Ecommerce digital media_and_convergence_promise_oct_10_final_v2

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The E-Commerce, Digital Media and Convergence Promise:

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  • Source:http://www.livemint.com/2012/06/20165308/Smartphone-usage-on-the-upswin.html
  • Sourcehttp://articles.economictimes.indiatimes.com/2012-02-21/news/31083025_1_e-commerce-letsbuy-online-retailershttp://www.indiadigitalreview.com/features/will-indian-ecommerce-see-more-corpses-battle-troyhttp://www.indiadigitalreview.com/features/how-only-four-companies-have-accounted-23rd-ecommerce-funding-2010-2012-india
  • Consolidation: http://articles.economictimes.indiatimes.com/2012-02-21/news/31083025_1_e-commerce-letsbuy-online-retailershttp://www.indiadigitalreview.com/features/will-indian-ecommerce-see-more-corpses-battle-troyhttp://www.indiadigitalreview.com/features/how-only-four-companies-have-accounted-23rd-ecommerce-funding-2010-2012-india
  • Ecommerce digital media_and_convergence_promise_oct_10_final_v2

    1. 1. The E-Commerce, Digital Media and Convergence Promise: Are we there yet ?
    2. 2. 1© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Contents Digital Ecosystem Digital Media Key Trends Business Models E-commerce Key Trends Business Models 1 2 3 4 Concluding Remarks Challenges and Way Forward Challenges and Way Forward
    3. 3. 2© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. India goes online… Claimed internet users as of June 2012 are 137 million Wireless connections are expected to constitute about 90 percent of all internet connections by 2016 Broadband wireline connections to grow upto 51 million by 2016 Internet enables smart phones expected to reach approximately 264 million by 2016 Mobile gaming touched INR 4 billion in 2011 Tablets Smart phones E-Books IPTV Onlinevideo Online advertisingOnline shopping Evolving models Internet connections projected to grow to 400 million by 2016 Downloads Applications E-tailing Online travel Social media Emailing Internet Online music Livestreaming Mobilehandsets Online gaming Online music Digital TV Applications E-commerce Wireless Broadband Digital cinema DigitalTV Digital advertising touched INR 15.4 billion mark in 2011 Online payment
    4. 4. 3© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The digital ecosystem is rapidly evolving with continuous growth in internet penetration and mobile device access… Urban users are expected to reach 105 million by December 2012 Source: IMRB IAMAI 2012 report Proliferation of new age devices... Source: Consumer and Convergence V, KPMG in India analysis As of June 2012, there are 137 million claimed internet users in India 99 million – Urban India 38 million – Rural India Source: IMRB IAMAI 2012 report 57 63 71 73 78 82 85 92 99 105 Units: Million Gadget usage
    5. 5. 4© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Mobile connectivity will drive the next phase of growth… Smart Phones and Tablets to drive on-line media consumption Source: KPMG in India analysis Demand for smart phones is driven by continuous reduction in prices Source: Smartphone market in India 2012 Frequency of accessing internet on mobile/tablet 39% 48% 7% 3% 1% 2% 0% 10% 20% 30% 40% 50% 4-5 times a day Daily 3-4 times a week Once a week Once in 15 days Once a month Source: Report by ViziSense & Komli Media, July 2012 - Afaqs.com Better user interface, affordable pricing and availability of internet has led to spurt in smart phones/tablet market in India 12,000 3845 2009 2012 - 32 % Price – INR
