma, 2014)5 and is expected to grow five to seven times in

the coming four to five years as estimated by many industry experts. Compared to last year,

Claimed Internet Users have increase by 39% in rural India to reach 101 Million in October

2014. Also there were 61 Million Active Internet Users in Rural India as of October 2014,

increasing by 33% from October 2013. At present, there are over 2.5 crore online buyers and

more than 21.3 crore internet users in the country, according to the Association.

A report by the IRIS Knowledge Foundation6 and UNHABITAT estimates that

around 430 million people in the 15 to 34 age group lived in India in 2011, and projects this

will steadily increase to 464 million by 2021. By 2020, India will be the world’s youngest

country with 64 percent of its population in the working age group. ASSOCHAM (2011)7

reported that 90 percent of India’s online shoppers were aged 35 or younger and over half

5
Sharma, M. R. (2014). Evolution of e-commerce in India. PWC India.
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was between the ages of 26 and 35. This is a very positive and significant finding as far as e-

commerce is considered.

E-tailing has started to bud in the rural side of the country also and the growth rate

may exceed the urban consumption. The online newspaper Business Standard, in its article

articulates the survey report of eBay. Based on the analysis of all transactions by Indians on

eBay between January 2013 and June 2014, it is reported that “It is the tier-II and tier-III

cities that are contributing significantly to the growth of e-commerce in the country, contrary

to the general perception of metropolises having pushed this. Against the 10 metro cities

where e-commerce has seen traction, there are as many as 3,133 tier-II and III cities, and

1,233 rural hubs, that are getting onto the online retail bandwagon” (EBay survey, 2014)8. It

was also recognized that “Delhi topped the list as the ‘number one e-commerce hub’,

followed by Maharashtra, Tamil Nadu, Rajasthan and Karnataka. And Customers have been

shopping more for products in the lifestyle category, with women shoppers in the country

being prominent contributors to the category”.

E-tailing has resulted in the development of etailware and price comparison sites. The

former being the development of software tools for creating online catalogs and software for

managing the business connected with doing e-tailing and the latter is the development of

sites that can quickly compare prices from a number of different e-tailers and can also link to

them (e.g., Junglee.com)

The new era of Social marketing trend has arrived in which e-tailers try to market

their products and services through social networking sites such Facebook, Twitter, etc.

Substantiating this, IAMAI (2015), affirms that India is the second largest market for social

networking giants such as Facebook and LinkedIn; 58,000 new users get connected on to a

social network every day. “Online retail has also seen a heavy overlap with social networking
8
EBay survey shows tier ii, iii, cities fueling e-commerce growth in India. (2014, December 19). Business standard.

K
due to aggressive marketing on such platforms. Social media would also become crucial as

more brands use social data to not just popularize their brands but also personalize experience

for customers on their websites” (Business Standard, 2012)9. “Our focus as an active brand

on Facebook lies in informing our customers about the products and offers that we feature on

our website. While we use Facebook ads and brand pages to promote our products, it also

offers us to target the promotions to specific audience demarcating them not only by

geographical locations but on interest base,” says Sandeep Komaravelly, vice-president

(marketing) of daily deal platform Snapdeal.com.

Price discounts and offers being one of the main criteria to shop online and a valid

customer attracting feature of websites, there are many special offers made accessible during

festivals as well as at the year ending period. The term 'Cyber Monday' was first coined in

2005 as a marketing term and has grown as a phenomenon over the years in the US. India

also got its own version of 'Cyber Monday' on December 12 this year as 'e-tailers' like

Flipkart, Snapdeal, Homeshop18 and Makemytrip, partnered Google India to offer discounts

for online shoppers. Now-a-days, End of Season Sale is gaining advantage among the e-

tailers as well as the customers. Having learnt from parent Flipkart’s mistakes during its ‘Big

Billion Day’ sale in October 2014, Myntra allowed a limited number of users on its website

to ensure a smooth experience for consumers during its two-day End of Season Sale, which

started at 8 am on Saturday, the same year. Unable to manage the traffic, Flipkart’s servers

crashed repeatedly through the day. But, Myntra made the customers to wait in queue with

the words displayed, “please wait, our shop is full of customers”. Amazon.in arranged a

Diwali Dhamaka Week sale from 10 to 16 October 2014 exclusively to boost up its business

in Indian market.

9
Indian Retailers like Facebook for Biz Expansion. 2012, September 28. Business Standard.
 One of Vaitheeswaran’s competitors is Sachin Bansal, a former Amazon India

employee and the co-founder of Flipkart.com, is now racing to set up its own delivery

network that will ship goods easily to the doorstep of customers at the right time. In the next

few weeks, Flipkart Logistics will start operations in 15 cities, including shipping items such

as television sets and washing machines (ArchanaRai, 2011)10. ‘E-kart’ is Flipkart’s delivery

service available in many parts of the country which also includes the one located in

Sripuram, Tirunelveli.

India has close to 20 million small and medium entrepreneurs manufacturing products

that can be sold through e-commerce. In September 2014, Flipkart launched its exclusive

Handloom Store, where it brought on board weavers from Varanasi. The company began

with 20 sellers and is looking to expand to 100 soon. A lot of sales come from small

entrepreneurs, manufacturers, and weavers, according to Ankit Nagori, senior vice-president,

marketplace, Flipkart. Flipkart aims at replicating this trend in online retail.

E-tailers continuously bring about new innovations in the online business world by

learning from their personal experiences, from other e-retailers’ mistakes and through

creativity which helps to attract entire customers towards online shopping. The e-tailers try to

bring about new innovations to prove their uniqueness and to retain their customers through

astonishing features leading to customer satisfaction. Flipkart’s innovations in India include

huge warehouses, 30day replacement policy, cash-on-delivery, and training to new

employees regarding customer service irrespective of the department. Launch of eBay Feed

that allows users to customize the homepage according to their needs. E-tailers keep on

expanding their product range and geographic location at the aim of improving their business

worldwide. EBay Daily, is a platform for international food items including beverages,

canned and bottled foods, sauces, and dessert. Domestic e-commerce

K
ArchanaRai. (2011, July 19). Online Retailers Eretail Private Equity. The Economic Times.

!
player HomeShop18 announced its food or grocery entry. After successfully launching

apparels, home and kitchen items, mobile phones and many more categories, HomeShop18

aimed to satisfy your taste buds. Thus, the online retailers are expanding their product range

towards perishable items also. Snapdeal has partnered Hero Electric to sell a new range of

electric bikes on its site. Pearson Education Services launches e-commerce portal named,

Edurite.com for Indian students. The portal aims to offer learning resources based on the

CBSE, ICSE and state board syllabus in various states - Andhra Pradesh, Karnataka, Tamil

Nadu, West Bengal and Gujarat. Apart from offering educational content which can be

consumed online, Edurite.com aims to offer study materials such as books, CDs, educational

toys and gifts that can be purchased by the students for offline delivery.

Many e-tailers struggle to withstand the online market due to its complex nature.

Among major deals, Snapdeal acquired Esportsbuy.Com, Flipkart acquired letsbuy.Com,

Madeinhealth was acquired by Healthkart, Yatra.Com acquired Travelguru from Travelocity

Global, Fashionandyou acquired UrbanTouch and Myntra.Com bought SherSingh.Com. Until

a clear business model is developed by the e-tailers before they decide upon entering the

online market and well-defined goals, this acquisition and shut down of feeble e-tail

companies will continue.

1.2.4 E-TAILING IN SOUTH INDIA

According to the report made by Indiaretailer.com, with the growth in the IT/ITeS sector

and other sunrise sectors like bio-technology, hospitality, etc. concentrated in the metro cities,

the cities of India have experienced exponential growth over the past few years, and are

expected to demonstrate robust economic performance in the coming years. Metros of

Bangalore, Hyderabad, and Chennai are growing at an exceptional rate, with the retail buzz in

these cities becoming more pronounced day by day (Talwar, 2010)11. These cities projected

11
Talwar, S. L. (2010, September). Retail Scenario in South India. Retail Franchise India.

"
to touch over US$ 20,000 million by 2010-11. With respect the demography of South Indian

consumers, Indiaretailer.com established that there were only about 11 million people in rural

South India who, on an average, spent more than $304 per annum in 2004-05, while about 26

million people spend in the range of $181 and $304 per person per annum.

