1. Shiv Masand

2. Part 1 Introduction
What is e­commerce?
Advantages and Disadvantages
Distribution channels
Part 2 E­Commerce in India
Factors contributing to success
Online Travel: Leader of e­commerce in India
● Ticketing
● Hotel Reservations and Packages
Online Retail
● New business Models
● Inventory Management
● Logistics
● Warehousing
● Cash on Delivery
● Discounts and Value added services
Regulations
Part 3 Flipkart
Success Factors
Supply Chain and Logistics
Pure Click companies vs brick and click
Part 4 Foreign Players
The Amazon Strategy
The Alibaba Strategy
Part 5 Birth of Express Delivery
Flipkart
Snapdeal
Part 6 Emergence of logistics firms
Gati, GoJavas, Delhivery etc
Part 7 Reverse Logistics and Recent trends

3. Introduction
What is e­commerce?
A type of business model, or segment of a larger business model, that enables a firm or
individual to conduct business over an electronic network, typically the internet.
Electronic commerce operates in all four of the major market segments: business to business,
business to consumer, consumer to consumer and consumer to business.
E­Commerce has allowed firms to establish a market presence, or to enhance an existing market
position, by providing a cheaper and more efficient distribution chain for their products or
services.
Advantages
­ Convenience.​ E­Commerce can take place 24 hours a day, seven days a week.
­ Selection.​ Many stores offer a wider array of products online than they do in their
brick­and­mortar counterparts. And stores that exist only online may offer consumers a selection
of goods that they otherwise could not access.
Disadvantages
­ Limited customer service.​ If you want to buy a computer and you’re shopping online, there is
no employee you can talk to about which computer would best meet your needs.
­ No instant gratification.​ When you buy something online, you have to wait for it to be shipped
to your home or office.​­ No ability to touch and see a product.​ Online images don’t always tell
the whole story about an item. E­commerce transactions can be dissatisfying when the product
the consumer receives is different than expected.
Distribution Channels

4. E­commerce has grown in importance as companies have adopted pure­click and brick­and­click
channel systems. We can distinguish pure­click and brick­and­click channel system adopted by
companies.
● Pure­click or pure­play companies are those that have launched a website without any
previous existence as a firm. Example: Flipkart and Amazon
● Bricks­and­clicks companies are those existing companies that have added an online
site for e­commerce. Example: Clothing stores
● Click­to­brick online retailers that later open physical locations to supplement their
online efforts. Example: Proper Cloth
E­Commerce in India
India​ has an internet user base of about 243.2 million as of January 2014. However, internet
penetration is only at a mere 11%. Considering this figure, it is fair to say that the potential for
growth of e­commerce in vast. Over the last few years, e­commerce has really made huge strides
in India with the emergence of companies like Flipkart, Snapdeal, Quikr and OlaCabs.
Key factors contributing to the success of E­commerce
● Widespread prevalence of Broadband Internet
● Growth in the in the number of smartphone users
● Rising standards of living
● Availability of wider product range
● Competitive prices as a result of reduced inventory and real estate costs
● Evolution of companies like Makemytrip, Saavn and Jabong
Currently, eTravel comprises 70% of the total eCommerce market. eTailing, which comprises of
online retail and online marketplaces, has become the fastest­growing segment in the larger

5. market having grown at a CAGR of around 56% over 2009­2014. The size of the eTail market 1
is pegged at 6 billion USD in 2015. Books, apparel and accessories and electronics are the largest
selling products through eTailing, constituting around 80% of product distribution. The
increasing use of smartphones, tablets and internet broadband and 3G has led to developing a
strong consumer base likely to increase further. This, combined with a larger number of
homegrown eTail companies with their innovative business models has led to a robust eTail
market in India rearing to expand at high speed.
Online Travel: Leader of E­Commerce in India
India’s travel and tourism industry has been growing at a rapid rate. The arrival of low cost
carriers has made air travel affordable to a large number of people and therefore airline
passenger traffic has risen rapidly over the last decade.
The key services of the online travel industry are tickets(air and land), hotels and tour packages.
Airlines either sell their tickets directly to customers or through GDS and OTAs . GDS offer air 2 3
and railway tickets, car rental information and hotel rooms. This makes it compelling for OTAs
to partner with them. OTAs also directly partner with airlines, hotels, railways and bus services.
Ticketing
Travel ticketing is the largest segment of internet commerce in India. The prime factor
responsible for the rapid growth of this sector is intangibility. The limited need to touch and feel
the product enabled this segment to grow faster than others in the industry. Price, schedule and
choice of airline are the only parameters to be considered while buying a ticket online.
1
CAGR: Compound Annual Growth Rate
2
GDS: Global distribution system
3
OTA: Online travel agencies