    6. 6. 5© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. ..powered by the youth…. Source: IAMAI, iCube report 75% Youth driving the Internet Usage... Smartphone usage by age-groups 15-24 yrs 31 + yrs Total Time spent on Smartphone 3 hrs 2 hrs Total Time spent on Browsing & Entertainment 2 hrs 1 hr Total Time spent on Chat & SMS 31 mins 15 mins On an average, Indian smartphone users are spending about 150 minutes a day on their phones and more than 50 percent of this time is on Browsing, Entertainment and Applications. Source: Nielsen Informate Mobile Insights 5% 13% 8% 8% 8% 5% Under 18 yrs 18-24 yrs 25-30 yrs 31-35 yrs 36-40 yrs Above 40 yrs Smartphone ownership among age groups (as a % of mobile phone users) ...and augmenting the adoption of media devices Source: Nielsen Informate Mobile Insights 5% 13% 8% 8% 8% 5% Under 18 yrs 18-24 yrs 25-30 yrs 31-35 yrs 36-40 yrs Above 40 yrs Smartphone ownership among age groups (as a % of mobile phone users)
    7. 7. 6© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. An evolving new media segment with number of users spending considerable time and players building business models to monetize on the same… Along with console, mobile and PC & digital TV are emerging in the gaming segment Growth in the digital ecosystem is one of the key enabler for online video consumption Digital books Portals Online classifieds Search Social networks Emerging segments Source : KPMG in India analysis 639 101 Television (Users) Video (Unique Users) Audience 2011 (Million) Source: Comscore, KPMG in India analysis
    8. 8. 7© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. What are users doing today…? Urban Population 2012 339 Mn Computer Literates 133 Mn Claimed Internet Users 99 Mn Active Internet Users 80 Mn Mobile Phone Users 628 Mn Mobile Internet Users 59.4 Mn Rural Population 2012 833 Mn Computer Literates 70 Mn Claimed Internet Users 38 Mn Active Internet Users 31 Mn Mobile Phone Users 323 Mn Mobile Internet Users 3.6 Mn Activity Urban E-mail 87% Social Networking 67% Chat 61% Music/Video/Photos 49% Information search 42% Activity Rural Music/Video/Photos 75% E-mail 56% Online Services (for educational purposes and Online Jobsites) 50% E-commerce 34% Social Networking 39% Online Finance 13% Rural Needs 16% Penetration of activities amongst internet users Source: IAMAI_Internet in India 2012
    9. 9. 8© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Accelerating commerce on the internet… Source: IAMAI digital commerce 2011, KPMG in India analysis 8146 14030 16600 21700 28500 40300 55600 77100 107800 0 20000 40000 60000 80000 100000 120000 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E INRCrores E-Commerce market in India Numbers of users transacting online 3 5 7 9 11 15 21 28 38 0 5 10 15 20 25 30 35 40 2007 2008 2009 2010 2011 2012 e 2013 e 2014 e 2015 e Noofusers(mn) Source: Avendus Research Bain Research, Press Articles The growth in e-commerce market in India is driven by Broad segments Source: IAMAI digital commerce 2011, KPMG Analysis  Online travel  E- retailing  Online financial services  Digital downloads  Other online services • Rising income levels • Better education • Payments infrastructure • Government initiatives
    10. 10. 9© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Provision of viable payment options is also one of the key enablers to drive e- commerce in India Indian electronic payment-wide array of choices for the consumer Source: KPMG in India analysis Case : Indian Railways 50% Net banking 30% Credit/ Debit cards 20% Prepaid cards In 2010-11, online ticketing at over INR 80 billion accounted for 40 percent of reserved accommodation of Indian Railways. Such payments were made through Cash on delivery (COD) plays a significant role in making consumer comfortable with online transactions 40 – 60 % Overall transactions coming through cash on delivery across categories in e-commerce Advantages  Eliminates long/complex payments process  Choice to touch and feel the product Transfers risks from consumers to supplier incase of delivery failures  Option of reverse logistics
    11. 11. 10© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Online consumption, improved connectivity and technological advancements … fueling growth in both digital media and e-commerce Payment options Young active users Mobile connectivity Internet users Smartphones / tablets / feature phones Social media / research / emailing Digital books, portals, v ideo….
