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New Delhi, December 31, 2012

First Published: 14:50 IST(31/12/2012)

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Dec 4, 2012, 05.17PM IST

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By Mahesh Sharma | June 12, 2013 -- 09:01 GMT (14:31 IST)

http://www.dnaindia.com/scitech/1844034/report-e-commerce-just-got-more-competitive-
amazon-comes-to-india-with-an-online-marketplace

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Amit Bapna & Delshad Irani, ET Bureau Jun 12, 2013, 02.45AM IST

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Published: June 13, 2013 in India Knowledge@Wharton

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By Abhishek Baxi for SMB India | March 1, 2013 -- 10:02 GMT (15:32 IST)

http://www.informationweek.in/software/13-04-18/growth_and_progression_of_e-
commerce_in_india.aspx

By Rohit Nasa and Ashna Suri, Infosys, April 18, 2013

http://articles.economictimes.indiatimes.com/2013-05-22/news/39445392_1_venture-capitalists-
ernst-young-sector
PTI May 22, 2013, 06.50PM IST
Electronic commerce, commonly known as e-commerce, is a type of industry where buying
and selling of product or service is conducted over electronic systems such as the Internet and
other computer networks. Electronic commerce draws on technologies such as mobile
commerce, electronic funds transfer, supply chain management, Internet marketing, online
transaction processing, electronic data interchange (EDI), inventory management systems,
and automated data collection systems. Modern electronic commerce typically uses
the World Wide Web at least at one point in the transaction's life-cycle, although it may
encompass a wider range of technologies such as e-mail, mobile devices social media, and
telephones as well.
Electronic commerce is generally considered to be the sales aspect of e-business. It also
consists of the exchange of data to facilitate the financing and payment aspects of business
transactions. This is an effective and efficient way of communicating within an organization
and one of the most effective and useful ways of conducting business.
E-commerce can be divided into:

 E-tailing or "virtual storefronts" on websites with online catalogs, sometimes gathered

into a "virtual mall"
 The gathering and use of demographic data through Web contacts and social media
 Electronic Data Interchange (EDI), the business-to-business exchange of data
 E-mail and fax and their use as media for reaching prospective and established customers
(for example, with newsletters)
 Business-to-business buying and selling
 The security of business transactions

Business applications

Some common applications related to electronic commerce are the following:

 Document automation in supply chain and logistics

 Domestic and international Payment systems
 Enterprise content management
 Group buying
 Automated online assistants
 Instant messaging
 Newsgroups
 Online shopping and order tracking
 Online banking
 Online office suites
 Shopping cart software
 Teleconferencing
 Electronic tickets
 Social-Networking
Governmental regulation

In the United States, some electronic commerce activities are regulated by the Federal Trade
Commission (FTC). These activities include the use of commercial e-mails, online
advertising and consumer privacy. The CAN-SPAM Act of 2003 establishes national
standards for direct marketing over e-mail. The Federal Trade Commission Act regulates all
forms of advertising, including online advertising, and states that advertising must be truthful
and non-deceptive. Using its authority under Section 5 of the FTC Act, which prohibits unfair
or deceptive practices, the FTC has brought a number of cases to enforce the promises in
corporate privacy statements, including promises about the security of consumers' personal
information. As result, any corporate privacy policy related to e-commerce activity may be
subject to enforcement by the FTC.
The Ryan Haight Online Pharmacy Consumer Protection Act of 2008, which came into law
in 2008, amends the Controlled Substances Act to address online pharmacies.
Internationally there is the International Consumer Protection and Enforcement Network
(ICPEN), which was formed in 1991 from an informal network of government customer fair
trade organisations. The purpose was stated as being to find ways of co-operating on tackling
consumer problems connected with cross-border transactions in both goods and services, and
to help ensure exchanges of information among the participants for mutual benefit and
understanding. From this came e-consumer, as an initiative of ICPEN since April 2001.
www.econsumer.gov is a portal to report complaints about online and related transactions
with foreign companies.
There is also Asia Pacific Economic Cooperation (APEC) was established in 1989 with the
vision of achieving stability, security and prosperity for the region through free and open
trade and investment. APEC has an Electronic Commerce Stearing Group as well as working
on common privacy regulations throughout the APEC region.
In Australia, Trade is covered under Australian Treasury Guidelines for electronic
commerce, and the Australian Competition and Consumer Commission regulates and offers
advice on how to deal with businesses online, and offers specific advice on what happens if
things go wrong.
Also Australian government e-commerce website provides information on e-commerce in
Australia.
In the United Kingdom, The FSA (Financial Services Authority)is the competent authority
for most aspects of the Payment Services Directive (PSD). The UK implemented the PSD
through the Payment Services Regulations 2009 (PSRs), which came into effect on 1
November 2009. The PSR affects firms providing payment services and their customers.
These firms include banks, non-bank credit card issuers and non-bank merchant acquirers, e-
money issuers, etc. The PSRs created a new class of regulated firms known as payment
institutions (PIs), who are subject to prudential requirements. Article 87 of the PSD requires
the European Commission to report on the implementation and impact of the PSD by 1
November 2012.
E-commerce in India

