Indian eCommerce Industry Highlights

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Indian eCommerce industry highlights curated by Pritam Banerjee, IIM A and Sumoya Ghosh, TISS Mumbai.

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Indian eCommerce Industry Highlights

  1. 1. Industry Report Indian E-Commerce Industry Pritam Banerjee, IIM A Sumoya Ghosh, TISS Mumbai
  2. 2. The E commerce industry has grown with a CAGR of 35% from 2009 to 2012 50000 47349 45000 40000 35142 35000 Asia Pacific region is witnessing the fastest growing changes in the ecommerce sector with India being one of the top contributors to the phenomena. 26263 25000 20000 19249 15000 10000 5000 0 A number of reasons can be attributed to this Decrease in the price of personal computers Growth in the number of active internet users Extremely competitive Internet Service Provider (ISP) market. 2009 Source: IAMAI, 2013 2010 2011 2012 E commerce market Current trends display a staggering CAGR of 34.58% from 2009 to 2012, bringing up the investment in the Industry from INR 19249 Crore (USD 3.49 billion) to INR 47,349 Crore (USD 8.60 billion) in a matter of 3 years. ECOMMERCE MARKET 30000
  3. 3. The B2B market is highly concentrated with Medium enterprises having a lions share. Growth of the Business to Business (B2B): 400 350.9 350 300 270 250 200 150 135 100 50 0 FY 2010 FY 2011 FY 2012 India B2B Market (USD Millions) Source: Ken Research, 2013 With a 3-firm concentration ratio of .957, the B2B market is high concentrated BUSINESS TO BUSINESS MARKET  Shot up from USD 135 million to approximately 351 million from FY 2010 to 2012 (Ken Research). Medium enterprises have the highest contribution at 48% followed by 32% and 20% of small and micro companies. Micro enterprises have experienced hampered growth due to lack of awareness among the micro enterprises.  However things look promising as small enterprises have displayed the highest CAGR of 69% in the last 3 years. This is mainly because a majority of these firms are run by young entrepreneurs who have higher propensity to use internet as a platform for generating sales. Players like indiamart.com, Tradeindia.com and Alibaba.com have hogged a majority of the market share
  4. 4. The E commerce industry has grown with a CAGR of 35% from 2009 to 2012 E-Commerce industry Segments: Mainly travel and non travel sites.  Online travel comprises 71% of the Digital Commerce pie.  Main reason for the same is due to booming urban internet savvy population. Share of contribution Online Travel 6% 5% 2% E tailing 16% 71% Financial Services Classifieds The other segments mainly ETailing, Financial Services, Classifieds, and other online services constitutes much lesser share of the digital space B2C MARKET & SEGEMNTATION Business to Consumer (B2C) domain growth:  High internet penetration and increase in the number of active users.  Rise of the disposable income of the middle class India has led to an increase in online spending of the goods. According to Internet and Mobile Association of India (IAMAI), as many as 19.2 million people have looked for information online, Out of these, 73% have bought either some goods or services from the internet.  The number of people who shops online has doubled in just two years and is a positive sign for the ecommerce industry
  5. 5. The online travel market forms a major chunk of the ecommerce industry and is growing at a healthy rate. 40000 34544 35000 30000 26572 25000 20400 20000 15000 Top Travel Websites Reach 10000 Indian Railways 19.2% 5000 Makemytrip.com 11,6% Yatra Online 8.35% Jet Airways 14953 4.6% TripAdvisor 3.9% Indiainforail.com 3.2% Cleartrip.com 3.0% Expedia 2.9% Travor Media 2.6% Mustseeindia.com 2.3% Redbus.in 2.0% 0 2009 Source: IAMAI, 2013 2010 2011 2012 Onine travel segment (INR Crore) The online travel segment has seen a CAGR of 55.5% from 2007-2012. This is due to rise of disposable income, surge in demand for domestic travel and the boom of the tourism industry. Domestic travel contributed to as much as 50% of the total market, followed by railways tickets, international air tickets, hotel bookings and bus tickets. ONLINE TRAVEL MARKET The Indian online travel market is highly fragmented. Indian Railways, the market leader, has only 19.2% reach. Other major players like makemytrip.com and yatra Online has 11.6% and 8.3% respectively. The portals have transformed from a mere ticketing website to a complete travel guide. The online travel segment market is expected to grow at a CAGR of 32% for the next 5 years and will remain a dominant contributor to the total ecommerce revenue.