    12. 12. 11© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Contents Digital Ecosystem Digital Media Key Trends Business Models E-commerce Key Trends Business Models 1 2 3 4 Concluding Remarks Challenges and Way Forward Challenges and Way Forward
    13. 13. 12© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Digitization – A game changer across major media segments in India Subscriber base in Television is expected to shift towards digital in coming years Similarly, digital sales have surpassed physical sales in Music industry Source: KPMG in India analysis Source: KPMG in India analysis Source: KPMG in India analysis Exhibition – Digital cinema  Digital print continued to grow during 2011  Digital now accounts over 80 percent prints of Hindi film releases  Leading to significant cost savings Print - Emerging sources of news consumption Television Blogs Social Networks Online news websites Source: KPMG in India analysis
    14. 14. 13© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Mobile becomes the preferred device for content access Source: Mobext India Survey_Role of the Connected Device in the branding and buying cycle of a Consumer Device purchases cannibalise other media consumption habits Mobile 80% Laptop/des ktop 13% Tablet 7% Primary Access device 46% 43% 40% Communicatio n Entertainment Information Use of Mobile/Smartphone Mobile is the device of choice Mobile dominates media consumption • 21 percent read less printed books • 22 percent watched less TV • 16 percent reduced time on Internet via desktop/laptop • 30 percent read fewer books in print • 31 percent watched less TV Tablet UsersSmartphone Users 44% of total media time is spent on the mobile As per a survey by Mobext India in 2012 among mobile/smartphone, laptop and tablet users:
    15. 15. 14© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Online video takes off in India 80 101 0 20 40 60 80 100 120 2010 2011 Million Online Video: Unique Users 4.8 7.6 0 2 4 6 8 2010 2011 Hoursperuserper month Online Video: Time spent 21 % 58 % 8 17 20 21 0 10 20 30 India UK Germany US hours per user per month Time spent watching Video online 79 74 70 69 66 55 55 52 42 33 33 25 23 23 22 21 20 20 19 15 15 Search Social… Appstore Webmail Chat Video Maps VASportal Content… News Adult Portal TV BSFI Travel Sports Shopping Entertain… Blogging Weather… Mobile… % Reach of online activities on Smartphones Source: Nielsen Informate Mobile Insights Source: ComScore, KPMG in India analysis Source: ComScore, KPMG in India analysis Source: ‘KPMG n India analysis After activities like communication and search, video is the most popular activities for smartphone users in India Compared to matured international markets, Indian market still has significant potential to grow Growth in both users and time spent on Online video
    16. 16. 15© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. E-book market presents a new growth opportunity Source: Bowker Educational Content 70% Other 30% INR 140 billion Total Book market in India While the current penetration of e-books in India is just 2 percent, the market is likely to take-up with the following opportunities in India:  World‟s third largest book market  Rising literacy rates  Rising adoption of e-readers and tablets Source: KPMG FICCI Report 2012 3 Lakh tablets sold during Jan-March 2012 and expected to grow by 25% annually 20 50 0 10 20 30 40 50 60 Purchased an e-book during last 6 months Likely to buy an e-book during the next 6 months % of respondents As per Bowker's survey in India (Feb 2012) Source: KPMG FICCI Report 2012
    17. 17. 16© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Consumers now willing to receive targeted advertisements on their personal devices Source: Consumer and Convergence V, KPMG in India analysis 70% consumers willing to be tracked for advertising
    18. 18. 17© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. A shift in ad-spend – Growth of digital media Advertisers shifting their focus from traditional media to digital media Source: Zenith Optimedia Source: KPMG in India analysis Percentage share of advertising spend by media Growing contribution of internet ‘s share to the World ad-spend... TV 39% Print 46% Radio 4% OOH 6% Digital Advertising 5% Digital has surpassed radio in terms of advertising spend
    19. 19. 18© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Contents Digital Ecosystem Digital Media Key Trends Business Models E-commerce Key Trends Business Models 1 2 3 4 Concluding Remarks Challenges and Way Forward Challenges and Way Forward