In urban South India, about 3 million people spend in the range of $208 - $363, while

about 10 million spent in the range of $363 - $668 per person per annum. Kerala has the

highest number of persons belonging to the $304 and more expenditure category in rural

South India. In urban South India, Tamil Nadu has the highest number of persons in the $668

and more expenditure category. With regards to the consumer behavior, there are significant

variations across cities. While the single largest expense across all southern regions is food,

Chennai spends the highest proportion on education while Delhi spends highest on personal

transport. Distinct regional and city specific variations in spending habits, consumption

baskets and eating preferences are observed across the southern states of India. In the retail

sector, the largest growth in prosperity has been in the south where the high income

household has grown the fastest. About 70 per cent of India’s rich live in eight states

including Karnataka and Tamil Nadu.

Across all the middle and high income classes, except the super rich, growth has been

highest in the southern region. The southern states have also seen the largest decline in

poor/low income households. Per capita income in South India is around $510. Highest

saving rate is also seen in the southern region. Browntape, (2014)12 quotes that “South India

Buys More than the North” by comparing data from over 700,000 orders made across

multiple marketplaces and various categories in 2014. As would be expected, the 5 metros in

the country are also the top 5 spenders in the country, among which the top amongst these

12
Browntape. (2014, december 18). Part of India contributing e-commerce growth. Iam wire.

#
metros is South India (Bangalore, Hyderabad and Chennai) as compared to the North.

Contribution to overall e-commerce sales is as below:

South India – 41%

North India – 32%

West India – 21%

East India– 5%

North east India-1%

Figure: 1.5 Percentage of online orders in India

Source: Browntape (2014)

According to eBay’s statistics, West India has the most active sellers at 46%,

followed by North India at 28%. Kolkata, the remaining metropolitan, was not in the top 10

and accounted to only about 1.32% of the total orders. In the top 15 cities, there were as

many Tier 3 cities as Tier 2 (classified according to the Sixth Central Pay Commission

classification of cities.)

$
 Table: 1.1 Regional wise split of orders in India

S.No. City State % of total orders

1 Bangalore Karnataka 14.12%
2 Delhi Delhi 11.65%
3 Mumbai Maharashtra 6.98%
4 Hyderabad Andhra Pradesh 5.73%
5 Chennai Tamil Nadu 4.12%
6 Pune Maharashtra 4.07%
7 Kanchipuram Tamilnadu 3.99%
8 Gurgaon Haryana 3.18%
9 Rangareddy district Andhra Pradesh 2.51%
10 Thane Maharashtra 2.14%
Gautam Buddh Nagar
11 Uttar Pradesh 2.09%
District
12 Ahmedabad Gujarat 1.63%
13 Ghaziabad Uttar Pradesh 1.52%
14 Kolkata West Bengal 1.32%
15 Jaipur Rajasthan 1.28%
Source: Browntape, 2014

Leaving the Government’s classification, and looking at these cities from a different

perspective, it is clear that most of these tier 3 cities are tier 2 cities with satellites that

contribute more than those without satellites towards e-tailing.

Thane – just an extension of Mumbai

Noida, Gautam Buddh Nagar – part of Delhi NCR

Kanchipuram – part of greater Chennai region

Rangareddy district – part of greater Hyderabad

Tier 2 and 3 Cities collectively brought in more than 56% of the total orders. With more

Internet connectivity and increase in DTH and pay TV penetration in India, exposure to new

age gadgets and fashion is growing. Youngsters from less developed cities and districts with

limited or no access to branded products are turning to online stores. COD has made it very

convenient for people to pay for products even if they do not own a debit or credit card. All

these factors could have played a role in this growth. Karnataka, Maharashtra, Tamil Nadu,

Delhi and Andhra Pradesh make up for almost 65% of the e-commerce pie with high

%
spending power. Despite the potential of these markets, certain bigger states like Kerala,

Bihar, Orissa, Madhya Pradesh and Assam generate less than 1% online sales each, either due

to connectivity issues, laws and restrictions, or even cheating customers (Browntape, 2014).

1.2.5 E-TAILING IN TIRUNELVELI

E-tailing in Tirunelveli is fast growing like other parts of Tamilnadu. Tirunelveli

being one of the sensitive parts of Southern India, the consumers in this locale are more price

sensitive and utility oriented with respect to shopping habits. Though the consumers of this

region have an outlook of having traditional culture, the use of cosmetics is not constrained.

Due to the fact that increasing spending power, changing lifestyle, marketing influences on

the younger generation, increasing internet facilities, increasing intentions towards

personality development, availability of smartphones and laptops and increasing benefits of

online shopping the inhabitants of Tirunelveli also have entered into the online world and

purchase of cosmetics through the Internet. The increasing number of courier companies in

and around the city has made the acceptance of online shopping more easily. The most

popular online shopping website Flipkart has its own delivery point in Tirunelveli named

“EKart” which is located at Sripuram, at the centre of the city. The other online shopping

sites deliver their orders through courier companies which include Blue dart, First Flight,

Fedex, DTDC, ST couriers, Professional couriers, etc.

1.2.6 THE E-COMMERCE MARKET

The e-commerce market is broadly classified into two: non travel online industry and

online travel industry. Online travel industry contributes the maximum part of e-commerce

revenue to the country. The non travel online industry comprises of e-retailing, online

financial services, online classifieds and other online services.

&
 Figure: 1.6 E-commerce market-Two broad categories

Source: Created for this research

The online retail sector broadly comprises two categories of players: Vertical –

focused players and Multi-category players. Vertical focused players are the e-retailers who

focus on only one particular product type such as electronics, apparels or baby products.

Multi-category players are those who deal with multiple categories of goods. They sell two or

more type of products.

Figure: 1.7 Online retail players

Source: Created for this research

'
1.2.7 E-TAIL BUSINESS MODEL

The business model of the conventional retailers and e-commerce providers differ

significantly. The need for a different type management of physical infrastructure is made

essential while adopting e-tail marketing strategy. The conventional infrastructure model

relies on increasing depth and breadth of coverage through several inventory nodes,

warehouses and stocking points connected by based on various other factors ranging from

production cycles and nature of even local taxation laws. The conventional order point occurs

at retail stores and static customer fronts located at the end of the chain, and inventory

requirements are predicted empirically based on several months or years of past data. In fact,

competing sales channels may also duplicate infrastructure, an indication of the typical sub-

ordination of the logistics function within the overall sales and distribution process (Sharma,

2014).

Figure: 1.8 Conventional retail model

Source: (Sharma, 2014)

On the other hand, e-commerce providers operating either through inventory-led or

marketplace models, are entering an entirely different paradigm of operations, where

management of the supply chain is core to the business of creating more business. With real-

time demand and tight delivery expectations, the supply chain needs to be built from the

(
customer-end, with the fundamental difference being the proliferation of delivery points and

the need to move large number of orders of small parcels (one or two goods) across the

length and breadth of the country at an affordable cost (Sharma, 2014).

Figure: 1.9 E-tail model

Source: (Sharma, 2014)

1.2.7.1 Market place model vs. Inventory-led model

There are basically two models of doing B2C e-commerce: Inventory-led model and

the Marketplace model. In the inventory model, the e-commerce portal stocks up all the items

itself either at a single place or at decentralized depots. The advantages of this version are

bulk buying discounts, quality inspection at source and long and huge credit offered

especially but the downsides being enormous carrying cost in terms of store keeping,

decaying, vaporizing, interest and so forth. The key point is the inventories under this model

are owned by the e-commerce portal. The marketplace model sprung into the virtual horizon

as an alternative especially to address the downsides of the full inventory model. The e-

commerce portal does not hold any inventory under the marketplace model. In this case, the

e-commerce portal simply brings the buyers and sellers together. The seller merely uses the

website of the e-commerce portal and fulfills the order himself. The website (marketplace

!K
model), of course, provides all the enabling services like tracking facility for the customer,

payment gateway for the customer etc. But its job is no more than that of an agent. It hands

over the sale proceeds to the supplier as per the agreement with him after deducting its

service charges.

1.2.8 TOP CATEGORIES DRIVING ONLINE RETAIL

Though there are various product categories being sold through the internet, some of

those categories contribute most to the sector. The below chart shows that electronics tops the

sale among all the other product categories sold online in the year 2013.This is portrayed in

PWC analysis based on IAMAI 2013 report (Sharma, 2014).