6. Another emergence in this sector is Opaque Pricing. The OTA’s sell tickets at a discounted price
but the name of the airline is only revealed after the completion of the booking process. The
benefits of this method are that consumers can buy tickets at low prices and airlines can sell
maximum number of seats. However, a potential drawback of this method is that it takes away
their opportunity of differentiating their services.
Hotel Reservations and Packages
OTA’s are shifting their attention to hotel reservations and packages since margins in the
ticketing business are eroding rapidly.
The success of the online hotel industry depends on the following factors:
● Efficient management of diverse supplier base
● Overcoming technological constraints
● Ensuring a pleasant customer experience
● Accuracy of information
In order to cater to the needs of value conscious customers, OTA’s are bundling air tickets and
hotel reservations.
Online Retail or eTailing
Online retail constitutes a very minute portion of the organized retail market in India. However,
this will continue to improve every year as the organized retail market continues to grow at 24%
per annum. While eTravel constitutes a majority portion of the e­commerce industry, the
eTailing segment is gaining momentum and is expected to match the levels of eTravel.
The online retail market is made up of two categories of players.

7. Vertical focussed players: Deal in specific category of goods such as apparels, electronics and
baby products. Vertical­focused businesses bring to the table a deep understanding of their target
customer segments and product categories. Maintaining category focus enables a portal to design
the entire customer experience around the specific needs of its target segment.
Multi category players: Deal in multiple categories of goods. A broader product category is
always a safer bet since a higher volume of transactions could drive down cost per transaction
(economies of scale), and it has a healthy impact on valuations also.
New Business models
e­Malls
An electronic mall (e­Mall) or e­Marketplace provides a platform for merchants to set up virtual
stores and sell their merchandise. Merchants frequently choose this option due to the advantages
of reduced cost and the complexity of putting products up for sale on the web. Smaller merchants
also look to leverage the brand name of the e­Marketplace, based on the premise that this would
lead to increased trust and, therefore, readiness on customers’ behalf to buy products online.
Larger merchants sell their products through these virtual stores, in addition to their own sales
channels. Pricing is controlled by the merchants.
Deals/Group Buying
Deal sites provide daily discount offers in various categories including restaurants, apparel,
lifestyle products and travel. Group buying sites work on the premise that collective buying leads
to larger volumes for merchants, which, on their part, offer attractive prices to consumers. There
is a subtle difference between deals and group buying. In group buying, a minimum number of
buyers is required for a deal to go live, whereas deal sites do not have such requirements. Deal

8. sites provide merchants a means for reducing distressed inventory in the services sector. Another
motivation of discount selling is building customer loyalty. By taking a cut in their initial deal
profits, merchants aspire for repeat visits and treat the loss as customer acquisition cost.
Factors to Consider
Inventory Management
There are two main models for inventory management in the e­commerce industry
Stock and sell method: ​Inventory risk is assumed and investment is made into warehouses and
logistics. A significant advantage in this method is that the e­commerce player has more control
on order fulfillment. Additionally, the e­commerce players can benefit from economies of scale
as they buy products in bulk. Lastly, through this model, the e­Tailers form innovative product
bundles that are aligned with the unique needs of customers.
Consignment Model: ​The website acts as the middleman. However, the product is shipped
directly from the vendor to the customer. There is no investment into warehouses and logistics.
The delivery of the goods is carried out by the merchant or other third party providers. A
potential drawback for this model is that the e­commerce player is highly dependent on the
merchant.
Logistics
eTailers need to make the conscious decision of whether or not to work with third party delivery
services or to deliver the products on their own. Initially, eTailers were using third party
delivery services but there has been a gradual shift towards self­delivery due to the following
issues with third parties:
● Cost of logistics in India is high due to substandard quality of infrastructure