    20. 20. 19© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Globally, content providers are experimenting with different business models for online content A combination of ad supported and paid models are used to monetize content in developed markets Player Subscription (Paid/Free) Monetization/Pricing Spotify 2.5 M; 10 M Free with ads; USD 4.99 per month for web; USD 9.99 / month for web and one mobile device Deezer 1.4 M; 20 M Ad supported free streaming (Eur10 m); free, medium tier (4.99 Eur) and premium tier (9.99 Eur) 7Digital 3 M registered users Free with ads; USD 4.99 per month for web; USD 9.99 / month for web and one mobile device Netflix 24.6 M $7.99 for unlimited streaming movies OR unlimited one-disc at a time rental service ($11.99 for 2 unlimited). $15.98 a month for unlimited streaming and discs Hulu 2 M All content is ad supported. Non paying users can only watch on computers. For $7.99. Hulu Plus customers can watch shows in high- definition and access programs on mobile devices, video game consoles. New York Times 0.5 M Free for 10 articles a month; Three paid packages ranging from $15 to $35 per month to include access on the website, phone apps, iPad app Financial Times 0.3 M Freemium model with limited free content and tiered pricing ranging from $4.95 per week to $8.59 per week (which varies considerably across geographies) MusicVideoPrint Source: KPMG in India analysis, news articles
    21. 21. 20© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. While there is a growing demand for video content, consumers have not shown a willingness to pay for the content leading to a primarily ad funded model Monetization of video content online is primarily through ad funded models Ad Funded Paid Models • Ad rates have been rising especially for video ads and are around 400-500 on a CPM basis • Challenge: ad rates remains low compared to TV ad rates • Low willingness to pay for content compared to developed markets • Ditto TV, launched by Zee offers premium content online with monthly subscriptions starting at Rs 21 per month Innovative monetization models for video online • Sponsorship of entire web property • Bundling sponsorships with television • Supplementing TV content with online platforms: • Using existing TV content innovatively online The freemium model is expected to become popular in India for music online • In India, 90% of digital music revenue comprises of caller ring back tones • Gaana.com, Saavn.com provide ad funded streaming services • Players such as Flyte, from flipkart, and Hungama offer downloadable music content at attractive prices • Freemium models are expected to become popular where consumers get an option between ad supported content or paying for premium content
    22. 22. 21© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Contents Digital Ecosystem Digital Media Key Trends Business Models E-commerce Key Trends Business Models 1 2 3 4 Concluding Remarks Challenges and Way Forward Challenges and Way Forward
    23. 23. 22© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Overdependence on ad revenues Measuring ROI for advertisers • Lower ad rates compared to developed markets • Ad revenue is shared by platform providers and aggregators • Numerous options for advertisers to advertise online .e.g Google, Facebook, Twitter, Pinterest, YouTube • Difficulty is measuring returns accurately Digital Piracy • Digital piracy is a big threat to content monetization • India ranks 4th globally in terms of illegal movie downloads • Content providers will have to build revenue models that involve consumer payments • Improved targeting through data analytics • Introducing alternate rates such as charging advertisers only when an ad is viewed • Focus on developing quality content suited for the medium and educating consumers on piracy Challenge Outlook Overdependence on advertising, lack of systems for measurement of ROI and digital piracy are the challenges faced by the digital media industry
    24. 24. 23© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Contents Digital Ecosystem Digital Media Key Trends Business Models E-commerce Key Trends Business Models 1 2 3 4 Concluding Remarks Challenges and Way Forward Challenges and Way Forward
    25. 25. 24© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Travel and retail are the biggest segments in the e-commerce space Online Travel 80% Online Retail 7% Online Financial Services 6% Online Digital Downloads 2% Online Other Services 5% Source: IAMAI digital commerce 2011 E-Commerce segments - Market Share
    26. 26. 25© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Among online retail segments, apparel has shown the fastest growth while comparison shopping dominates the reach Apparel is the fastest growing subcategory in online retail Comparison shopping leads in terms of reach % Reach among online users (July 2012) YoY Growth % (July 2011 – July 2012) Source: ComScore report _State of e-Commerce in India
    27. 27. 26© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Growing internet penetration, incomes and living standards have spurred e-commerce transactions in non metros and rural areas Source: India Goes Digital, Avendus; Internet in India (I-Cube 2011), IAMAI; CRISL, News Articles Total(Mn) 32 46 50 63 82 3.3 3.7 5.5 8.5 12.1 17 20 24 27 31 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Rural active internet usership (%) Growing internet penetration, income levels and living standards in the non- metros....