India has an internet user base of about 137 million as of June 2012. The penetration of e-
commerce is low compared to markets like the United States and the United Kingdom but is
growing at a much faster rate with a large number of new entrants. The industry consensus is
that growth is at an inflection point.
Unique to India (and potentially to other developing countries), cash on delivery is a
preferred payment method. India has a vibrant cash economy as a result of which 80% of
Indian e-commerce tends to be Cash on Delivery. Similarly, direct imports constitute a large
component of online sales. Demand for international consumer products (including long-
tail items) is growing much faster than in-country supply from authorised distributors and e-
commerce offerings.
Market size and growth

India's e-commerce market was worth about $2.5 billion in 2009, it went up to $6.3 billion in
2011 and to $14 billion in 2012. About 75% of this is travel related (airline tickets, railway
tickets, hotel bookings, online mobile recharge etc.). Online Retailing comprises about 12.5%
($300 Millions of 2009). India has close to 10 million online shoppers and is growing at an
estimated 30% CAGR vis-à-vis a global growth rate of 8–10%. Electronics and Apparel are
the biggest categories in terms of sales.
Key drivers in Indian e-commerce are:

 Increasing broadband Internet (growing at 20%MoM) and 3G penetration.

 Rising standards of living and a burgeoning, upwardly mobile middle class with high
disposable incomes
 Availability of much wider product range (including long tail and Direct Imports)
compared to what is available at brick and mortar retailers
 Busy lifestyles, urban traffic congestion and lack of time for offline shopping
 Lower prices compared to brick and mortar retail driven by disintermediation and
reduced inventory and real estate costs
 Increased usage of online classified sites, with more consumer buying and selling second-
hand goods
 Evolution of the online marketplace model with sites like ebay, Infibeam, and Tradus.
The evolution of ecommerce has come a full circle with marketplace models taking
center stage again.
India's retail market is estimated at $470 billion in 2011 and is expected to grow to $675 Bn
by 2016 and $850 Bn by 2020, – estimated CAGR of 7%. According to Forrester, the e-
commerce market in India is set to grow the fastest within the Asia-Pacific Region at a
CAGR of over 57% between 2012–16.

Infrastructure

Many open source ecommerce softwares and platforms are growing in prominence
including Magento. There are many hosting companies working in India but most of them are
not suitable for eCommerce hosting purpose, because they are providing much less secure
and threat protected shared hosting. eCommerce demand highly secure, stable and protected
hosting. Trends are changing with some of eCommerce companies starting to offer SaaS for
hosting webstores with minimal one time costs.
There could be various methods of ecommerce marketing such as blog, forums, search
engines and some online advertising sites like Google adwords and Adroll.
India got its own version of the Cyber Monday in December 2012. Google India said it had
partnered with many of e-commerce companies
including Flipkart, HomeShop18,www.dealkyahai.in/,Snapdeal,Indiatimes
shopping and MakeMyTrip. Cyber Monday is the term coined in the USA for the Monday
coming after Black Friday, which is the Friday after Thanksgiving Day. Google said that, this
was the first time, when an industry wide initiative of this scale was undertaken to offer users
an incentive to gain from deals that they can find on the web on a single day.
In early June 2013, Amazon.com launched their Amazon India marketplace without any
marketing campaigns.

Funding

As of 2012, most of the e-commerce companies are yet to start making money. However, due
to their growth prospects, many venture capital firms such as Accel Partners have invested
considerably. In one of the biggest fund raising, Flipkart.com, in August 2012, raised about
8.22 billion (US$140 million). Entertainment ticketing website BookMyShow.com raised 1
billion(US$17 million) investment by Accel Partners.

Online shopping touched new heights in India in 2012

People turned to the Internet to buy everything from diapers to books, houses and even
groceries this year, pushing e-commerce revenues in the country to $14 billion with the
possibility of even higher earnings in 2013.

Factors like spiralling inflation and slower economic growth failed to dampen the online
shopping frenzy as more and more companies opted for selling wares through the internet
route, offering innumerable options and discounts to buyers.
"Increasing Internet penetration and availability of more payment options boosted the e-
commerce industry in 2012. Besides electronics, customer traction grew considerably in
categories like fashion and jewellery, home and kitchen and lifestyle accessories like watches
and perfumes," Snapdeal vice president (marketing) Sandeep Komaravelly said.

While travel still comprises a significant portion of the e-commerce market, other segments
are catching up fast.

"Apparel, books and lifestyle categories (beauty, footwear and health) will drive e-
commerce," HomeShop18.com founder and CEO Sundeep Malhotra said, adding that
relatively stable and growing domestic economy will also be major growth drivers. "The
coming year looks promising for the industry."
According to Peppercloset.com owner Sumeet Arora, e-commerce segment has doubled to
$14 billon this year from $6.3 billion in 2011. This figure is likely to reach 38 million by
2015.

So, what can one expect in 2013 from the thousands of e-commerce websites.

"More personalised offers, loyalty programmes and better customer care is what most e-
commerce companies would focus on to offer customers a richer, more relevant online
experience," an industry analyst said.

According to HomeShop18.com, an innovation that will "revolutionise" e-commerce in India

is cost optimisation through warehouse and logistics management that will enable companies
to do profitable business.