Figure: 1.10 Commodity distributions in e-tailing

"Q !Q R12G8C/.9GF

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Source: (Sharma, 2014)

Supporting this, a report made by Red Seer consultancy (2015) states that Electronics

gains around 45-50% of the total online retail market in India and ranks first, followed by

fashion (18-20%), Home decoration and lifestyle (15%, Books, Music and videos (10%) and

other products (8%). Similarly, based on Global Trends in Online Shopping, A Nielsen

Consumer Report, June 2010, Ernst and Young identifies that, Electronics is the largest

category of products selling online in India, with a market share of 61%. Electronics include

!
computers, peripherals, televisions, cameras and mobiles. While electronics goods enjoy the

maximum popularity in India, apparel and accessories seem to be the largest-selling

categories in leading markets such as the US, the UK and Germany. This is because of the

higher margins that this category generates for e-Commerce players. As is the case in leading

e-Commerce markets, we can expect online retailers to shift to selling higher-margin

products such as apparel. The preference for apparels in online shopping is a global

phenomenon.

According to a survey conducted by Nielsen in March 2010, books and

clothing/accessories/shoes emerged as the most preferred product categories to be bought

online in the next six months. A total of 44% of the respondents claimed to buy books online

in the next six months, while 36% preferred clothing/accessories/shoes. Product categories

sold in organized retail indicate a slightly different scenario from online retail. Certain

segments that command a significant share of the organized retail market are underpenetrated

in the online retail sector. Food services and beverages have a share of 20% of the organized

retail market. However, these product categories are still at a nascent stage in the online retail

world. A number of online groceries are coming up in India. Considering that the working

population in metros spends considerable time travelling and the number of nuclear families

is rising, online groceries seems to offer a convenient channel. Online groceries seem to be

more popular in higher-density population countries. For instance, countries such as the UK

(4%) and Japan (30%) have greater online grocery penetration than the US (2%), which is

less densely populated. India, also being a densely populated country, may see growth in

online groceries.

!!
1.2.9 CONCEPT OF ONLINE MARKETING

The e-tail companies depend on different online marketing strategies to create

awareness, communicate and make customers recognize their website. Online advertising,

also called online marketing or Internet advertising is a form of marketing and advertising

which uses the Internet to deliver promotional marketing messages to consumers. According

to P.T. Joseph (2012), online marketing means, the use of the power of online networks,

computer communications and digital interactive media to reach the marketing objectives

(P.T.S.J.Joseph, 2012)13. Now with increasing new habit of the customers to search

information on the Internet made all businesses to include online marketing in their

marketing mix. The art of online marketing involves finding the right online marketing mix

of strategies that appeal to the company’s target market and will actually translate into sales

(Sridevi & SenthilKumar, 2015)14. Dave Chaffey (2012)15 defines Internet marketing as

“Achieving marketing objectives through applying digital technologies”. He adds that “E-

marketing is sometimes considered to have a broader scope than Internet marketing since it

refers to digital media such as web, e-mail and wireless media, but also includes management

of digital customer data and electronic customer relationship management systems (E-CRM

systems)”.

1.2.10 METHODS OF ONLINE MARKETING

The different methods through which information can be delivered to the customers

online include, display ads, web banner ads, pop-ups, floating ads, expanding ads, trick

banners, interstitial ads, text ads, search engine marketing, Sponsored search, Social media

marketing, Mobile advertising, email ads, chat ads, online classifieds, affiliate marketing and

content marketing. Banner advertisements, pay per click (PPC), and targeted email lists are

often methods used in Internet marketing to bring the most value to the advertiser.

13
P.T.S.J.Joseph. (2012). E-commerce:An Indian perspective.
14
Sridevi, J., & SenthilKumar, K. (2015). Emerging Trends In Online Marketing. ICTACT Journal of Management Studies , 1 (1), 34-38
15
Chaffey, D., & Ellis-Chadwick, F. (2012). Digital Marketing: Strategy, Implementation and Practice.

!"
1.2.11 ADVANTAGES OF ONLINE MARKETING OVER TRADITIONAL

MARKETING

Joseph (2012) points out that online marketing will not replace traditional forms of

marketing anyway. Instead, it will both add to and subtract from today’s marketing mix. It

will add more interactivity, more choices and also adds information value to products and

services. But it will subtract costs. Removes marketing dependence on paper, and takes away

barriers to starting a business or extending a business to international markets.

Benefits to the customers

• Customers stay updated- Customers are kept updated with product information either

via the website or emails. With the internet now becoming mobile, through 3G

technology and Wi-Fi, customers can be kept updated almost in real time.

• Customers can compare online- One of the greatest advantages for the customer is

that they can compare products or services they wish to purchase from the comfort of

their own homes. Instead of visiting a number of different retail outlets, the user

simply has to open different window tabs to compare prices or features of the

product/service they wish to purchase. Many retailing websites offer the facility

where different products they sell can now be easily compared. There is also price

comparison websites that customers can use to get the best possible price for their

products. Comparison sites help the customers to compare the price, features and

other facilities provided by different e-tailers under a same roof, thereby making their

research process and buying decision easy.

• Clear product information for the customer- Websites offer clear product information

on the product or service. There is little chance of misinterpretation

or mishearing what the sales person said.

!#
• Transparent pricing- Pricing online is very clear and transparent for the customer.

Customers can take advantages of pricing that may change regularly or take

advantages of special offers that last for a limited period.

• Track your purchase- Consumers have to pay for their product /service before they

receive it. It is important that consumers feel reassured when this happens. Many

websites allow consumers to track their purchase from order, dispatch to

transportation before delivery to their home address. Again this reassures the

consumer and makes them feel that they are obtaining a good service online.

• 24/7 Shopping- There is no time restriction on when a consumer can shop online.

Many online sales now start at midnight on a particular day encouraging customers to

shop all hours of the day.

• Customization- Online marketing allows personalization. Products can be ordered

with customized features. Some of the shopping websites allow the customers to

personalize their homepages depending on their need and satisfaction.

• Fewer Traps- Physical stores are made to lure you into buying more things. They use

posters, sales messages, colors and product placement to make you buy additional

items. The most popular products are typically in the back because the owner may

want the customers to view all of his or her other products. Many people will find a

few additional items by the time they reach the thing they came in for. These tactics

are not as pronounced with online stores. This means that the customers won’t feel

the pressure to buy other things.

• Discreet Shopping- Physical stores often make it difficult to buy certain items.

Shopping online provides privacy to the customers.

• Cash On Delivery- Online websites provide satisfaction to the customers through

convenience such as cash on delivery. The customers need not worry about losing

!$
 their personal or financial details. In particular, Indians prefer to transact in cash vis-

a-vis all other payment instruments. Among emerging markets, the country leads

when it comes to cash transactions.

• Discounts, convenience and value-added services- A large number of discounts being

provided by the e-tailers influence the growth of online retail among the Indian

consumers who are price sensitive in nature. Discounts are one of the major incentives

for shopping online. E-Tailers offer products at reduced prices, since their operational

and inventory costs are much less than those of offline retailers. This, coupled with

the wider product assortment offered, is a major driver of online shopping. E-Tailers

in India are providing various value-added services such as free shipping, product

returns, product and price comparison, user reviews and demonstration videos. All

these factors have driven the change in preference from offline to online shopping.

• Rising fuel price- Deregulation of fuel prices has led to a rise in fuel prices in India.

Furthermore, heavy traffic is being witnessed in urban areas, and parking space

constraints are cropping up at malls. Consumers get rid of these kinds of problems

while they purchase their goods online.

Benefits to cosmetic sellers

• Worldwide reach- Internet has the capability to bring millions of worldwide target

customers to get connected with the business entity. Online marketing reaches more

customers than traditional offline marketing.

• Measurement of marketing efforts- The effectiveness of any online advertising

campaign can be measured easily using web analytics and cost-volume-profit analysis

tools. Online marketing includes a wider range of marketing elements than traditional

business marketing due to the extra channels and marketing mechanisms available on

the Internet.

!%
• Cost efficient- Large audiences are reachable at a fraction at low budgets compared to

that of traditional advertising budgets.

• Efficient marketing- Targeting a particular group of customers is easy through online

than traditional marketing. Social networks, forums and blogs play a key role in this

aspect. Also, online marketing provides better competitive advantage and better

control over the business activities. It suits even for small and medium size business

organizations to do effective marketing of their products and services. Traditional

marketing depends highly on marketing personnel who must be well trained and

experienced to handle the customers and make them buy. Traditional print

advertisements may be skipped and scanned over by the customers while reading the

articles on the newspaper, whereas, online marketing encourages them to take action

and move towards the shopping site.