    28. 28. 27© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. E-commerce transactions spur in non metro cities and rural areas Source: India Goes Digital, Avendus; Internet in India (I-Cube 2011), IAMAI; CRISL, News Articles Tier 2 and 3 cities contributed about 40% and Rural India contributed 9% of all e-commerce transactions between July‟10 to June‟11 3311 cities shopped online between July „10 to June ‟11, of which 1267 were non metros Metros Key Motivators* Convenience Non Metros Non availability of products * Ebay Census 2011 Yepme.com Contribution from non metros (%) ~ 60% Lenskart.com 50% Bagskart.com 70% Watchkart.com 28% Flipkart.com 60% ....Giving a thrust to e-commerce Many e-commerce sites now have majority of their sales coming from non-metros Source: eBay Census 2011
    29. 29. 28© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. While VC/PE funding continues to grow in the e-commerce space, most of it is goes to the large players Note:The above chart includes investments in the entire „online‟ space and is not restricted to only E-Commerce Source: Venture Intelligence, KPMG in India analysis 107 485 470 0 100 200 300 400 500 600 2010 2011 2012 (till Sept) US$mn 4.5x Deal Volume 25 81 69 Company Investment (US$ mn) Investors Date Flipkart 150 Tiger Global, Accel India, Iconiq Capital, Others Feb-12 JustDial 60 Sequoia Capital India, SAP Ventures Jun-12 Ybrant Digital 48 Oak Investment Partners, Asia Pacific Capital, Others Jan-11 Yatra Online 45 Intel Capital, Norwest, Valiant Capital Apr-11 Pubmatic 45 Helion Ventures, Nexus Ventures, DFJ, SVB, August Capital Jun-12 Snapdeal.com 40 Kalaari Capital, Nexus Ventures, Bessemer Jul-11 Fashion and You 40 Sequoia Capital India, Intel Capital, Norwest, Nokia Growth Partners Nov-11 Quikr 32 Warburg Pincus, Norwest, Matrix Partners India, Others May-12 Private equity investments in online space Largest investments during 2011-12 (ytd) Together secured 67 percent of the total estimated investment in non-travel e- commerce between June 2010 to May 2012 Flipkart Smile Group Snapdeal Myntra Source: Juxt Research Source: Venture Intelligence, KPMG in India analysis
    30. 30. 29© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Signs of consolidation emerge in different segments reducing fragmentation Reasons for consolidation Highly competitive market Only 11 million e-commerce users, while more than 400 non-travel online retailers exist High customer acquisition costs INR 50-100 mn a month spent on marketing, overheads and salaries by top e- commerce companies Lack of capital Series B funding dying down for many companies as investors become choosy about companies they invest in Acquirer Target Nature of acquired company Date Fashion and You Urban Touch Fashion and beauty retailer Aug-12 Hushbabies Mangostreet Babycare retailer Aug-12 Yatra.com Travelguru Hotel aggregator Jul-12 Yebhi Stylishyou Fashion jewellery portal May-12 Snapdeal Esportsbuy.com Sports goods retailer Apr-12 Flipkart Letsbuy Electronics Retailer Feb-12 Recent acquisitions in the e-commerce space Source: Press releases
    31. 31. 30© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Contents Digital Ecosystem Digital Media Key Trends Business Models E-commerce Key Trends Business Models 1 2 3 4 Concluding Remarks Challenges and Way Forward Challenges and Way Forward
    32. 32. 31© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. E-commerce companies globally have adopted diverse operating formats and revenue models Parameter Amazon Sears eBay Asos Gilt Birchbox Polyvore Model Consignment Click & Mortar Market place Consignment/ Private Label Flash Sales Subscription model Content curators Revenue in 2011(mn) 48,070 41,600 11,650 550 370 ~1 Na Unique Visitors per month (Mn) 120 12 89 17 1.5 0.15 10 SKUs (in Mn) 39mn (books) + 11mn (others) Na 1.5 Na Na Na Na Warehouse Area (Sq.ft) 44.1 mn 46 mn (integrated with offline) 3.2 mn (GSI) 3.5 mn Na Na Na Acts as an intermediary providing a platform for buyers and sellers, Eg- E- bay, Etsy Directly sells to consumers Eg- Amazon Combines aspects of offline & online retail Eg: Sears Business Model Comparisons Source: Company Websites, Internet sources, KPMG in India analysis Operating Formats Format Market Place model Click & Mortar Consignment Model Revenue Models Sell directly to consumers through direct retailing, flash sales, group buying etc . Curators of content charge brands to promote their products online. Eg. Polyvore Provide goods monthly to subscribers. Eg. Birchbox, Dollarshave club, Lost Crates