While players like eBay and IndiatimesShopping have been around for a while, one saw
many more portals mushrooming in 2012. An important entry in the Indian market was that
of one of the world's largest online retailer -- Amazon.com. The website launched the desi
version as 'Junglee.com'.

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.

Celebrated on the Monday after Thanksgiving, 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.

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.

"Mobility most likely will be the trend to look forward to the next year. Mobile commerce
would be huge as more and more people access Internet through tablets and smartphones.
Most companies are looking at enhancing their mobile presence," Malhotra said.

According to a study by IMRB International and IAMAI, there were an estimated 137 million
Internet users in the country as of June 2012. Of this, while 99 million were from urban parts
of the country, the remaining 38 million were from rural India.

The next year is expected to see increased participation from tier 2 and tier 3 cities.

"With a gap of demand and supply in physical retail category, online shopping is set to grow
in tier 2 and tier 3 cities. The introduction of cash on delivery has helped gain the trust of
consumers in these markets and get rid of the apprehension of using credit cards online," he
said.

According to him, there is a rising demand for books and health and beauty products from
these cities, but tier 2 markets score highest on kids and baby items and home appliances.

The year also saw acquisitions and consolidation activities picking up pace as dozens of
online shopping portals set up shop.
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

"Acquisitions and consolidations will continue...its just the begining and will continue
happening over the next few years. Bigger players will acquire smaller players and more
investments will flow into the segment," Arora said.

Despite the fact that most of these e-commerce companies are yet to start making money,
growth prospects for these companies remain high and there seems no dearth of investors.

According to experts, in 2012, the e-commerce companies in India raised over $500 million
(about Rs.2,743.3 crore).

In one of the biggest fund raising by an Indian e-commerce firm, Flipkart in August this year
raised $150 million (about Rs. 822 crore) from four investors.

Entertainment ticketing website BookMyShow.com also saw Rs. 100 crore investment by
Accel Partners, while Yebhi.com raised funding from Fidelity Growth Partners India and
Qualcomm Ventures.

While "one will not see obscene valuations", investors would continue to make small
investments and 2013 will be a year of growth and consolidation, Arora said.

Online retail has also seen an heavy overlap with social networking due to aggressive
marketing on such platforms.

"As smartphones and tablets continue to proliferate, companies will need to embrace multi-
channel commerce strategy in 2013," Purehomedecor.com owner Sandeep Jaglan said.

While consumers will be spoilt due to choice, players will have to sweat it out to differentiate
themselves from the competitors.

Komaravelly of Snapdeal believes that personalisation would emerge as a key focus area in
2013. "The ability to customise and personalise shopping experience for customers will
become a critical differentiator. Social and mobile platforms will see increased customer
adoption in the coming year," he said.

Elitify.com Founder and CEO Amit Rawal agrees. "The market is overcrowded with
companies that are competing for the same pie and have very little differentiation in their
product offering," he said.

Differentiation is centered around beating the other in marketing and competing on prices,
both of which are not sustainable trends for any industry, he added.

"So the only way forward is consolidation of players that can create synergies both in terms
of operations and product offerings," Rawal said.

Marketing campaigns by major players like Flipkart and Jabong have also made e-commerce
a household phenomenon, especially in the big cities, say experts.
Social media would also become crucial as more brands use social data to not just popularise
their brands but also personalise experience for customers on their websites.

Some experts are of opinion that cash on delivery, which is at present the predominant
payment mechanism, will become less popular and give way to usage of debit/credit cards.

"Given the various disadvantages like longer cash cycles for retailers, collection challenges
etc, cash on delivery will become less popular and cards will start becoming more
ubiquitous," Malhotra said.

With more lucrative deals, loyalty plans and newer products hitting the online shelf, netizens
can shop to their heart's content. 2013 surely promises to make customer the king for e-
commerce companies.

Google partners e-commerce sites for 'Cyber Monday' on December 12

NEW DELHI: Google India today said it has partnered with a host of e-commerce players
including Flipkart, Snapdeal,Homeshop18, IndiatimesShopping, and makemytrip to bring to
India its own version of 'Cyber Monday' on December 12.
Internet users can log on to 'www.gosf.in' and get deals for 24 hours on this day from over 50
partners across e-commerce, local and classified, online travel sites and BFSI
(banking, financial services and insurance) industries, Google said in a statement.
The festival will offer users an opportunity to shop for jewelry, shoes, apparel, travel
packages, books, kidswear, gadgets, watches, computer accessories, health and fitness
equipment, home decor products andreal estate deals, it added.
First coined in 2005 as a marketing term by online retailers for the Monday coming
after 'Black Friday', which itself is the name for Friday after Thanksgiving in the US, the
'Cyber Monday' has become a phenomenon over the years.
In 2010, comScore reported consumers spent USD 1.028 billion online on Cyber Monday
(excluding travel) compared to USD 887 million in 2009.

With over 137 million Internet users in the country, India is witnessing a significant growth
in the online activity. This is for the first time, an industry wide initiative of this scale is being
attempted to offer users an incentive to gain from deals that they can find on the web on a
single day, Google said.