• Word-of-mouth and recommendations- Once the company website is well-

established, long term exposure can be easily created through marketing platforms

like social media. Word-of-mouth in social network and community blogs keeps the

customers reminded about the brand all the time.

• Better Customer Contact- Another key advantage of online marketing is better

customer contact. The Internet allows companies the ability to provide clear

communication with customers. They can also use capture pages to obtain the names,

phone numbers and email addresses of customers. Capture pages are often the first

pages consumers and customers see when clicking on a link from an online ad.

The company running the ad then invites people to sign up and read more about their

products or services. Businesses can continue the communication through emails by

sending out periodic messages. Emails can also be automated with special software,

!&
 or through Internet product vendors. This type of communication would cost much

more with traditional marketing methods

1.2.12 LIMITATIONS OF ONLINE MARKETING

Besides being beneficial than traditional marketing, online marketing has its own

limitations also.

• One of the main limitations of the online marketing of products is that the customers

cannot try the products before making the buying decision. The lack of tangibility,

touch and feel property and taste are important drawbacks of online marketing.

• Lack of personal approach by the sales personnel to convince the customers and make

them buy is also considered as a loss in case of online marketing.

• Dependability on technology may at times ruin the process of online shopping, mainly

during the online payment stage due to any technical barrier.

• Creating trust among the customers with regards to content security and privacy

issues by providing safe and secure online payment systems is the next biggest

challenge for the e-tailers.

• Maintaining a logistics and supply chain management is a tricky task in online

marketing than traditional.

• Dealing with multi cultural markets, facing a greater competition from worldwide

brands of products and high transparency of price are becoming the evolving

challenge to online business world.

• Facing the different international legal and policy issues makes the online marketing

even more challenging.

!'
 • Website designing, modifying and maintenance costs may keep on increasing due to

constantly evolving environments (Ray, 2011)16.

1.2.13 CHALLENGES IN ONLINE RETAIL MARKET

• Lack of touch-and-feel a mental barrier for online shopping

Most Indian consumers prefer to sample a product before making a purchase. This

applies across categories such as clothing, shoes, perfumes and accessories. Lack of touch-

and-feel in online shopping could lead to issues such as wrong product sizes (in shoes and

clothing). This creates a mental barrier for consumers to shop online.

• Increased competition with the entry of global players

The growth potential of the online retail segment in India is attracting leading

international players. The entry of international players would increase competition in the

segment. The advanced technology capabilities of global players in areas such as customer

analytics and recommendation engines would pose a challenge for local companies.

International players have larger financial resources than their Indian counterparts. This

enables them to bear losses and restrict supplies to their competitors by buying out supplies

from vendors. This could drive out smaller domestic players from the market.

• Low margins prompting e-Commerce players to look at new business models

The majority of e-Commerce companies are price players due to the stiff competition

they face and the race to acquire the maximum number of customers. This results in very low

margin or none at all (Rebirth of e-commercein India, 2013).

1.2.14 GOVERNMENT REGULATIONS IN E-RETAIL IN INDIA

For the growth e-commerce, Indian government is taking necessary steps through

effective Telecom policies, introduced Information Technology IT ACT to create necessary

legal and administrative framework. To build the confidence among common public to

16
Ray, S. (2011). Emerging trend of e-commerce in India: Some crucial issues, prospects and challenges. Computer engineering and
intelligent system, 2(5), 17-36.

!(
increase online business, The CCA (Controller of Certifying Authority) has created PKI

(Public Key Infrastructure) i.e. for electronic authentication via digital signatures. This will

avoid cyber space crimes and don’t let anybody unpunished (Srikanth & Dhanapal)17. To

increase the use of internet, our government has taken various steps to reduce cost and offer

attractive plans for corporate and end users with high speed communication services getting

increased day by day based on the demand. This will drive e-commerce transactions to huge

growth in e-Retailing sector. Besides, an International Legal Framework is necessary to

create a mutual trust environment which is the ultimate base for e-commerce activities.

Electronic commerce security planning and management calls for identification of the users,

better risk assessment and evaluation, application specific security identification, better and

appropriate network security policies, information resources protection, better security

management policies, retransformation and re-skilling human resources in terms of

identifying roles and responsibilities and improving physical and environmental security are

also necessary. With the increase in training to the Law Enforcement Agencies to deal with

the cyber crimes, the other difficulties associated with the protection and privacy of personal

and business data will turn safe and secure. Also increase in the well defined IT Acts

regarding intellectual rights (patents, trademarks, copyrights) including domain names will

lead to trust worthy e-commerce environment. E-commerce, especially, poses a new

challenge to taxmen across the globe as its activities cut across borders, and impact

differently the economies of countries. From the perspective of an e-commerce company, in

case of the ‘inventory based model’, VAT or CST, as the case maybe, is levied on the sale of

goods; whereas, in case of the ‘market place model’ service tax is levied on the commission

earned. However, on transactions done by an e-commerce company that follows the

‘fulfillment model’, there is a VAT issue at the State level where the warehouse of the e-

17
Srikanth, V., & Dhanapal, R. (n.d.). A Business Review of E-Retailing in India. International Journal of Business Research and
Mangement, 1(3), 105-121.

"K
commerce company is located. Against the backdrop of confusion over the model, VAT

authorities in the State of Karnataka have sought to tax the e-commerce companies. On

similar lines, even the VAT authorities in Tamil Nadu have issued a press release seeking to

tax e-commerce companies on sale of any goods within the State.

1.3 THE COSMETIC INDUSTRY

The Federal Food, Drug, and Cosmetic Act (FD&C Act) defines cosmetics by their

intended use, as "articles intended to be rubbed, poured, sprinkled, or sprayed on, introduced

into, or otherwise applied to the human body...for cleansing, beautifying, promoting

attractiveness, or altering the appearance" [FD&C Act, sec. 201(i)]. The products included in

this definition are skin moisturizers, perfumes, lipsticks, fingernail polishes, eye and facial

makeup preparations, cleansing shampoos, permanent waves, hair colors, and deodorants, as

well as any substance intended for use as a component of a cosmetic product (fda.gov).

Cosmetics are care substances used to enhance the appearance or odor of the human body.

They are generally mixtures of chemical compounds, some being derived from natural

sources and many being synthetics. Often makeup is confused with the meaning of cosmetics.

Makeup is a subset of cosmetics which refers primarily to coloring products intended to alter

the user’s appearance, whereas cosmetics refers to a broader range of products including,

skin-care creams, lotions, powders, perfumes, foundation, concealer, lipsticks, fingernail and

toe nail polish, eye and facial makeup, mascara, permanent waves, colored contact

lenses, hair colors, hair sprays and gels, deodorants, hand sanitizer, baby products, bath oils,

bubble baths, bath salts, butters and many other items. Indian cosmetic industry is segmented

as skin care, hair care, color cosmetics, perfumes and oral care segments.

"
1.3.1 HISTORY OF COSMETIC INDUSTRY IN INDIA

India is a country where cosmetics were used even during the very ancient days. Natural

products and creams made of castor oil, bees wax, olive oil, and rosewater were used as

cosmetics by the women of ancient India. The raising fashion consciousness, beauty concern

stimulations from the media, along with the increasing purchase power of the Indian

population among both men and women has taken the cosmetic industry booming to a greater

height. The urbanization and the greater exposure to the West are also responsible for the

driving customers towards cosmetic purchase. With the tremendous increase in the demand

for beautifying substances day by day, a large number of local as well as international

manufacturers have gradually extended their ranges and products in different provinces of

India.

The Industry had rapid growth between 2006 and 2008, growing at a CAGR of around

7.5%. Beauty expert Shahnaz Husain was the first to introduce the concept of ayurvedic

cosmetics to the world when she launched her products way back in 1970. This emphasized

the importance of herbal cosmetics to be included in the spectacular growth of the cosmetic

business. Today, the Indian cosmetics industry has a surplus of herbal cosmetic brands like

Forest Essentials, Biotique, Himalaya, Blossom Kochhar, VLCC, Dabur and Lotus and many

more. In recent years, cosmetic manufactures in India have received orders from overseas

markets; for example - Indian herbal cosmetic products have a tremendous demand in the

international market. In fact after China, India is being seen as a strong manufacturing hub

and a good source for natural ingredients. Since the opening up of the Indian economy in the

early nineties, many international brands like Avon, Burberrys, Calvin Klein, Cartier,

Christian Dior, Estee Lauder, Elizabeth Arden, Lancome, Chambor, Coty, L’Oreal, Oriflame,

Revlon, L’Oreal, Yardley, Wella, Schwarzkopf, Escada, Nina Ricci, Rochas, Yves St.

