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Executive Summary

The year 2000 can be described as a decade of Foundation building when e-commerce inched
into the common man’s life through travel retail, financial services, classified services and eretailing.
From the year 2007 onwards, was the emergence of game changing players who brought more
investment and innovation in this space. Global biggies like eBay and Amazon also joined the
league giving stiff competition to indigenous players like Flipkart and SnapDeal.
Horizontal formats have come and started fighting the war aggressively and some vertically
differentiated formats had come along. Undifferentiated players becoming unviable and
unsustainable players had to consolidate merge and find out ways to survive, followed by
acquisitions at national and international levels for growth and survival, signaling an alternative
exit mode and a gradually maturing landscape.
Various players have been working to diversify into allied businesses and supplement the
revenue and boost their bottom line in the process. Indian Postal Service provided the much
needed growth steroid by modernize its operations and being a preferred partner for e-commerce
players to reach the widest number of PIN codes across India.
The current wave of e-commerce is driven by startups, and backed up by the Venture Capitalists
(VCs) and Private Equity firms (PEs). In terms of the sheer size of investments there have been
many big ticket deals.
Indian corporate czars have also shown their eagerness to invest in booming online retail sector;
notable figures like Ratan Tata, Azim Premji and Narayan Murthy are in the list of them. Scores
of other Indian entrepreneurs, who have tasted hard earned success, have started giving it back to
the ecosystem by not only investing their time and money on young startups, but also becoming
their beta users, educating them on pitfalls and making connection with other investor, e.g. new
startups like Demand farm and Olacabs got funds and mentorship from MuSigma and SnapDeal
respectively. This was a trend which happened in Silicon Valley but has only started in India
recently. Amazon’s Jeff Bezos was an angel investor in Google and Twitter and LinkedIn’s Reid
Hoffman was early investor in Facebook and Zynga.
Many Indian offline retailers are either going online with their own websites, Brick and Click
model, e.g. In US Walmart is doing Online Business and in India Future Group has opened one
online flank in Big Bazaar Direct as an Omni-channel to curb with the eTailers or are doing tieups with online eTailers with marketplace model to move out of the walls of store to the world
out here.
Is this a dangerous game of paying rich valuations for a very aggressive future promise or
actually e-commerce is poised for an exciting period of exploding growth in near future?
We will find out soon.

everything from designer wear to socks is selling online. Online greengrocers have become active in some areas of Bangalore. A growing number of Indians are fast turning into full-time online shoppers. choose add-ons apply for financing and confirm it online and for leftover paperwork can go to dealership. RedBus. top e-retailers are threatening to dwarf the revenues of brick-and-mortar rivals . As their tribe grows rapidly. and Myntra you see clothes that are both branded and affordable.com have already been showcasing new projects by the builders but the change in the trend came when Tata Housing had a tie-up with SnapDeal to sell Tata Value homes and sold 85 homes in 6 days. In the Apparel industry. E-commerce industry is dominated by travel sector (transportation. buying everything from books to apparel. In real estate. websites like Magic Bricks and 99acres. Many sectors are seeing buyers moving online in droves: books. Mumbai and Delhi. accommodation and holiday packages). Reliance fresh and Foodhall also have forayed into e-groceries and Spenser Retail and other brick and mortar companies are also testing the waters. Mumbai-based discount broking firm RKSV entered into the playing field and today is clocking daily revenue of Rs. which gives investors direct access to a stock exchange's trading system. Yatra. Homeshop18. SEBI’s Direct Market Access in 2008.at least in some categories for sure. 4000 crore.Have they changed the way business is done in India? The online world is changing the paradigm of Indian markets. transportation currently has the largest presence online. the homespun e-retailer. . Tradus brought real commerce (local retailers in Delhi) online and introduced grocery delivery in Delhi promising one day delivery. Even Automobile dealers may have cause to worry because Snapdeal. Olacabs are poised for an exciting period of growth in coming years. UBER. know its price. Cleartrip etc are prominent players of the sector. Jabong. now even sells a car and scooters. footwear. apparel and travel. TaxiforSure. One might see the trend where customers can look at the models online. the Mahindra Scorpio and Gusto. aided by a liberal return policy and cash-on-delivery. Even those who sell cinema tickets in black will feel the heat due to online ticket booking by BookMyShow. spectacles. home decor and electronic devices at the click of a button. MakeMyTrip. Within the travel sector. watches.