  6. 6. E-tailing segment is the most growing segment in the e-commerce space. 7000 6454 6000 5000 3000  E-tailing encompasses buying consumer items like apparels, electronic devices, home and kitchen appliances, jewellery, online. Competition is intense due to low entry barrier of this segment.  However, Amazon.com, flipkart, snapdeal.com, jabong.com, and myntra.com are some of the major players.  This segment is expected to grow further as people become more pressed for time.  Also the choice that e-tailing sites offer to customers will drive demand for this segment.  However there will be intense price based competition in this sector and consolidations are in the order 2372 2000 1550 1000 0 2009 2010 2011 2012 Etailing (INR Crore) Source: IAMAI, 2013 •The E-tailing market grew at a staggering pace of 60% in the last 3 years. • This high growth is due to changing customer preferences, faith in online retail, and high convenience yield provided by online shopping. E-TAILING SEGMENT E-Tailing: 3842 4000
  7. 7. There are plenty of opportunities for the online financial services in India. 3500 2886 3000 2500 2255 2000 1848 1540 1500 1000 500 0 2009 2010 2011 2012 Financial Services (INR Crore) Source: IAMAI, 2013 The online financial services segment is expected to grow at the steady pace of 23% for the next 5 years. ONLINE FINANCIAL SERVICES The financial services segment includes applying for insurance, paying online bills, and premiums and online transactions. According to Ken research group, in every 18 minutes an online insurance plan is sold. The costs of these insurance policies are lesser with premiums being 40%-60% cheaper. This is a win-win situation for both the insurance provider and the customers.  Also the convenience provided by online portals has led to more customers choosing the online route for bill payment The growth will be fuelled by the expanding online insurance market and more internet penetration.
  8. 8. Classified sub segment in the B2C sphere will have a good growth in the future 2500 2354 2000 CLASSIFEIDS SEGMENT Classified segment has also witnessed approximately 40% growth over the last few years.  Currently it is in a very nascent stage and has lot of scope for growth. Online advertising is lot cheaper than conventional methods and unlike the latter; it is not constrained to a geographic location. Here, the growth is mainly fuelled by services like online job (60% of the segment), online matrimony, B2C classifieds and B2B classifieds. Naukri.com, timesjob.com, monster.com are the major players in the job market while jeevansathi.com, shaadi.com are the major matrimonial sites. 1682 1500 1085 1000 775 500 0 2009 Source: IAMAI, 2013 2010 2011 Classifieds(INR Crore) 2012
  9. 9. The other online services although smaller in size, is growing significantly . 1200 1110 1000 Other online Services 600  These include sites offering online services like buying entertainment tickets, food and grocery.  IAMAI estimates the market size of these services to be around INR 1,110 Crore in 2012.  This is expected to grow by 25%.  The market for buying entertainment, movies and sports tickets is valued at INR 795 Crore while online food delivery is sized at INR 250 Crore.  Bookmyshow.com is a major player in the segment. 518 431 400 200 0 2009 Source: IAMAI, 2013 2010 2011 Other Online Services (INR Crore) 2012 OTHER ONLINE SERVICES 792 800
  10. 10. With rising personal Disposable income, E commerce will get a huge boost. Personal Disposable Income will continue to rise 2017 FUTURE SCOPE AND GROWTH 1. According to the International Monetary Fund (IMF), personal disposable income has grown by 15.8% annually from 2007 to 2012 reaching to USD 1546 billion in 2012. 2. As personal disposable income rise, it signals that the purchasing power of the people and their standard of living has increased. 3. As a result, demand for goods and services are expected to rise. With more disposable income, the benefits of time saving offered by e-commerce will lead to growth in the sector. PDI of India (USD Billions) 2016 2015 2014 2013 2012 2011 2010 2009 0 Source: IMF 2013 1000 2000 3000 4000