"!
Laurent, Tommy Hilfiger, Max factor, Max Mara, and Shiseido have entered the Indian

market (India:Cosmetic Imports and Exports Aspects, 2010)18.

Besides targeting the women customers, the shift towards men’s grooming came into

existence soon after the Emami Group entered the market with men’s fairness cream market

in 2005. Emami created history by launching Fair And Handsome, a fairness cream for men,

followed by Hindustan Unilever’s Fair & Lovely Menz Active in 2007, Beiersdorf (Nivea for

Men), L’Oreal (Garnier PowerLight).The market also offered exclusive male hair care

products beyond dyes, scrubs and face washes such as Garnier Color Naturals for Men and

the Garnier Men range of deodorants, Hair grooming and styling products such as Brylcream,

Marico’s after-shower hair gel, Set Wet from Paras Pharma, Zydus Cadila’s EverYuth Menz

and so on. According to a recent study by Hindustan Unilever, men in India’s southern states

are most enthusiastic users of skin whitening creams and consume the most of the fairness

products, although the love for fair skin is spread evenly all across the country. The low and

medium-priced categories contribute much to the growth of the industry that account for 90

% of the cosmetics market in terms of volume. Skin care and cosmetics account for more

than Rs.18.5-billion market size while the hair care market is worth more than Rs.80 billion

in 2010 as reported by ASSOCHAM. Companies like Pond’s and Fair & Lovely were one of

the leading companies in this segment.

According to a research report “Indian Cosmetic Sector Analysis (2009-2012)”, published

by Research and Markets, notes that the cosmetics industry has registered sales worth Rs.

422.3 Billion (approx. US$ 9.3 Billion) in 2010 (Ranjan Narula Associates) (Indian cosmetic

sector analysis 2009-2012)19. The Indian cosmetic market size was valued to be around INR

3,000 crore in 2011, INR 10,000 crore in 2012 and INR 29,000 crore in 2013 (ASSOCHAM).

18
India:Cosmetic Imports and Exports Aspects. (2010). Indo-American Chamber of Commerce.

19
Indian cosmetic sector analysis 2009-2012. (n.d.). Researchandmarkets.

""
 Besides the high growth in the value of Indian cosmetic market size and its revenue,

the worldwide revenue of cosmetic industry also seems to have a considerable growth year by

year. The following figure portrays the revenue growth of worldwide cosmetic industry

during the years 2007 to 2012.

Figure: 1.11 Revenue of the cosmetics industry worldwide from 2007 to 2012

(In billion U.S. dollars)

300
250
200
150
233.92 244.8
100 206.72 212.16 214.88 224.4

50
0 0
2007 2008 2009 2010 2011 2012

Source: www.statista.com

Annual growth in the Indian beauty and cosmetics markets which is estimated to remain

in the range of 15-20 per cent in the coming years is twice as fast as that of the US and

European markets (Business Standard, 2013). Over the last five years, cosmetics products

have seen a growth of 60 per cent. The number of salons has also gone up. Its growth rate is

35 percent.

The cosmetic industry has also made its expansion towards rural areas of the country,

offering specialized products to generate revenue from all corners of the country.

Government participation in this sector covers Drugs and Cosmetics Act 1940, Bureau of

Indian Standards and Drugs and Cosmetics Rules 2010 which states the instructions

regarding the ingredients and packaging materials, labeling and its content, etc. the following

"#
figure explains the size and growth of Indian BPC market from 2007 to 2012 (Vijujose,

2013)20

Figure: 1.12 India BPC Market - Size and Growth

500
400
300
474
200 401
295 335
226 260
100
0
2007 2008 2009 2010 2011 2012

Market size in INR billion

Source: Viju Jose(2013)

1.3.2 TYPES OF COSMETICS

Cosmetics are something which has become an integral part of a woman’s fashion

statement. They not only manage to camouflage her flaws but also enhance her features. The

basic categories for cosmetic formulas include Solution Cosmetics These are the simplest

type of cosmetic formulas and are used for a wide range of products such as shampoos, body

wash, hand cleansers, colognes, etc. They are homogeneous mixtures of soluble ingredients.

To make them you simply fill your container with the main diluent (usually water) then mix

he ingredients into it. Sometimes warming the system slightly will increase the
the rest of the

speed at which you can make them.

• Creams / Emulsions - The majority of cosmetics use raw materials that are not

compatible so a cream or emulsion is used. Emulsions are pseudo stable mixtures of

immiscible liquids dispersed in another liquid. They are used for products like hand

moisturizers, make up, hair conditioners, sunscreens, etc. To create them you need

20
Vijujose. (2013). India – A growing market for Beauty and Personal Care (BPC) business
business. Indian Home and Personal Care Industry
Association.

"$
 three formula components including an oil phase, aqueous phase, and an emulsifier.

The formulas are made by heating up the oil and water phases separately, mixing

them together (along with the emulsifier) when they are hot, and cooling them down

with thorough mixing. The result is a cream with tiny particles of dispersed in the

diluent phase. See our article on emulsion HLB for more information on creating

emulsions.

• Lotions - Creams are not always appropriate for some applications because they can

be too heavy or greasy. In these cases, the lotion form is used. Lotions are essentially

thin creams. They are used for facial moisturizers, leave-in hair conditioners, and

moisturizing cleansers. Since these are emulsions, you make them the same way you

would a cream. They are generally easier because you do not have to worry about the

emulsion getting thick enough as it cools down.

• Suspensions - Suspensions are another product form for delivering incompatible

ingredients. Unlike creams, they are typically clear products with visible particles like

gelatin beads or inorganic minerals (e.g titanium dioxide) suspended throughout. They

are used for sunscreens, hand washes or shampoos. To create them you need to

include a polymer or clay that gives the formula some internal suspending structure.

Ingredients like carbomer or bentonite clays are useful.

• Ointments / Pastes - These are super thick products used for things like hairdressing

and medicated skin products. Usually, they are anhydrous (contain no water) and are

sticky & greasy. Some common ingredients used to create pastes include petrolatum,

lanolin, or dimethicone. Making them is a simple matter of heating up the raw

materials and rapidly mixing them until they are dispersed.

• Tablets & Capsules - Another product form that is often used for creating color

cosmetics is the tablet. These are physically blended solids that are held together by

"%
 being pressed into shape. You’ll need special equipment to create these products.

They are also generally more expensive.

• Powders - One of the most common types of product forms for color cosmetics is

powders. Powders are also used for products like baby powder & foot powder. They

are just mixtures of solid raw materials blended together into a fine powder. Some

typical ingredients include talc, silicates, and starch. Special equipment is needed

when making these products as the fine powder can be dangerous.

• Gels - Another common form of cosmetic products is gels. These are thick products,

typically clear, and have a property known as “shear thinning”. This means they stay

thick until you apply a force which makes them thin and flowable. Anyone who has

tried to get ketchup out of a bottle knows what we’re talking about. Gels are used for

hair products, body washes, shaving products, and in toothpaste. They are made by

using a gelling agent such as an acrylic polymer, a natural gum or a cellulosic

thickener.

• Sticks - Sometimes you need to create a product that the consumer won’t necessarily

want to touch, for example, lipstick or underarm deodorant. In these cases you’ll use a

stick product form. Sticks are solid delivery forms that deliver active ingredients

through a rubbing action. The way you create them is by using mostly materials that

are solid at room temperature. The ingredients are heated until they melt, mixed, and

poured into either a mold or the final container. When they cool, they take the shape

of their packaging.

• Aerosols - Aerosols are more of a packaging product form than a specific formulation

type. You could actually create an aerosol out of almost any cosmetic formulation if

you have the right can, propellant, and nozzle set-up. Aerosols are any cosmetic

delivered from a pressurized can. They are composed of a concentrate and a

"&
 propellant. You first make the formula as you would any other cosmetic, then fill it

into the can. You seal the can and pressurize it using the appropriate propellant.