"The initiative is aimed at encouraging shoppers to adopt online shopping with a focus to
reach out to first time online buyers. The participating companies will also offer special deals
for the first time buyers on their websites," it said.

"The online shopping industry is already over USD 1.5 billion and with this initiative, we
want to reach out and promote online shopping to the first time buyers," Google India MD
and VP Sales and Operations Rajan Anandan said.

"For this 24 hour sale, we have lined up some really exciting offers from our portfolio of 500
brands and we're confident that shoppers will come back for more," Myntra.com Co-Founder
and CEO Mukesh Bansal said.
The partners include eBay India, Flipkart, Snapdeal, IndiatimesShopping, Makemytrip,
Yebhi.com, firstcry.com, Homeshop18.com, Croma, Gitanjali Group, Monster India, Tradus,
GoIbibo, among others.

Cash on delivery delinquents threat to India e-commerce

Summary: Indian e-tailer Flipkart's decision to stop the COD option for orders above
US$185 to the state of Uttar Pradesh could reflect the challenge of high return rates and
fraud, according to an Forrester analyst.

Flipkart's decision to stop cash on delivery (COD) for orders over US$185 (10,000 rupees) to
the state of Uttar Pradesh may be the first sign that online retailers are pushing back against
the popular payment method.

While COD is essential in a nascent e-commerce market, it can have a large negative impact
on business margins, said Vikram Sehgal, vice president and research director at Forrester
Research. He was writing in a blog post on Monday, called "India's e-commerce woes:
managing logistics challenges in India," which explores the impact the cash on delivery
model.
He pointed out given the challenges of high return rates and fraud, especially for COD
goods, Flipkart recently announced that it was not going to be fulfilling orders of more than
10,000 rupees in certain areas of Uttar Pradesh.

Flipkart stopped the COD option for orders above US$185 to the state of Uttar Pradesh.

"This is exacerbated in a nascent market where consumers are testing this new medium of
ordering goods, as the return rates can be quite high," he said. Return rates, for when items
are not paid for at the time of delivery, ranges between 5 and 25 percent, depending on
product category, customer demographics, and their online experience.
Managing deliveries
Sehgal said the ban was the right move. "I believe Flipkart's decision to stop delivering goods
worth more than 10,000 rupees in certain areas of India is the right strategy for Flipkart, as it
looks to manage this challenge while ramping up its top-line (revenue) growth," he said.

According to a report in the Times of India, Flipkart customers would order expensive goods
"just for fun", and refuse to accept them upon delivery.

"It takes a minimum of 10 days to ship a product to a customer and back to the company if
it's not purchased. It causes loss to sellers, selling through Flipkart, as their products get
blocked in transit," a senior Flipkart executive told TOI. The report added ransportation and
insurance costs were typically proportionate to a product's value.

Cash on delivery (COD) is a highly popular payment method in a country where consumers
are scared, or don't have the means, to transact online.
Last week Amazon launched an online marketplace for India, where shoppers can pay for
goods using the COD option with no limitations.

Sehgal said Amazon's decision to offer COD was not risky, but to be successful it must
carefully manage: the order sizes; minimize returns via customer analytics and barring repeat
offenders; and category selection.

E-commerce just got more competitive: Amazon comes to India with an online marketplace

The world's largest online retailer, Amazon launched its online marketplace in India today
making an entry into the increasingly expanding e-commerce Indian market.

The site is designed as a market place that facilitates transaction between buyers and sellers.

The Amazon media center announced the site going live on June 5 stating that currently it
will only sell physical books, movies & TV shows.

However additional categories including mobile phones and cameras will be coming soon.

Restrictions on foreign direct investment (FDI) have thus far prevented Amazon from selling
direct to consumers in the country, but, by hosting a site where third parties do the selling, the
issue is sidestepped.

The model helps Amazon overcome Indian regulatory hurdles that prevent foreign online
retailers from having a fully owned Indian arm selling directly in India. Country manager
Amit Agarwal said the model adopted by Amazon is fully compliant with all relevant Indian
laws.

The site claims to provide a safe and secure online ordering experience, electronic payments,
cash on delivery, returns, Amazon’s customer service with 24x7 support, and a globally
recognized Amazon’s A-to-Z Guarantee.

The site is also accessible on mobile devices allowing customers to shop anywhere.

The site currently has a book store that features over 7 million print books across 200 plus
categories including fiction, management, children’s books and academic publications.

There is also a preview feature that allows customers to read selected texts from many books.

“India is one of the fastest growing markets in the global publishing industry. But publishers
and authors need to find new readers to sustain the growth momentum. Amazon has set
benchmarks for innovation and efficiency in sales internationally and I look forward to seeing
their work in India as well,” said Amit Tripathi, celebrated author of the bestseller Shiva
Trilogy.
Movies & TV shows store features a collection of over 12,000 titles in English and Hindi
across DVD, Blu-ray, Blu-ray 3D and Video CD formats.

“Our vision, at Amazon, is to be Earth's most customer centric company; to build a place
where people can come to find and discover virtually anything they want to buy online. With
Amazon.in, we endeavor to build that same destination in India by giving customers more of
what they want – vast selection, low prices, fast and reliable delivery, and a trusted and
convenient experience,” said Greg Greeley, Vice President of International Expansion at
Amazon.com. “We're excited to get started in India and we will relentlessly focus on raising
the bar for customer experience in India.”