9. ● Inadequate airline fleet size of airline companies
● Logistics companies in India lack technological infrastructure
● Cash on delivery transactions come with additional costs
Benefits of using in house logistics
● According to analysis, in house logistics becomes more cost effective once the number of
deliveries exceeds 100 a day.
● Cash on delivery works better as it creates a shorter cash cycle.
● Ability to meet specific customer delivery requirements
● Delivery agents can build a good brand image when they meet the customers
Few challenges associated with in house logistics
● It is capital intensive and requires efficient management
● Scaling of in house logistics can be difficult
In the near future, eTailers are expected to employ a hybrid model with a mix of in house and
outsourced logistics.
Warehousing
Non­uniform VAT rates levied by state governments, CST charge on inter­state sales and the 4 5
retention of VAT in case of inter­state stock transfers make it challenging to decide warehouse
location. This challenge is compounded further by the fact that state governments can change
VAT at their level. CST cannot be offset against any other tax in India. This means that it is a
cost incurred by manufacturers and retailers. This results in double taxation, since an online
retailer passes on costs to consumers.
4
VAT: value added tax
5
central service tax

10. Drivers of online Retail in India
● Cash on Delivery: Indians prefer to transact in cash vis­à­vis all other payment
instruments. While the base of credit and debit cards is on the rise, Indians have been
slow in using these payment instruments for shopping online. CoD has helped to address
some of the major issues associated with online shopping such as security concerns,
desire to see a product before the actual purchase. Most students don’t have credit or
debit cards and therefore CoD has become a necessary option especially since students
and teenagers spend a lot of their time on the internet.
● Discounts, convenience and Value added services: The Indian consumer is price
sensitive, and discounts are one of the major incentives for shopping online. e­Tailers
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
the major driver of online shopping. e­Tailers in India are providing various value­added
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.
Regulations
In India, the Information Technology Act 2000 governs the basic applicability of e­commerce. It
is based upon UNCITRAL Model but is not a comprehensive legislation to deal with
e­commerce related activities in India. Further, e­commerce laws and regulations in India are
also supplemented by different laws of India as applicable to the field of e­commerce. For
instance, e­commerce relating to pharmaceuticals, healthcare, traveling, etc. are governed by

11. different laws though the information technology act, 2000 prescribes some common
requirements for all these fields. The competition commission of India (CCI) regulates anti
competition and anti trade practices in e­commerce fields in India.
India’s most successful online megastore: Flipkart
Success Factors
Back at the time when Flipkart was launched, any e­commerce company faced two major
difficulties. One was the problem of online payment gateways. Not many people preferred online
payment and the gateways were not easy to set up. Flipkart tackled this problem by introducing
cash on delivery and payment by card on delivery in addition to others.
The second problem was the entire supply chain system. Delivering goods on time is one of the
most important factor that determines the success of an ecommerce company. Flipkart addressed
this issue by launching their own supply chain management system to deliver orders in a timely
fashion.
Supply Chain and Logistics
Pure Click Companies(Flipkart)
Flipkart currently operates with 25 warehouses and 60 delivery centers throughout the country.
Most of these warehouses and delivery centers are in Tier 1 cities but the company aims to
expand into tier 2 and 3 cities as well.
In terms of inventory stocking, orders are placed for new products based on frequency of order
and forecasting.
For items listed as "In Stock", Sellers will mention the delivery time based on your location
pincode (usually 2­3 business days, 4­5 business days or 4­6 business days in areas where

12. standard courier service is available). For other areas, orders will be sent by Registered Post
through the Indian Postal Service which may take 1­2 weeks depending on the location.
Sometimes, items have to be sourced by Sellers from outside India. These items are mentioned
as 'Imported' on the product page and can take at least 10 days or more to be delivered to you.
Flipkart has its own delivery system known as eKart logistics in some locations and also has
contracts with reputed courier companies like Blue Dart and DHL.
Customer order
↓
Check for product at delivery center→(NO)→ Check at warehouse→(NO)→ Product is ordered
(YES)↓ (YES)↓ ↓
Delivery will be completed in 1­2 days Delivery in 2­5 days Delivery in 6­15 days
(Sent to logistics body) (Sent to logistics body) (Sent to logistics body)
Logistics
Location of the product is identified
↓
Logistic body is assigned based on location, type of product and cost
(Information about the product is sent to the logistics body through an automated software)
↓
Product is delivered
Orders over Rs. 300 are delivered for free otherwise a delivery fee of Rs. 30 is charged
Issues and Proposed solutions to Flipkart’s supply chain and logistics