the country is at the cusp of an e-retail revolution. Shopclue offers microsite for wholeseller merchants and e-commerce portal Zopper will map retailers of U. Today. The industry has grown with a CAGR of approx 56%. and is expected to grow at CAGR of 5560%. There is a fundamental shift in consumers’ shopping behavior and therefore transform in the entire retailing ecosystem of India. Unorganized retail has been estimated around $550-600 billion. Amazon and SnapDeal is an endorsement of the growth potential of the industry. Thus businesses have started moving out from the wall of stores to the wall out here. Currently. Whereas in India ecommerce is miniscule proportion of India’s retail market and lags far behind US and China.Urban ladder. With buyers from big cities and small towns alike preferring to shop online. e-commerce players and consumers. e-commerce in US and China is valued at USD 224 billion and USD 220 billion.1 1 Source: ASSOCHAM . indicating that future growth is at inflexion point. Pepperfry and FabFurnish allow one to buy furniture online along with home décors. Many small and medium business enterprises are also leveraging low cost online medium to expand their consumer base. the organized retails have been able to corner a market of about $25-30 billion and e-commerce is just about $3-4 billion. They are partnering with e-commerce website with marketplace model. But given the kind of enthusiasm on the part of investors. India's internet penetration is approximately one-third of China and the size of the industry is approximately one-sixtieth of China. India's e-commerce industry is where the US was in 2003 and China was in 2007. The recent investment in Flipkart. Furnishing and Kitchenware. respectively. the sector holds a great promise of standing at $15-18 billion in next three years.P. Market Scenario E-commerce in India is still at an early stage of growth.

higher nuclearization of families etc. longer commutes.) is rapidly growing in India.Growth Drivers Increasing time-poverty This is mostly noticed in core consuming class residing in urban India. complex tasks on the Internet including file sharing. 2 Source: IRIS Knowledge foundation and UN-HABITAT . 92% are mobile wireless subscribers. financial transactions. The widening of digital penetration Internet penetration is rapidly expanding in India. The population of Internet-habituated consumers (one who are comfortable conducting. interactive tasks. By 2020. The very poor may have the time but no disposable. An interesting feature of the widening of digital penetration is the growth of Internet access via mobile devices whose user base is growing more rapidly compared to broadband users. primarily driven by the rollout of 3G and 4G wireless technology. of the total 237 million Internet subscribers in the country. On account of digital media (TV and social). etc. As per Telecom Regulatory Authority of India (TRAI) data released in December 2013. higher cost and reducing availability of trained domestic help. There is also a heightened percolation of Internet-enabling devices like laptops/ PCS and smartphones driven by the increasing affordability of entry-level devices. India will be world’s youngest population in working age group. This growth is expected to continue given the increase in the penetration of high speed Internet. Demographic Dividend India is demographically well placed as it continues to enjoy demographic dividend. recreation. and shopping. growing number of social obligations to attend. Country’s productive working age group is higher and proportion of dependents is low. by 2020. The middle classes face more pressures on their time as they juggle the time needs of their jobs.2 The young population is consumer and shopper in their own right and spend significant amount of their disposable income in shopping online Indian consumers today have many new needs and aspirations. attending to the myriad needs of their family. Mobile Shop-o-holics are likely to increase and mobiles likely to become the primary shopping device in India. they outsource many of their mundane time intensive activities to an assistant thus leaving them with more time for leisure. there is also an increasing convergence across geographies and socio-economic strata when it comes to these new needs and aspirations. which fact highlights the importance of mobile Internet services. It is currently ~20%. but is projected to reach 40%. discretionary spending earnings.

. FDI policy for multi-brand retail leaves them with almost no access to global capital. This skew in retail presence is fuelling the growing demand for the online channel owing to its wider reach and delivery to even the smaller cities and towns. has been in India for two decades now. mass media campaigns. due to the structural issues faced. more products. Limitation of the Brick & Mortar format While organized retail. at ~8%. Such organized retail is concentrated in the larger cities and are unable to meet the rising aspirations in the smaller cities across India. EMIs.Improved supply side Credit needs to go to e-tailers who have invested much capital and effort in widening the market through multiple means like better interfaces. faster delivery. options like cash-on-delivery. etc. discounts and promotions. easy returns. its contribution to total retail is still low. in primarily the Brick & Mortar format.