With respect to retailers, Amazon allows access to all sizes of business.

“Our vision is to become a trusted and meaningful sales channel for retailers of all sizes
across India, enabling them to succeed and efficiently grow their business online,” said Amit
Agarwal, Vice President and Country Manager, Amazon India. “With Fulfillment by
Amazon, we will do the heavy lifting for the sellers so that they can focus on core business
functions like sourcing and pricing their products.”

With Amazon now encroaching India, it will be interesting to see how major retail online e-
commerce markets like Flipkart and Ebay will react to this new development.

Flipkart currently dominates the e-commerce Indian market

The e-tailing reality show

While nobody doubts the potential of ecommerce in India, what is upping the antennae is the
prolific marketing spends of some of the companies in the space even as the players pursue
the profitability paradigm. As the world's most well-known e-tailing site Amazon launches its
marketplace model in India, the battle field is going to get tougher in an already intrepid
marketplace.
A popular meme on the internet cites the return of Jagmohan Dalmia, Nawaz Sharif and
Narayana Murthy to the BCCI, Pakistan and Infosys, and makes a case for the 90s being
back. And yet for most TV viewers, it feels like a time warp right back to the early 2000s —
the infamous and very shortly lived dotcom boom.

Of course the Zatangs and Indyas have made way for an entirely new breed of e-tailing
brands. The spends on this category have been on a northward progression.

Agrees Dr Subho Ray, president - IAMAI (Internet & Mobile Association of India), there has
been a spurt in traditional advertisements by ecommerce sites and this is primarily because
mass media such as television tends to bring more credibility. Add the fact that most online
companies are looking to raise money from private investors and thus there is a need for buzz
and eyeballs to create a brand.
The Indian ecommerce market is going through a huge surge of growth and according to
2012 CRISIL report, Indian online retail industry will grow from Rs 32 billion in 2012 to a
projected revenue of Rs 100 billion in 2015, a CAGR of 45%-48%.

Internet users and 3G penetration is expected to grow at an estimated compounded rate of

over 60% through 2015 which will result in over 180 million users in India with access to
online retail.

Pegging on this potential growth story, the ecommerce brands are betting big on the Indian
consumer and hoping to lure her with their offerings ranging from fashion and lifestyle, to
books and gadgets, and much more.

In this pursuit many of them like Myntra, Ebay, Flipkart, Yebhi, Jabong, Babyoye, Olx,
Quikr, are parking humongous marketing dollars on high decibel television advertising,
celebrity associations and activation hoping to crack the code and have loyal customers.

Yebhi.com, a leading player in the fashion and lifestyle space, claims to have many firsts to
its credit: for instance the unique trynbuy feature, publicised through a high decibel TV
campaign, wherein the customer can choose the product(s) online and return it if unsatisfied.
Says Nikhil Rungta, chief business officer, Yebhi, "With this feature we are trying to bypass
the key barrier of lack of touch and feel that is afflicting most websites as well as replicating
the offline model in the online world."

Recently the portal also announced a tie-up by establishing 30 virtual stores across Cafe
Coffee Days across two cities — Delhi and Bengaluru — where customers can buy
products from a virtual wall using their smartphones, much on the lines of the celebrated
'HomePlus Subway Virtual Store' launched by Tesco in South Korea.

Another player Jabong.com recently went in for its first ever alliance with Bollywood by
launching an exclusive collection inspired by the lead pair of the film "Yeh Jawani Hai
Diwani" on the website. Claims Manu Kumar Jain, co-founder, Jabong, "There was an
increase in the number of clicks on the website as a result of the association, from people who
follow the stars and their style."

While refusing to share the exact marketing spends, Jain said that, as a brand they want to
change the perception that pricing and discount can be the only levers for growth in this
market.

Flipkart.com that started off as a leading brand in books and electronics and now entered the
lifestyle space has created a distinct identity for itself with its campaign featuring kids in
moire grown up situations. Shares Ravi Vora, vice president - marketing, Flipkart,
"Advertising has helped us in creating interest amongst the target base to come and check us
out, now the challenge is to continue being relevant to them."

The belief seems to be that unlike traditional brick and mortar retailing where the storefront
itself acts as an advertising medium, ecommerce retailers have to rely on traditional media to
create awareness. "In the early days of business it is important to spend on marketing.
However to reach profitability, it will become crucial for ecommerce companies to curb their
marketing to revenue ratio under 10%,"says Mukesh Bansal, CEO & co-founder of
Myntra.com, a fashion and lifestyle portal.
Avers Amitava Saha, co-founder, Firstcry which claims to be India's largest baby and kid
store, and adds that while their site traffic is decent the conversion is low compared to
markets like the US. In his view, it will improve as more people start buying online just as it
has happened in the travel industry.