Recent VOC (volatile organic compounds) regulations have reduced the use of

aerosols in cosmetic products (Romanowski, 2014)21.

The cosmetic can also be categorized as skin care, hair care, makeup, perfumes and personal

care.

! Skin care- The range of products that are offered for the skin care market are much

more diverse than the hair care market. Skin care includes skin moisturizers,

cleansers, facial products, anti-acne, and anti-aging products. These include creams

and lotions to moisturize the face and body which are often formulated for different

skin types per range, sunscreens to protect the skin from UV radiation and

damage, skin lighteners, and treatment products to repair or hide skin imperfections

(acne, wrinkles, dark circles under eyes, etc.), tanning oils to brown the skin.

! Hair care - Shampoos make up the vast majority of this market since almost

everyone uses shampoo. Other significant market segments include conditioners,

styling products, hair color, and relaxers. Currently, the biggest players in this

category are Procter & Gamble (Pantene) and L’Oreal.

! Make-up - The color cosmetic market includes anything from lipstick to nail polish.

Included are things like blush, eye shadow, foundation, etc. The array of products is

vast and the number of color variations is practically infinite. The market is highly

segmented so there isn’t really one dominant player. Maybelline and Clinique are just

a couple of significant brands.

! Perfume - This market segment has really taken a hit in the last few years but it still

has turned to a noteworthy part of the cosmetic industry. This is the highest profit

21
Romanowski, P. (2014, April 4). A cosmetic market overview for cosmetic chemists. Chemistscorner.

"'
 segment of the cosmetic industry but consumers are fickle. Only a few brands (like

Chanel #5) can last for a long time. Fine fragrances come and go like fashion and

companies have to continue to reformulate just to compete.

! Personal Care - The “personal care” category comprises of things like toothpaste,

deodorants, sunscreens, depilatories, and other personal care products not yet

mentioned. The dominant companies are many of the same already mentioned, P&G,

L’Oreal, and Unilever.

1.3.3 INDIA BEAUTY AND PERSONAL CARE MARKET SEGEMENTS

The following table shows the growth rate of various product categories selling in

India which in the past decades.

Table: 1.2 Growth rate in the sale of beauty and personal care by category in India

Product category % growth value 2007-12 CAGR

Baby and child specific products 10.7
Bath and shower 13.9
Color cosmetics 27.4
Deodorants 39.9
Depilatories 26.9
Perfume 22
Hair acre 15.7
Men’s grooming 19.3
Oral care 13.5
Oral care excl power toothbrushes 13.5
Skin care 18.4
Sun care 14.7
Premium cosmetics 25.2
Mass cosmetics 16.3
Beauty and personal care 16
Source: (Vijujose, 2013)

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 1.3.4 TOP COSMETIC SELLERS WORLD WIDE

The following table shows the Brand value of top 20 cosmetic companies worldwide

in terms of U.S. million Dollars (Brand value of top 15 cosmetic brands worldwide)22.

Table: 1.3 Brand value of top 20 cosmetic companies worldwide

S.No. Brand name 2011 USD 2012 USD 2013USD 2014 USD

1. L’Oreal 7,630 7,744 8,696 10,766

2. Avon 10,171 7,901 5,169 6,384
3. Pantene 2,545 2,643 5,974 6,163
4. Nivea 6,569 5,574 5,843 6,079
5. Dove 4,517 5,045 4,242 5,885
6. Garnier 2,493 2,340 2,632 4,809
7. Estée Lauder 3,037 3,716 3,870 4,589
8. Lancôme 5,685 5,095 5,508 4,088
9. Olay 11,066 11,756 3,955 4,083
10. Johnson's 1,179 1,148 1,513 3,603
11. Christian Dior 2,114 2,540 2,952 3,329
12. Head & Shoulders 394 - 3,138 2,953
13. Chanel 2,283 2,292 2,813 4,509
14. Maybelline 1,568 2,016 2,398 2,921
15. Clarins 2,057 2,018 2,375 2,602
16. Shiseido 2,972 2,907 2,203 2,507
17. Natura 2,274 2,332 1,849 2,465
18. Neutrogena 6,350 6,248 2,127 2,313
19. M.A.C. 1,094 1,258 1,382 0
20. L'Occitane 1,705 1,611 1,698 1,570
Source: www.statista.com, branddirectory.com

22
Brand value of top 15 cosmetic brands worldwide. (2014). Statista.

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1.3.5 TOP COSMETIC SELLERS IN INDIA

According to ASSOCHAM report, 20 percent population believe to use the well known

branded products like Uniliver, proctor & gamble, Godrej, Dabur etc. Rest of 80 billion

population spent on low cost cosmetics. Marketing of cosmetic or any not necessitated

products are very price sensitive in India. Besides this, the leading cosmetic brands that are

sold in India are as follows:

! Lakme-Lakme is a superior Indian cosmetic brand and a part of giant Hindustan

Unilever and it was founded in year 1952 by JRD TATA. The company is headed by

Mr.Anil Chopra who is the CEO of the company. In 1996 the Tata group decided to

sell off its stake in Lakme to Hindustan Lever Limited. Lakme was also ranked at

47th as one of the most trusted brand in India according to The Brand Trust Report in

2011. This brand also sponsors the Lakme Fashion Week (LFW) twice a year. It also

launched the Lakme Perfect Radiance and Lakme eyeconic kajal which gained

significant market share.

! Lotus-The company Lotus Herbals Ltd. was set up two decades ago in the year 1993

by Kamal Passi. Lotus Herbals is a premier name in the cosmetic brands in India. This

brand deals with manufacturing and selling of various kinds of cosmetics. The list

includes face cleansers, sunscreens, winter care, hair oils, and shampoos. Passi knew

the importance of good packaging and made sure his products stand out in design.

The product is also priced at least 10-15% lower than that of other contemporary

brands in the segment. However the brand doesn’t believe making a huge expenditure

on advertising. Lotus Herbals Ltd Company specializes in producing cosmetics that

claim to have Ayurveda as well as herbal goodness. They offer millions of beauty

care products such as Skin Care, Body Care and Hair care category. The brand

promotes their products by accrediting their USP to be an amalgamation of traditional

#
 knowledge along with modern technology. They believe in making use of herbal

ingredients and making their product devoid of chemical-based, synthetic cosmetics.

This brand is also strictly against the cruel practice of animal testing. They also sell

cosmetic products online on their website portal.

! Biotique

Biotique was launched by Vinita Jain in the year 1984. This brand also manages to

stand out in the world of chemical-based cosmetics as it doesn’t contain any artificial

preservative or synthetic perfumes. The ingredients used are extracted naturally from

herbs. Moreover the herbs/plants used for extracting raw material are also monitored

from its nascent stage hence the end product is organic.

! L’Oreal

L’Oreal is one of the giants in the cosmetic segment in the world. L’Oreal

World’s hot favorite cosmetic brand L’Oreal is a French brand which was founded in

1909. Jean-Paul Agon is the chairman and CEO. The Company has been present in

India for about 20 years. Today, L’Oreal India is a subsidiary of L’Oreal which is

growing at a very fast rate. L’Oreal Paris is one of the trademark brands of this

company. In 2013 the company grew at a commendable rate of 70%. L’Oreal decided

to invest Rs.970 crores in India. Moreover in the same year L’Oreal made its first

acquisition in India - Cheryl’s Cosmeceuticals, thus entering the professional skincare

segment. The company is a leading name in Personal care and beauty products; it has

strong market base in Shampoo, hair color and skin care related product category.

! Shahnaz Husain

This brand was founded in the 1970’s by Shahnaz Husain and was awarded the

Padma Shri in the year 2006. This brand also tries to harness the natural goodness of

Ayurveda. Currently it has around 350 products spread out over different categories

#!
 like skin, hair, make up etc. The brand claims that its USP is the hard work done on

research so that the quality of the product is of superior grade.

! Revlon India

Among all the international players in the cosmetic segment in India, the first one to

launch was none other than Revlon in 1995. It happened due to the collaboration

between Umesh K Modi along with Revlon Pvt Ltd in 1994 . Pricing is done for the

mid-level consumers as it neither too high nor too low priced. The company owns

approximately 20-25 % of the domestic colour cosmetic market share.

! Maybelline

It was launched way back in 1915. It was later acquired by L’Oreal and in India it was

launched by its subsidiary, L’Oreal India. One of the major factors that have helped

this brand to carve its niche is being reasonably priced in spite of having an

international appeal. The Maybelline Colossal range was a huge hit in India which

made the brand more popular.