13. Supply chain costs, primarily warehouse management and logistics, are one of Flipkart’s largest
expenses. The company has struggled to operate its large logistics network, which includes more
than 15,000 employees, in a cost­efficient manner, partly because its focus was toward adding
capacity to meet surging demand rather than saving costs.
The company is putting greater emphasis on controlling supply chain costs by strictly
implementing its business plans by monitoring expenses on a quarterly basis and improving
space utilization at its warehouses by increasing use of technology.
Brick and Clicks (shoppers stop and big bazaar)
In order to build a profitable online business retailers must integrate it seamlessly with their
bricks­and­mortar operations. In this model, the products are usually delivered from the retail
stores to the individual customers. The companies usually have a dedicated fleet of vans or other
automobiles that deliver the product to the customer. This saves the retailer from investment in
new distribution centers and further utilizes the already present stock in store.
Warehouse→Retail store→Delivery to customer from store
Some companies like Walmart in the USA separate their online operations from their brick and
mortar. This means that the products are delivered from separate warehouses and not from the
stores.
In terms of who’s responsible for delivering the product, almost all brick and clicks have
contracts with courier services like DHL, UPS and Blue Dart.
The only exception being delivery of food items. This tends to be done by the respective retailer/
or producer itself.

14. Dimension Elements Benefits
Information integration ● Information sharing
and transparency
● Direct and real time
accessibility
● ​Reduced bullwhip
effect ​
● Early problem
detection ​
● Faster response ​
● Trust building
Synchronized planning ● ​Collaborative
planning, forecasting
& replenishment ​
● Joint design
● ​Reduced bullwhip
effect ​
● Lower cost ​
● Optimized capacity
utilization ​
● Improved service
Workflow coordination ● ​Coordinated
production planning
& operations,
procurement, order
processing,
engineering change &
design ​
● Integrated, automated
business processes
● ​Efficiency & accuracy
gains ​
● Fast response ​
● Improved service ​
● Earlier time to market ​
● Expanded network
New business models ● ​Virtual resources ​
● Logistics restructuring ​
● Mass customization ​
● New services ​
● Click­and­mortar
models
● ​Better asset utilization ​
● Higher efficiency ​
● Penetrate new markets ​
● Create new products

15. The Amazon Strategy
The locations of warehouse facilities are strategically important to Amazon. Amazon makes
facility locations decision based on the distance to demand areas and tax implications.
Amazon assigns the orders to an appropriate delivery centre with the lowest outbound logistics
cost. In Amazon's warehouse, there are 5 types of storage areas.
● Library Prime Storage is the area dedicated for book/magazine.
● Case Flow Prime Storage is for the products with a broken case and high demand.
● Pallet Prime Storage is for the products with a full case and high demand.
● Random Storage is for the smaller items with a moderate demand
● Reserve Storage will be used for the low demand/irregular shaped products.

16. Amazon uses an propitiatory warehouse management system to make the putaway decision and
order picking decision.
A warehouse management system aims to control the movement and storage of materials within
a warehouse and process the associated transactions, including shipping, receiving, putaway and
picking. ​Warehouse management involves the receipt, storage and movement of goods,
(normally finished goods), to intermediate storage locations or to a final customer.
After the orders are picked and packed, Amazon ships the orders using common carriers so they
can obtain the economy of scale. Orders will arrive at UPS facility near a delivery point and UPS
will perform the last mile delivery to customers.
The Alibaba Strategy
Alibaba doesn’t own any of its own assets for last mile delivery or even fulfillment; they are an
online virtual e­commerce platform that tenders orders, more like an eBay. The company will
either sell consignment inventory provided by vendors, or goods will be shipped from a vendor
warehouse or location. Alibaba’s role is essentially to coordinate track­and­trace logistics, giving
coordinate information for delivery, tendering the funders and clearing it—much like what
Amazon does when they sell goods for a third party.
It is like Amazon in that it matches buyers and sellers. Unlike Amazon, Alibaba does not hold
inventory or participate in logistics such as sourcing, storage, or shipping.
Alibaba.com makes money by receiving a commission on each transaction as well as by
charging subscription fees to sellers who maintain storefronts in the marketplace. This is their
B2B platform.