Mobile's Dramatic Growth in India Spurs a New Era of E-Commerce

In a move to tap the growing e-commerce market in India and increase its access to
consumers, Coca-Cola recently piloted an online store for home delivery of its products.
Coca-Cola is among the early birds in the fast moving consumer goods (FMCG) sector in the
country to set up a standalone portal. But even as e-commerce is gaining traction in India --
according to Bangalore-based management consulting firm Zinnov, e-commerce is expected
to increase from US$6.3 billion in 2011 to US$23 billion by 2016 -- the buzz is growing
around mobile transactions.

With more than 900 million cell phone connections, India is the second largest mobile market
in the world after China. A recent report by Boston Consulting Group stated that the total
number of Internet users in India is expected to increase from 125 million in 2011 to 330
million by 2016. The report noted that, at present, around 45% of online consumers in the
nation use only the mobile to access the Internet. This is expected to increase to 60% over the
next three years.

"I think mobile is key to the next e-commerce boom in India, because if you take pure e-
commerce -- eliminating mobile -- the reach is very limited at present," said Kartik
Hosanagar, a professor of operations and information management at Wharton. Noting
that only 150 million of India's 1.2 billion population is on the Internet, Hosanagar added:
"But even the 150 million figure is not relevant because most of these [Internet users] don't
have broadband connections nor are they comfortable shopping online." Indian mobile users
have already engaged in some forms of commerce on mobile devices through ringtone
downloads and the like. "So, the trust factor is already there. If 3G rollouts happen fast
enough, there is little doubt that mobile may be the technology that pushes e-commerce into
high gear in India."

According to Hosanagar, the biggest challenge in the mobile commerce space is in the
presentation. "You are trying to showcase a product in such a small screen and nobody has
successfully cracked it at scale as yet," he noted, adding that with a large proportion of online
users in India accessing the Internet only through the mobile, one is likely to see new
business models around mobile commerce emerging from here. Other areas where he sees the
mobile Internet emerging strong are education and health care. "That, for me, is the true
promise of mobile in India," Hosanagar said.

Hosanagar was in India recently to conduct a three-day Wharton Global Modular Course
(GMC) on "Technology and Entrepreneurship in India." Held at the Indian Institute of
Management Bangalore (IIMB), the event was attended by students from Wharton and IIMB
and focused on Indian tech-enabled sectors like mobile, the Internet and software. The course
included site visits to start-up businesses, panel discussions and guest lectures from Indian
entrepreneurs.
Game Changer

Like Hosanagar, Mukesh Bansal, co-founder and CEO of online fashion and lifestyle store
Myntra.com and a guest speaker at the event, expects mobile Internet to be a game changer.
According to Bansal, while 4% of Myntra's revenues last year came from transactions over
mobile devices, at present this number has gone up to 12%. "In the next 12 to 18 months, we
expect around 20% to 25% of our revenues to come from mobile. We have redesigned our
portal for mobile interface and we plan to launch some mobile applications in the next couple
of quarters," said Bansal. "The biggest challenge for us with mobile is that fashion shopping
is all about images and videos. Recreating that experience on mobile is hard because the
screen real estate is very small."

Phanindra Sama, co-founder and CEO of redBus, India's largest bus ticketing company, is
also enthusiastic about the business potential of the mobile sector. "A significant amount of
our sales today are from our mobile application. Over the next three years, we expect this to
cross to 50%," he noted. According to Sama, he and his team decided early on that they
would not position redBus as merely an online bus ticketing company but that the business
"would be open to every possible means of selling tickets." At present, redBus' channels
include the company website, a call center and 40,000 point of sale outlets. Sama is now
exploring the option of selling tickets through direct-to-home television. "When we started,
we realized that the world is changing rapidly, and we told ourselves that 'While today the
Internet is popular, five years later it may be a different scenario altogether,'" he said. "This
has worked in our favor. If we had not been ready for the mobile world, someone else would
have come with a mobile bus ticketing solution and we would have become obsolete."

Ashish Bhinde, executive director at Avendus Group, pointed out that while technology in
India has been services-led up to now, the non-linear side of technology -- digital and mobile
Internet -- will outpace and outgrow services over the next two decades. "The minute the
enablers come in place, the leapfrogging that we saw from fixed lines [telephones] to mobile
is likely to happen in segments like online travel, online classified and music downloads on
mobile devices." Bhinde predicted that the expansion of 3G services and the launch of 4G
services will make a huge difference to in-home and on-the-go connectivity. "Mobile
broadband will be the primary driver of overall Internet penetration in the country," he added.

Bhinde suggested the online payment landscape in India is at an inflexion point. "We are a
cash economy and digital payment in the country is still nascent." He said that cash-on-
delivery, an Indian innovation, is likely to continue as a significant mode of payment, but that
in-store prepaid e-wallets, multi-purpose prepaid cards and mobile wallets will gain
momentum. "The hybrid kiosks or 'trust point' that offers a combination of online and offline
shopping is something to watch out for," he added. "Companies have to keep in mind that
there is a large segment of the country that will take much longer to go online; therefore,
ignoring that segment does not make sense."

The India Challenge

In a session on "How to Build a Global Tech Business from India," Krishna Mehra, co-
founder and vice president of Capillary Technologies, a provider of cloud-based loyalty,
mobile and social customer relationship management solutions, spoke about the challenges of
selling software in the country. "Account management and customer management is
extremely important in India. The client wants a warm body to talk to. Also, while the
channel network for hardware is well established, the channel for selling software is very
fragmented."