Poor quality. Marketplace players also face the challenge of working with a ‘digitally ill-equipped’ vendor base which is not yet ‘ready’ for serving marketplaces efficiently. Another challenge for e-tailers is achieving differentiation through which to break out of price wars and drive consumer loyalty. thus being a large chunk of vote-bank can’t be ignored. Retail sector provides largest employment to all three genders across the entire country. After taking holistic view of the industry trend. One needs to understand that e-commerce websites following marketplace models are just the platform facilitating buyer and seller. had organized nationwide protest in more than 150 places across the country demanding investigation into business module of e-commerce platform and their pricing mechanism and constitution of regulatory authority for e-commerce. Is it about protecting the brand value or it is more about shrinking margins? The key challenge is the ecosystem's lack of readiness. the apex body of traders in country. We can see amendments in Consumer Protection Act for inclusion of e-commerce into law ambit for a healthy competition between offline and online traders and protection of consumers. Will the e-retailers will one day go bust. Cyber security issues might also scale up. LG electronics has decided not to deal with eTailers at all and also not to provide service support to sale done through eTailers. in terms of speed and reliability. This draws a scope of a populist measure by state governments in wake to protect small brick and mortar stores from predatory prices of eTailers. Recently Karnataka government planned to amend VAT Act to remove ambiguities regarding bringing ecommerce under the tax net. If Customer is the king then he should be served at best pricing possible. The last mile delivery infrastructure is as yet inadequate and suboptimal. of data communication networks is a major hurdle in e-tailing’s growth. like the dotcom sector in the early 2000s? . They sell directly to buyer without stepping out of workplace. the Confederation of All India Traders. it is the seller which decides the price. and only they can change the price in system. e-commerce players should also understand that deep discounting disturbs the market dynamics and entire eco-system and due to wafer-thin-margin the major eTailers are yet to make profit. the tide seems to be in favor of e-commerce and it will grow by leaps and bound. Just when shopping was getting interesting government is ready to play spoilsport. One needs to understand that definition of cost is different for a trader as compared to a manufacturer.Untoward Factors Seeking a level playing field to do business in the country. But in e-marketplace model.

the conventional inventory-based format is supposed to be a revenue guzzler because of the heavy investment it requires in setting up warehouses and storage space. Natural consolidation will happen in e-commerce. Though leading e-commerce companies boast of $1billion gross merchandise value targets.3%. have happened already. not their margins. but one has to make conscious choice between profitability and growth and one can use the funds for brand-building.Pertaining to the fact that none of the big e-retailers is anywhere close to making profits. But almost all of them admit to being in the red. one must delay profitability. it reported net earnings of $274 million on sales of $74. quite like in telecom and there will be significant capital consolidation around companies who have shown scale. Myntra and Snapdeal shrug off any talk of profit because they are in growth mode right now. These are all closely-held companies and their financials are not made public. Now just about four to five players remain. There were around 900 e-retailers in 2011. If one wants to grow faster. technology and backend operations. Some analysts compare it to the dotcom bubble of the 1990s. On the other hand. e-retail is making an all-out pitch to capture more and more of the total retail pie in India estimated at $600 billion. these are just the value of the products sold on the website. Whatever closures had to happen.a margin of a little over 0. Indian e-retailers like Flipkart. and wonder if good money is once again being thrown after bad. is more profitable.45 billion . Though one can’t deny that being profitable is an important milestone for any company. Marketplace models. In 2013. This isn’t the bubble that is going to burst but is poised for an exciting period of exploding growth in the period of 3-5 years. other than the smaller niche companies. With all eyes on growth and not so much on profitability. Indian e-retailers cite the example of American online behemoth Amazon which took six years to break even after starting operations in 1995. Like Amazon. model followed by Alibaba. years after being in business. Conclusion . where an e-retailer does not own the inventory but allows individual businesses to sell their products on its website.

One must acknowledge that emergence of e-commerce as a very promising development that can provide millions of small producers and even small retailers to reach out a much larger customer base through so called marketplace model and other models.e-Commerce has taken the world of retail by storm and captivated the imagination of entire generation of entrepreneurs. . Indian startup funding report 2014. Government too must actively support the growth of e-commerce by having clear (and fair) policies relating taxation (revenue sharing of tax between centre and state) and relating to protection of consumer right. Marketplace model is the much needed growth steroid and will bring win-win situation for both the parties . References Information was sorted out from various e-books. Business Standard and Financial Express were consulted. operational managers as well as blue-collared workers.com.retailers (online and offline). magazines. newspapers and websites were sorted out. Naming few of them are. IAMAI report on mobile internet. A bright future is ahead for talented entrepreneurs. various newspapers like Economics Times. Assocham report on e-commerce. Times of India. yourstory.