  11. 11. Number of active internet users are rising which is an impetus for e-commerce Number of active Internet users in India is poised to rise 800 684.5 700 600 505.3 500 375.3 400 314.2 300 248.6 168.6 200 100 60.1 89.3 121.5 0 2009 Source: Ken Research, 2013 2010 2011 2012 2013 (E) 2014 (E) No of Internet Users India in Millions 2015 (E) 2016 (E) 2017 (E) FUTURE SCOPE AND GROWTH Internet penetration has increased by a CAGR of 30% from 2007 to 2012. There has been an increase in internet user base and such trend is expected to continue. With more number of unique users, the attractiveness of the sector will rise. This will led to more advertisement on the digital media. As advertisements increase, the trial rate and the repeat rate for online retailing is likely to increase. This will trigger growth in both the travel and non travel segment due to more customer acquisition.
  12. 12. With more demands for plastic cards, the ecommerce industry will get a momentum. Total No of Plastic cards on the basis of cards outstanding (Milions) Demand for debit and credit cards will see a rise FUTURE SCOPE AND GROWTH 2017 The demand for debit and credit cards has also seen a steady rise over the last few years. Most of the banks now provide online banking and debit card facility with every new account. With the financial inclusion drive by the RBI, the number of bank accounts (and hence the number of debit cards) will definitely see a rise. This coupled with rising disposable income will invariably lead to more online transactions. 2016 2015 2014 2013 2012 2011 2010 2009 0 100 Source: Ken Research, 2013 200 300 400 500 600 700 800
  13. 13. We have a very positive outlook for the E commerce market in India Overall the future of the ecommerce industry is indeed very bright. "I believe we can still be a footnote in the history of e-commerce.“ -Jeff Bezos (US founder and CEO of Amazon.com) CONCLUSION  The ecommerce industry in India is nascent.  With internet penetration, Personal disposable income on the rise and with gradual demand of debit and credit cards, the ecommerce industry is all set for some good growth numbers in the future.  There are, however, concerns amongst customers regarding the quality of the product/offer, lack of the “fun” factor of shopping, and, about the security of the online payments.  These challenges are being addressed by innovations like cash on delivery, money back guarantee; such challenges can be easily dealt with.  Due to lower barriers of entry, competition is likely to be quite high.  Price based competition can lead to shrink in margins.  However the next few years will see some consolidation in the market space and inflow of investment in this sector is quite likely.
  14. 14. About the Authors Pritam Banerjee Work Experience: Consulting, Deloitte, Mumbai Summer Internship: Equity Research, Espirito Santo Investment Bank, Mumbai Sumoya Ghosh (Coordinator, E-cell, TISS Mumbai) College: Tata Institute of Social Sciences, Mumbai. Work Experience: UNICEF Sumoya is a student of Social Entrepreneurship in TISS Mumbai. She has worked with UNICEF and is the coordinator of the E-cell of TISS and the editor of the social entrepreneurship magazine. A meritorious student of Jadavpur University, she has published reports on various topics including Direct Cash Transfers and is known for her work. TEAM PROFILE A meritorious student from BESU, and an internationally rated Chess player, Pritam has worked for Deloitte Consulting as a functional domain Analyst and is appreciated for his high quality deliverable. His summer internship report on Direct Cash Transfer is widely discussed in Press and has been appreciated by Senior management of various companies. It has also been a part of the curriculum of IIM Ahmedabad.

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