According to Mehra, the software-as-a-service model works better in India as compared to

shrink-wrapped products because Indian businesses are not in favor of heavy capital
expenditures. "An operating expenditure-based pricing and servicing model is better suited to
Indian customers. It also prevents piracy," he said.

Mehra added that while Capillary Technologies has a 60% to 70% market share in the loyalty
market in India, the company decided to expand globally because it felt that focusing on India
alone would limit growth. He noted that the motivation for Indian software companies to go
global is three-fold: "One, in India, there is lack of a large local market for software. Two,
there is the currency conversion factor. And three, many venture capitalists prefer a global
story."

There are also regulatory challenges in building a global business out of India, Mehra said,
which is why many Indian companies are looking to set up holding companies outside the
country. "We moved our headquarters to Singapore because of the regulatory nightmare," he
noted. Describing the advantages of building a technology business from India, Mehra
listed juggad or frugal innovation at the top of the list. "Customers are more forgiving about
product defects. There is a lot of talent available in India and the ability to iterate quickly.
And raising capital is easier here than in many other parts of the world."

Sharing his experiences of being an entrepreneur in India, Gaurav Mendiratta, founder and
CEO of SocioSquare, a digital marketing agency started in 2011, suggested that in a new-age
business like his, micromanagement is very important. "You have to push the team to learn
and stay updated every single day. You also need to ask for updates or set processes around
getting updates, otherwise you will not get them," said Mendiratta, adding that to customers,
"relationships are far more important than any contract or sometimes even more than your
offerings. If your relationship is strong and the client wants something new that is not part of
your offerings, he will wait for you or even help you develop it."

Naveen Tewari, founder and CEO of InMobi, the world's second largest mobile ad network
after Google, recalled that when company leadership decided early in their journey (the firm
was started in 2007) to build a global footprint everyone discouraged them. "We were told
that it was not the right thing to do because it had not been done before. But we persisted and
that has worked very well for us." Other key focus areas at InMobi, Tewari added, have been
"to build and build a great product. Also, we always think big. We follow the 10X rule -- at
any and every point of time we want to grow 10 times in all aspects. We believe it is a
mindset issue." On the people front, Tewari said that he believed in hiring people with the
right attitude and the right aptitude. "The smarts can come later."

E-commerce comes of age in India

Summary: For India's e-commerce industry, the times they are a-changin’. While the
penetration of e-commerce is low, it is growing at a fast rate with a large number of new
entrants, reaching an inflection point.
For India's e-commerce industry, the times they are a-changin'. While the e-
commerce penetration is low compared to the United States and several European markets, it
is growing at a much faster rate with a large number of new entrants.

Most industry analysts agree that the growth is at an inflection point. India's e-commerce
market was worth about US$2.5 billion in 2009, US$6.3 billion in 2011, and $14 billion in
2012. The country has close to 10 million online shoppers and this number is growing at an
estimated 30 percent.

"With approximately 8 million Indians shopping online in 2012, the online shopping industry
in India is growing rapidly and will continue to see exponential growth," said Rajan
Anandan, vice president and managing director of Google India. "By looking at the trends in
2012, we expect 2013 to be a strong growth year for players who're focused on growing
categories like apparels and accessories, and niche product categories like baby products,
home furnishings, and health nutrition. We expect the growth to come from outside of the top
eight metros."
While there have been some obvious deterrents of shopping online like the inability to touch
and try the goods before purchasing, concerns over receiving faulty products, and security
concerns in posting personal and financial details online, there are unique aspects of online
shopping in India.

For example, cash-on-delivery is the most preferred payment method. India has a vibrant
cash economy and as a result, 80 percent of e-commerce transactions in the country are cash-
on-delivery. Also, direct imports constitute a large component of online sales. There is huge
demand for international consumer products that either are not available in India or are
expensive on retail shelves.

On the other hand, online shoppers have also been positive toward global trends. Online
classified sites like eBay and local players--OLX and Quikr--see more consumers buying and
selling second-hand goods. Also, major e-commerce players like Infibeam and Tradus, and
Flipkart soon, are also adopting the online marketplace model.

"Looking at the online shopping experience holistically, streamlining the entire process is
what led to the rise of e-commerce in India," explained Amod Malviya, senior vice president
and head of engineering at Flipkart. "For example, factors like cash-on-delivery,
and increased automation of supply chain and logistics have gone a long way in addressing
concerns like lack of credit card penetration and bottlenecks in last-mile deliveries."
"Increased application of technology in both backend and frontend processes have improved
the browsing experience, and provided consumers with greater transparency when it came to
the order process and so on," Amod added.

He breaks down a visitor's journey in three phases. "One, find and discover the product of
need. Two, decide. And three, transact. Of these three, in our case, the transaction step has
the least dropoffs, primarily limited to the payment gateway's success rates. Cash-on-delivery
is a great help here.