17. Recommendations that help to reduce shipping costs
● Negotiate deals with multiple carriers: These carriers will offer discounts based on the
volume of products that need to be delivered
● Use packaging provided by the carriers: No dimensional fees.
● Considering regional carriers for smaller orders as their prices are cheaper
Birth of Express Delivery
● Flipkart
Flipkart offers same day delivery in 10 cities namely Bangalore, Delhi, Mumbai, Noida,
Gurgaon, Faridabad, Kolkata, Manesar, Navi Mumbai and Thane. Additionally, the order needs
to be placed by 12 noon and it will be delivered before 9pm.
Customers who wish to use this option would have to pay an additional 140 rupees per
item(original price is Rs. 200).
If the order is not delivered on the promised date under the same day guarantee scheme, the
shipping charges would be remitted to the customer’s Flipkart Wallet. Additionally, under the
money back guarantee, twice the shipping charges will be remitted to the Flipkart wallet.
However, this amount is non­refundable.
There is a separate system within the supply chain to cater to same day delivery. It works just as
the normal delivery system but with less lead time and there is priority on the product’s packing,
shipping and delivery.
However, same day delivery is not available for all products. Only products sold by WS retail
can be delivered on the same day.
Flipkart also offers one day delivery in over 65 cities.

18. Customers who use this option incur an additional cost of 90 rupees per item.
Same­day Guarantee/In­a­day Guarantee Delivery options are only available for products sold by
select sellers. Some products cannot be delivered using these options due to logistical reasons.
Flipkart uses its own capabilities as well its partnership with other logistics firms in order to
guarantee in a day delivery service.
● Snapdeal
Just like Flipkart, Snapdeal offers the same/next day delivery in only select cities and for select
products. The price of next day delivery is Rs. 70 per product and that off same day delivery is
Rs. 100 per product. Snapdeal does not have its own delivery service. All its deliveries are via
third party logistics like GoJavas and Blue Dart.
A significant step taken by Snapdeal in order to improve supply chain management is increase
the number of warehouses from 50 in 20 cities to 75 in 30 cities.
In case the order is not delivered on the promised date for Same­day/Next­Day delivery,
Snapdeal will remit the shipping charges borne by you as SD cash. As per Snapdeal’s
Compensation Policy, double the shipping charges will be credited to your Snapdeal account.
Emergence of new small logistics firms
With the growth and expansion of e commerce over the last few years, a large number of
logistics firms have come up. A few examples would be Ecom Express, Delhivery, Gati,
GoJavas and Quickdel Logistics. These companies have sparked competition with well
established courier services as they have widened their reach and are able to offer better prices.
Most of these companies have set up e commerce fulfillment divisions and are changing
processes and IT to respond to the changing needs of online retailers.

19. Gati
Gati spans more than 99% of districts in India and has the rare distinction of the largest
multi­modal connectivity comprising surface, air and rail. There are over 500 pickup points in
India and coverage of more than 200 countries managed by a sizeable workforce of over 5500
people.
Delhivery
They operate fulfillment centers across regions and have fulfillment centers across 150 cities.
Their pan india express delivery network, in house fulfilment and transportation management
systems, customer analytics, geo coding, and route optimization helps to reach consumers with
12­48 hours.
GoJavas
State of the art warehousing helps to provide efficient fulfillment services. Android based
technology enables GoJavas in depositing COD money in the respective bank accounts within 48
hours of collection. First logistics company in India to support ‘Try and Buy’ Delivery concept.
Customers can try certain lifestyle products and buy only if they are satisfied.
Reverse Logistics
Reverse logistics is much more than just returning a product. It involves putting together checks
that minimise the possibility of returns, disposal, gatekeeping, as well as all other supply chain
issues after the sale of a product. The uncertainty regarding the kind or quality of return, the
generation time or the distribution of the reverse logistics makes it difficult to put it down to a
routine. Another major issue with returns is the provision of cash on delivery. The COD system
delays a payment from going through. Courier companies usually hold the money for about two