! Himalaya

Bangalore based herbal, Ayurveda and pharmaceutical company which was

established by Mr. Manal in 1930, had a vision to make Ayurveda accessible to the

world. Himalaya has been able to patent its sunscreen, Under-Eye Cream, Anti-Acne

range and Hair Loss cream among others from the United States Patent and

Trademark Office. The business of Himalaya in India contributed 60% of the brand’s

sales of Rs 1, 200 crores in 2011. Himalaya is also the owner of the popular face wash

‘Purifying Neem’ which is very popular in a country like India where problems like

acne and greasy skin are widespread. The company is popular name in Ayurveda

product niche and sells its products in more than 55 countries across the globe. Its

product offering range includes beauty, healthcare and cosmetic products.

#"
! Colorbar

Colorbar Cosmetics is one of the leading brands of cosmetics in India. It was founded

in 2004. The founder as well as managing director of the brand is Samir Modi. The

brand is known for its bright peppy colors and has a number of products to add colour

to nails, eyes, lips and face.

! Elle 18

The brand Elle 18 is owned by Hindustan Unilever Limited (HUL). It was launched

in 1998. Elle 18 is a best choice cosmetic brand in India for teens and college going

girls since it is aimed at the youth as it has bright colours along with neon shades in its

products. The pricing of the products are also done keeping in mind the youth. The

Elle 18 Colour Pop Liner (5ml) is priced at Rs 75. It has a wide collection range

including Color pops, Black out liner, kajal, nail pops, lipsticks etc.

! Emami Limited

Most popular Indian fairness cream brand, Emami is a FMCG company and producer

of baby care and cosmetic products. Emami is rated one of the most popular cosmetic

brands in India in men’s fairness cream category. It is headquartered in Kolkata, West

Bengal and founded in 1974 by RS Agarwal and RS Goenka.

! Bajaj Corp

Bajaj Corp is a part of Bajaj group and has strong market presence in hair care

product category. Bajaj Almond drop is a most popular hair oil brand of the company,

holds significant share in hair oil category in the country. Its other major products

offering includes Jasmine oil, Face Pack, No-marks cream, Kailash Parbat hair oil etc

! Amway

Amway is an American multinational enterprise established in 1959 and recorded

around 12 billion dollar revenue in year 2013. The brand offers million of beauty and

##
 healthcare products. Attitude is latest launched beauty product of the company which

is quite famous amongst women.

! VLCC

VLCC is a reputed name among the cosmetic companies in India, manufacturing

more than 100 products, having 10000 retail outlet and 200 distributors. The

company is a major producer of skin care, hair care, body care and pain relieving

products. It claimed all products are Ayurvedic and herbal in nature and has no side

effects.

! Marico

Among the top 10 cosmetic companies in India, Marico is an Indian health and beauty

brand based in Mumbai. The company was founded in 1987 and recorded 600 million

dollar revenue last year (Top Cosmetic Brands in India, 2013)23, (Top Brands in

India)24.

1.3.6 ONLINE SALE OF COSMETIC PRODUCTS

The cosmetic industry worldwide seems to be continuously developing, now more than

ever with the advent of the Internet companies. Many famous companies sell their cosmetic

products online. According to Schneider and Perry (2000), e-commerce is more suitable for

standard goods, low-value goods, digital goods and simple services (i.e. intangible goods)

(Schneider & Perry)25. There are evidences which prove that the customers had started to

shop various products through the Internet including cosmetics. In an interview regarding

online marketing, Snapdeal Vice President (Marketing) Sandeep Komaravelly26 said “Besides

electronics, customer traction grew considerably in categories like fashion and jewellery,

home and kitchen and lifestyle accessories like watches and perfumes,". Supporting this,

23
Top Cosmetic Brands in India. (2013). Top10 companies in india.
24
Top Brands in India. (n.d.). Business.mapsofindia.
25
Schneider, & Perry. (2000). In R. L. Chan, E-Commerce, Fundamentals And Applications (p. 3).
26
Komaravelly, S. (2012, December 31). Online Shopping in 2013: What users expect. Times of India.

#$
HomeShop18 Founder and CEO Sundeep Malhotra27 also has said, "Apparel, books and

lifestyle categories (beauty, footwear and health) will drive e-commerce". It was also added

that relatively stable and growing domestic economy will also be major growth drivers. The

following figure represents the growth of e-commerce sales and the total sales growth

worldwide during the year 2013. The following figure shows that the beauty and personal

care industry has the highest growth rate with 29.1% CAGR in the world wide total sales and

6.0% growth rate with respect to sales through e-commerce (Dotcomweavers, 2014)28.

Figure: 1.13 E-commerce sales growth vs total sales growth worldwide

Source: Dotcom weavers, 2014

There are plentiful cosmetic brands that are being marketed online including Indian as

well as International brands. Increased awareness in India of the latest global beauty trends

has made more international players to increase their presence in India. Also, the

International brands have the opportunity to sell their products in India through the Indian e-

tailers by adopting ‘The Marketplace Model’. Market place model is the model in which

products are sold by third party intermediaries. These third parties or marketplaces display

the seller's wares, collect orders and payments, forward orders to the seller, track delivery,

27
Malhotra, S. (2012, December 31). Online Shopping in 2013: What users expect. Times of India.
28
Beauty and Personal care leads retail e-commerce worldwide. (2014, March 19). Dotcom weavers.

#%
and release payment to the seller after deducting a fee. Lists of some of the cosmetic brands

that are sold online are as follows.

Table: 1.4 List of some cosmetic brands sold online

Lakme Shahnaz Husain

Lotus Revlon India
Biotique 350Buy
L’Oreal Alur
Sun Burn Neutrogena
Procter &Gamble Mary Kay
Olay Covergirl
Mac Cosmo Herbal
Eva Maybelline
Himalaya Chambor
Colorbar Elle 18
Amway Oriflame
Avon Cameleon
Aroma Rimmel
Inglot Revolution
Nivea Schwarzkopf
Gillette TRESemme
Coloressence Bourjois
Sally Hansen Adidas
Nike Park avenue
Victoria’s secret Veet
VLCC Estee lauder
Calvin Klein Bath and Body works
Toni and guy Pantene
Dove Fiama Di Wills
Garnier Lacto Calamine
Jovees Herbals Ponds
Pears Vaseline
Vatika Head and shoulders
Yardley ZA
Aroma magic Sunsilk
NewU Livon
Axe Eva
Basic care Denman
Camaleon Christian Dior
Source: Created for this research

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1.3.7 ONLINE COSMETIC WEBSITES

Cosmetics are sold in the internet through well established general e-commerce

websites or by the beauty brand e-commerce websites. New entrants as well as international

brands use the established marketplace websites to enter the local market and obtain customer

through these websites. The e-commerce websites may be multi-product e-stores or cosmetic

specific e-stores.

Figure: 1.14 Categories of online cosmetic selling websites

GENERAL
ECOMMERCE MULTI-BRAND
ONLINE WEBSITES COSMETIC
COSMETIC SPECIFIC
WEBSITES ECOMMERCE
COSMETIC WEBSITES
SPECIFIC
ECOMMERCE
BEAUTY BRAND
WEBSITES
ECOMMERCE
WEBSITES

Source: Created for this research

1.3.7.1 GENERAL E-COMMERCE WEBSITES:

The general e-commerce websites focus on selling a variety of product categories

besides cosmetic products such as electronics, books, apparels, footwear, bags, music,

kitchen items, home and furniture, sports items, baby items and so on. These are multi-

product e-stores focus on selling a variety of cosmetic brands through their websites. It does

not confine itself to sell only one type of cosmetic products such as ayurvedic, herbal, etc. it

sells both organic and inorganic or synthetic type of cosmetics of all brands through its

website. The e-commerce websites such as Flipkart, Snapdeal, Jabong, Shopclues, Amazon,

Junglee, eBay, Myntra, Yebhi, Homeshop18, Fashionandyou, Shopperstop, Majorbrands,

shopalike, Infibeam, televantage, firstcry, fragume, grabmore, perfume2order are some of the

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multi-product
product online stores which sell all type of beauty and personal care products, besides

electronics, apparels, footwear, bags, books, home and furniture, kids items, sports products

and so on. The following pictures represent the differen

differentt types of layouts in few multi
multi-

product or general e-commerce

commerce websites showing different category of products. Flipkart is a

leading Indian e-commerce

commerce website selling all type of products including cosmetics
cosmetics.