"Factors that impact the customer during the decision phase are many, and also vary from
category to category. Availability and pricing usually play a significant role. Images of the
product have a significant role for some categories. Lastly, richness of the information about
the product as well as product reviews have a noticeable role to play."
Growth and progression of e-commerce in India
With the rise of Internet usage, 3G penetration, and increasing smartphone users, India's e-
commerce market is growing at a fast pace. Let’s take a look at the road ahead for the sector
and the challenges that it needs to address to ensure continued growth

The e-commerce market in India has grown by 34 percent in the last seven years, was about
USD 600 million in 2011-12 and is expected to touch USD 9 billion by 2016 and USD 70
billion by 2020. According to Forrester, the Indian e-commerce market is expected to grow at
a CAGR of over 57 percent between 2012 and 2016, which is the fastest within Asia-Pacific
region.

The key factors that are driving this growth are the rise of Internet usage (growing at 20
percent) & 3G penetration, and increasing smartphone users with availability of Internet on
mobile phones. It is estimated that currently there are 27 million mobile Internet users in
India out of which 4 percent are buying products on mobile. This figure is expected to
increase to 20 percent mobile shoppers in the next four years. These factors accompanied by
busy lifestyles, traffic congestion, lack of offline shopping time, great deals and discounts
offered online, and use of innovative e-commerce models such as group buying and second-
hand sales have led to more and more consumers switch to online shopping. With the rising
middle class incomes, global exposure and changing demographics (close to 50 percent of the
population is less than 25 years of age), this trend also holds true for the Tier II & III cities.

Online travel (76 percent) and financial services (10 percent) form the biggest component of
online shopping followed by e-tailing (8 percent). While services such as travel tickets,
movie tickets, restaurant discount vouchers, hotel bookings, utility payments, insurance
policies, and premium payments lead the wallet share of the amount spent online, product
categories such as computers & accessories, cameras & mobiles, electronic durables, and
books are picking up. But, product categories such as apparel, jewelry and footwear (require
high touch and feel), which offer maximum potential in terms of market size, faces
challenges such as high return rate and negative cash cycles due to COD (cash on delivery).

However, the e-commerce industry today faces certain challenges. Firstly, there is a very low
penetration of credit/debit cards in India, which restricts the online purchasing power. Even
though strategies such as cash on delivery have been introduced, they have their own nuances
and pose high working capital issues to the companies. Secondly, high volume items such as
refrigerators require high freight & shipping costs and because the e-commerce model in
India is based on free shipping concept, sale of such items online could suffer a setback.
Finally, the distribution & logistics in India is not very well organized and prone to fraud.
Hence, buying of high value items such as jewelry, electronic goods (LCDs), which require
travel insurance adding up to the total costs may not be one of the bestsellers in the digital
space.

The key to success in this segment is delivering high quality user experience which includes
differentiated and detailed product catalog, order fulfillment, website performance, different
modes of transaction(credit cards, payment gateways, cash on delivery etc.), and simple and
sensible checkout. Furthermore, with the increase in competition in this segment, the e-
commerce players need to invest in research and development of differentiated product
catalogs, innovative service and customer engagement concepts, and cost effective supply
chain and logistics models.

Authors: Rohit Nasa, Principal - Business Consultant, Infosys and Ashna Suri, Associate -
Business Consultant, Infosys

'Strong growth prompts $305 mn investment in e-commerce'

MUMBAI: Strong growth in the country's eCommerceindustry has prompted venture

capitalists and private equityplayers to take keen interest in the sector investing USD 305
million in 2011, consultancy firm Ernst & Young (E&Y) said in a report today.
In the report titled 'Rebirth of eCommerce in India', E&Y said declining broadband
subscription prices, aided by the launch of 3G services, have been driving growth of the
sector.

"The trend of online shopping is set to see greater heights in coming years, not just because
of India's rising internet population, but also due to changes in the supporting ecosystem.

"Given these developments, venture capitalists and private equity players are taking keen
interest in the sector," E&Y India Partner and Technology Industry leader Milan Sheth said.

India's eCommerce sector attracted USD 305 million (in 37 deals) from January to November
2011, as compared to USD 55 million raised from 12 deals in 2010, which amply
substantiates the growth trajectory of the industry, the report said.

The bulk of the funds raised by players was used to expand market presence, build logistics
and supply chain capabilities, and enhance technology platforms, it added.

Several VCs are investing in the e-Commerce space because they feel this is the right time to
invest and do not want to miss out on its current wave of popularity, Sheth said.

"The sector would continue to receive funding from VC and PE players despite concerns
relating to a valuation bubble. Early stage - focused PE players would invest a major part of
their funds (40 per cent) in internet-based companies by 2014-15," he added.

The report said changing lifestyles of the urban population has led many people relying on
the internet for their shopping needs.

"Cash-on-delivery has been one of the key growth drivers and is touted to have accounted for
50-80 per cent of online retail sales. Players have adopted new business models, including
stock-and-sell, consignment and group buying," Sheth said.

However, concerns surrounding inventory management, location of warehouses and in-house

logistics capabilities are posing teething issues, he added.

Classifieds, the earliest entrant in the e-Commerce space in India, is undergoing a shift in
operational model from vertical to horizontal offering.
Players now offer a gamut of services ranging from buying/selling cars to finding domestic
help/ babysitter, the report said.