20. weeks and with this option, there is a transaction fee of about Rs. 50 and a commision which is
usually about 1%. Some courier company also charges an extra Rs 50 to Rs 100 as return fees to
ship the merchandise back to the point of origin. The COD payment model has given consumers
the liberty to reject products at the door or even before the delivery of the product. In order to
prevent these refusals, companies are now checking multiple times with the customer if they
want the product. Additionally, firms that deal in apparel, clothing and footwear often have a
clause wherein they won't accept more than 5% of returned clothing from their distributors. This
means that these products will have to be auctioned off at a discounted rate.
Most companies try to reduce their reverse logistics cost by collecting the returned product and
giving the new product in the same trip. Companies like YeBhi.com also use a ‘try and buy’
policy wherein the customers can order three products, try them and then pick the one that fits
best. Another approach to the return/replacement policy is that companies can set up their own
drop off facilities wherein customers will drop off the products they are not happy with. They
will then be refunded electronically.
Efficient ways of managing returns
❖ Increase the customer acceptance probability of CoD products: Delivery charges should
be separated from product cost and customers will have to pay the delivery cost
regardless of whether they accept the product.
❖ Perform more checks on the products that are being delivered
❖ Ensure quick turnaround of returned goods
❖ Consolidating returns/reverse logistics operations

21. ➔ Flipkart
In order to return a purchased item on Flipkart, a customer needs to put in a request either online
or on the mobile app. The product can be either returned in which case the customer would be
refunded or it could be replaced. The product has to be in its unused and original condition and
all the contents of the product need to be returned.
Returns/replacements are done free of cost. In the case of a return, the entire amount will be
transferred to the respective customers’ Flipkart account.
In the case of a replacement, Flipkart will usually bring the replacement product with them. If
not possible, the product will be collected at the earliest and the replacement product will be
delivered as and when it is received from the courier partner.
In the rare case when the product cannot be picked up due to location, the customer needs to ship
the product through another courier service. Flipkart will reimburse this shipping cost to the
customer.
A refund will be issued when the seller cannot provide a replacement.
A return/replacement request has to be placed within a specific time frame.
For sellers with Flipkart Advantage, the request has to be placed within 30 days.
For fashion and books sellers, the request has to be placed within 30 days.
For all other sellers, the request has to be placed within 10 days.
Returns and replacements are not an option in the following situations:
● Return request is made outside the specified time frame
● If something is missing from the original package
● Product is damaged due to misuse by the customer.

22. ● Specific categories like innerwear, lingerie and socks
● Fragile/hygiene related items
● Made to order or custom jewellry
● Products with missing or tampered serial numbers
➔ Snapdeal
Since Snapdeal does not have its own delivery service, its return procedure is slightly different.
The customer has to first email snapdeal and inform them that they want to return the product.
Snapdeal will then arrange for a courier service to pick up the product within 4 business days. If
Snapdeal is unable to arrange a courier service for the pickup, the customer will have to do this
themselves. Snapdeal will then reimburse the customer upto Rs. 400 of the shipping cost.
In the case where the customer wants a refund for the returned product, here is the timeline at
which he/she will be refunded.
Debit card/credit card/netbanking 7-10 working days from the refund initiation date
NEFT transfer 7-10 working days from the refund initiation date
SD cash Within 12 hours
Recent trends in E­Commerce
● Amazon has started to advertise other products on its packaging. For example, it has
lately been advertising the Despicable me franchise which is set to release its new movie
on July 10th. This mode of packaging can be a new revenue stream for e commerce
firms.

23. ● Amazon is offering free shipping on smaller products now. In order to attract cost
conscious consumers, the firm has removed the $35 minimum that was required in order
to get free shipping. However, this delivery will take 5­7 days as opposed to a prime
customer who gets free delivery within 2 days.
● Amazon plans to introduce its own line of food products.
● Flipkart plans on shutting down its website to focus on its phone application. It is
estimated that in 2014, the number of indian internet users will be 550 million of which
80% will be on the mobile.
● Flipkart has now partnered with the dabbawalas of Mumbai for last mile delivery. These
dabbawalas are known for their efficient error free delivery system. They are currently
using a paper logistics system but the goal is to transition to apps and wearable
technology.