Snapdeal, Fashionandyou, Jabong, Shopclues, Ama

Amazon,
zon, Junglee, Shoppersstop, Shopalike,

Majorbrands, Infibeam, Televantage are some other examples of general ecommerce

websites. Firstcry.com is a website that sells all type of products including cosmetics for kids

in specific.

Figure: 1.15 Cosmetic product categories in Flipkart.com

lipkart.com

Figure: 1.16 Cosmetic product categories in S

Snapdeal.com
napdeal.com

#(
Figure:
re: 1.17 Cosmetic product categories in F
Fashionandyou.com
ashionandyou.com

Figure: 1.18 Cosmetic product categories in Jabong.com

Figure: 1.19 Cosmetic product categories in Shopclues.com

hopclues.com

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Figure: 1.20 Cosmetic product categories in A
Amazon.com
mazon.com

Figure: 1.21 Cosmetic product categories in Junglee.com

Figure: 1.22 Product categories in Shoppersstop.com

hoppersstop.com

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 Figure: 1.23 Cosmetic product categories in Shopalike.in
hopalike.in

Figure: 1.24 Cosmetic product categories in M

Majorbrands.in
ajorbrands.in

Figure: 1.25 Cosmetic product categories in Infibeam.com

nfibeam.com

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 Figure: 1.26 Cosmetic product categories in Televantage.com
elevantage.com

Figure: 1.27 Cosmetic product categories in Firstcry.com

irstcry.com

1.3.7.2 COSMETIC
OSMETIC SPECIFIC E
E-COMMERCE WEBSITES:

The cosmetic specific ee-commerce websites focus on selling cosmetic products alone

through their website. Some of the cosmetic specific websites sell a variety of cosmetic

ustomers by comparing the price and

brands, providing choice of selection to the ccustomers

specifications of different brands. Some of the cosmetic specific websites, also known as

beauty brand e-commerce

commerce websites are owned by particular cosmetic brands themselves and

cosmeticc items of their own brand alone. This type of

so these websites focus on selling cosmeti

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websites can sell their products directly to the customers and has direct relationship with

them.

! Multi-brand
brand cosmetic specific ee-commerce websites:

Some of the cosmetic specific websites that sell different cosmetic brands are

nykaa.com, thebodyshop.in, fabbag.com, 365gorgeous.in, newu.in, purplle.com,

violetbag.com, strawberrynet.com, beautykafe.com, Luxola.com, theskinstore.in, blab.co.in

and so on. The following figure

figures portray the website of few multi-brand
and cosmetic specific ee-

commerce websites.

Figure:1.2
Figure:1.28 Website of Nykaa.com

hebodyshop.in
Figure: 1.29 Website of Thebodyshop.in

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 Figure: 1.30 Website of Fabbag.com

Figure: 1.31 Website of 365gorgeous.in

Figure: 1.32 Website of Newu.in

$$
 Figure: 1.33 Website of Purplle.com

! Beauty brand e-commerce

commerce websites
websites:

Some of the beauty brand e-commerce websites that sell their own brand items are

shop.kayaclinic.com, vedicline.com, lotusherbals.com, justherbs.in

justherbs.in, biotique.com,

imgayush.com, makeupshades.com, colorbarcosmetics.com and so on. The following figures

show the websites of this kind.

Figure: 1.34 Website of Shop.kayaclinic.com

$%
 Figure: 1.35 Website of Vedicline.com

Figure: 1.3
1.36 Website of Lotusherbals.com

Figure: 1.3
1.37 Website of Justherbs.in

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 Figure: 1.3
1.38 Website of Biotique.com

Figure: 1.3
1.39 Website of Imgayush.com

1.3.7.3 OFFICAL COSMETIC WEBSITES:

Some of the cosmetic websites are official sites of those particular brands. These

types of websites help the customer to explore the variety of their brand items and then

redirect the customers to a well established e-commerce marketplace to buy the produ
product.

Lakmeindia is an example of this kind of website. The official website of Lakmeindia is as

shown below which helps to explore the range of products and redirect to another e-

commerce marketplace.

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 Figure: 1.40 Website of lakmeindia.com to explore the rrange
ange of products

Figure: 1.41 Website of lakmeindia.com redirecting to e-commerce

commerce marketplace

1.3.8
.8 WEBSITE FEATURES:

Pertaining to the success of online marketing, the website features plays an important

role in it. Website is the interface between the seller and the buyer which communicates the

information in all aspects sufficiently and induces the buyer to make buying decision. The

design of the website must be in such a way that it attracts the customer, makes them easy to

find the way to their product

roduct and end up with an order placement. There are various features

that are being expected by the customers in the online shopping websites. The features of the

multi-product selling
cosmetic specific websites are unique and attractive compared to that of multi

$(
websites. According to a report made by L2 Think Tank, a leading benchmarking and

education firm (2013), the following website features were available on beauty brand e-

commerce websites worldwide during the year 2012 and 2013.

User reviews, providing samples with the orders placed, auto replenishing facility,

live chat experiences, providing answers for customer questions and loyalty program are the

features that were available on beauty brand e-commerce websites (i.e.,) websites owned by

the cosmetic brands themselves. It is evident from the above figure that the top features

provided in the cosmetic websites is user reviews, which was provided by almost 83% of the

beauty brand e-commerce websites during the year 2012 as well as 2013 followed by the

other features (Dotcomweavers, 2014).

Figure: 1.42 Website features available on beauty brand e-commerce sites

Source: Dotcomweavers,2014

Now-a-days, other features such as 24/7 customer care, links to you tube makeup

videos, links to communities, blogs, expert opinions, virtual makeover options, user gallery,

celebrity tips and many other features are being provide in beauty brand e-commerce

websites. The following figure shows the website of Lakmeindia.com which has virtual

makeover options in its homepage. The customers can have a live experience of the wide

range of cosmetic products being available in the website. The customers can try the products

%K
over their own uploaded photo or over the model photos provided in the website. This helps

the customers to buy the exact type of products that suit their skin colour and nature.

Figure: 1.4
1.43 Website of Lakmeindia.com

The following figure portrays the website of Healthkart.com which provides the

customers with the facility to participate in a community that shares user stories and

experiences, gallery, transformations, shared Q&A, blogs regarding fitness and health.

Similarly, commerce websites and

ilarly, it would be useful for the customers if the beauty brand e-commerce

general e-commerce websites also provide same kind of facilities.

Figure:1.4
Figure:1.44 Website of Healthkart.com

%
 The following figure shows the website of elle18 which provi
provides
des a stepwise guidance

o the customers to dress up for a Christmas party. Stepwise makeup procedure and product

usage specifications must be provided in the cosmetic websites.

Figure: 1.4
1.45 Website of elle18.in

The website of blab.co.in also provides me mber stories being shared with the
member

customers of that website and is shown in figure 1.20.

1.46 Website of blab.co.in

Figure: 1.4

%!
1.3.9 GOVERNMENT REGULATIONS FOR COSMETIC INDUSTRY

The Indian Government has implemented new rules (from April 1st, 2013) to regulate

the import of cosmetics. The rules to amend the existing Drugs and Cosmetics Rules, 1945,

were first published (as draft rules) way back in February 2007. Subsequently after few

amendments these were finalized as ‘Drugs and Cosmetics (4th Amendment) Rules, 2010’ on

19th May, 2010. Amidst concerns raised by many importers on the timely grant of

registration certificates, the Government did defer the implementation. And of course Indian

urban population’s brands fetish appears to be never satiated giving rise to increasing import

of cosmetic products. However, these rules were finally brought into effect on 1st April, 2013

(RanjanNarulaAssociates, 2014)29. The government regulations towards the taxation,

ingredients of cosmetic products, import of cosmetics from other countries, sale of cosmetics

through online medium directly by foreign brands must be regulated in a well defined manner

so that the illegal activities can be avoided and the customers can be saved from injustice

being done to them.

1.4 CHAPTER SUMMARY

This chapter gives an overview of the concept, structure, origin and growth of e-

tailing; the concept, types and growth of online marketing; and the history and growth of

cosmetic industry in context with the world as well as India. The sale of cosmetics through

online marketing is also focused in this chapter. The merits, demerits and challenges in e-tail

industry are also discussed in detail.

29
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