    33. 33. 32© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Some sites had to rework their strategy mid-way to stay relevant to the Indian consumers. Companies had to strategically balance scalable, high margin and sustainable offerings with good consumer experience Player Details of change Indiatimes.com Key motivators for change • Followed an „e-bay‟ like aggregator model for 12 years • Shifted on to stock and sell „Amazon‟ like model •Better consumer experience through a warehousing model •Establishing trust amongst consumers Flipkart.com • Started as a bookselling website • Added categories like electronics, baby care, toys. Also moving into private label and digital content •Expanding product portfolio to make business scalable •Expansion into high margin categories to ensure better profit margins Searching for the right business model
    34. 34. 33© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Growing ‘hybrid’ approaches As players adapt to the changing ecosystem, lines that separate offline and online are starting to blur increasingly giving rise to new ‘hybrid’ approaches Key Trend Details Adding ‘click’ to brick and mortar Presence Examples • Enables reach in tier 2 and 3 • Advantages over pure online players: existing supplier relationships, category expertise Samsung, Nokia, Westside, Woodland, Pantaloons, Shop pers Stop, Dabur, Geetanjali Jewellers, Tanishq Adding ‘brick’ to click • Online players are establishing offline presence to increase brand awareness and allow touch and feel of the products Yatra.com, Makemytrip.com, Lenskart.com, Inkfruit.com, J ewelsnext.com
    35. 35. 34© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Contents Digital Ecosystem Digital Media Key Trends Business Models E-commerce Key Trends Business Models 1 2 3 4 Concluding Remarks Challenges and Way Forward Challenges and Way Forward
    36. 36. 35© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Customer loyalty, under-developed logistics and payment process are impediments to the growth of e-commerce in India Lack of consumer loyalty Infrastructural challenges: Logistics and Supply Chain • High customer acquisition costs and aggressive marketing budgets • Competitive space with multiple players in each category • Underdeveloped last mile logistics • Cash on Delivery increases logistic costs Infrastructural challenges: Payments • Drawbacks of COD – higher rejection rates, increased working capital requirements and additional logistical processes. • Businesses need to differentiate and offer a strong value proposition to tap the strong underlying consumer demand • Variable cost contracts and volume discounts can bring costs down • Managing reverse logistics is critical. • Incentivize e-payments. • Develop innovative payment methods such as Alipay, which allows people to make payments through an escrow account. Challenge Outlook
    37. 37. 36© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Contents Digital Ecosystem Digital Media Key Trends Business Models E-commerce Key Trends Business Models 1 2 3 4 Concluding Remarks Challenges and Way Forward Challenges and Way Forward
    38. 38. 37© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Concluding Remarks ...Certain factors acting as key catalysts to the change: Business Models Consumer Loyalty Payment options Device Usage Measurement systems Mobile connectivity Growth through consolidation Product differentiation With evolution in digital ecosystem, E-commerce and Digital media in India is finally at the cusp of realizing its promise...
    39. 39. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. This document is meant for e-communications only.

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