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State of Etailing in India

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State of Etailing in India

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Overall, Q1’17 was a mixed bag for the industry- with flat performance in sales and customer growth, but with improvement in long term health indicators like unit economics, delivery performance and stakeholder satisfaction

Overall, Q1’17 was a mixed bag for the industry- with flat performance in sales and customer growth, but with improvement in long term health indicators like unit economics, delivery performance and stakeholder satisfaction

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State of Etailing in India

  1. 1. www.redseerconsulting.com Query@redseerconsulting.com 2011 RedSeer Consulting Confidential `and Proprietary Information © | www.redseerconsulting.com Query@redseerconsulting.com 2017 RedSeer Consulting Confidential `and Proprietary Information © Flexible in Approach, Firm on Results Flexible in Approach, Firm on Results Q1 CY17 Edition State of e-tailing in India • A comprehensive performance review of the online retail sector • Assessed through a regularly tracked set of performance indicators • Published quarterly 1 Published in May 2017
  2. 2. | What is in this report? 2 1. This report includes a comprehensive assessment of Indian online cab sector performance across seven key dimensions 2. Each key dimension is rated on whether the sector performed above expectations (Bullish ), broadly as per expectation (Neutral ) or significantly worse than expectations (Bearish ) on that dimension 3. Each key dimension is further built up from multiple sub- dimensions, which are also rated for the sector using the above criteria RedSeer’s Integrated Research ApproachTM incorporating the following: 1. Tracks 50,000+ monthly online transactions 2. Primary Interviews with 1,000+ sellers in 10+ cities every quarter 3. Primary Interviews with 3,000+ customers every month Sector Assessment Approach Integrated Research ApproachTM Research Methodology
  3. 3. | SN Key Dimension Sub-Dimensions 1 GMV Performance 1. Y-o-Y GMV performance 2. Q-o-Q GMV performance 2 Customer Adoption 1. Monthly active shoppers 2. Total quarterly transactions 3 Category Mix 1. GMV share of high margin (non-mobile) categories 2. GMV share of high repeat (fashion and FMCG) categories 4 Unit Economics 1. Commission Revenue (as % NMV) 2. Contribution Margin (as % NMV) 3. Cash Burn (as % NMV) 5 Delivery Performance 1. Overall O2D time 2. O2D delta between fastest and slowest e-tailers 3. Compliance to promise time 6 Customer Satisfaction 1. Overall Customer NPS 7 Seller Satisfaction 1. Satisfaction with online sales growth, cost of selling online and warehousing experience 2. Satisfaction with logistics, seller panel experience and payment processing speeds Overall Performance Seven Key Dimensions for Assessing Sector Performance 3
  4. 4. | Glossary 4 Key Word Description GMV GMV refers to Gross Merchandise Value- i.e. the Total value of goods sold NMV Net Merchandise Value- Value of goods sold net of cancellations and returns Monthly Active Shoppers No: of online shoppers who have shopped at least once in a month in past quarter Contribution Margin Margins/Commission revenue net of the discounting cost and the supply chain/payment expenses Glossary Note 1. The report broadly covers the trends in E-commerce Market in Q1 CY17 2. Trends in the offline retail market are not covered in this report Cash Burn Contribution margin, net of fixed costs like marketing, employee, tech and other admin costs
  5. 5. | 0% 100% Q1'16 Q2 Q3 Q4 Q1'17 % non-mobile order % non-mobile GMV Executive Summary 5  The industry’s lacklustre sales performance continued in Q1’17, with a limited y-o-y GMV growth of ~5%  The reason for limited growth was two fold– o Overall monthly active shoppers remained flat at around 15-17 Mn- the negligible addition of new shoppers led to flat volume growth for the industry in this period o Higher e-tailer focus on high value categories meant that non-mobile high volume categories like fashion and FMCG took a backseat- again leading to limited repeat buying behaviour and thus flat volume growth for industry  On the positive side, unit economics continued to improve in Q1’17, primarily driven by lower marketing spends  Delivery performance also continued to become faster and more consistent. Coupled with better product assortment/quality and improved post-delivery experience, this saw the Consumer NPS for industry record a strong improvement y-o-y Overall, Q1’17 was a mixed bag for the industry- with flat performance in sales and customer growth, but with improvement in long term health indicators like unit economics, delivery performance and stakeholder satisfaction 14 14,7 5% Q1’16 Q1’17 Gross GMV Annualized Run-Rate- E-tailing Industry (USD Bn) Sales Performance of non-mobile categories State of the E-Tailing Market Q1-CY17- Executive Summary
  6. 6. | Agenda 6 Appendix – RedSeer Offerings B Industry Review – Q1’17 A
  7. 7. | Sector Assessment Scorecard: Q1-CY17 Performance 7 SN Key Dimension Industry Performance Assessment Rationale 1 GMV Performance After a year of major growth slowdown in 2016, e-tailing industry continued its flattish growth trajectory in Q1-CY17 as well, with just 5% y-o-y growth 2 Customer Adoption Key reason for flat growth- Industry’s continued lack of success in onboarding new customers in Q1’17 3 Category Mix Flat growth is also a result of higher industry focus on mobiles and stagnant share of high-revenue, high volume non-mobile categories 4 Unit Economics Limited volume growth in high margin categories has seen industry revenues flatten; however, lower costs have improved CM and reduced burn 5 Delivery Performance Average delivery speeds and share of fast deliveries continued to improve for the industry in past quarter 6 Customer Satisfaction Driven by better delivery experience along with improvement in other key areas, consumer satisfaction improved y-o-y and q-o-q 7 Seller Satisfaction Seller satisfaction also improved- driven by improved supply chain and seller panel experience along with faster payment speeds 8 Overall Sector Performance Overall, Q1’17 was a mixed bag for the industry- with flat performance in sales and customer growth, but with improvement in long term health indicators like unit economics, delivery performance and stakeholder satisfaction Bearish Bullish Neutral
  8. 8. | 8 Source: RedSeer analysis The year 2016 represented a year of major growth slowdown for the e-tailing industry GMV Performance 4,5 13 14,5 2014 2015 2016  GMV growth slows but GMV ‘quality’ and unit economics improve  Largest ever monthly GMV for sector in Oct’16 (sales) month  Breakneck growth continues  Flipkart crosses USD 4 bn GMV run-rate while Snapdeal and Amazon touch USD 3 bn  Breakout year for sector  Flipkart crosses USD 1 bn GMV  Amazon, Snapdeal grow rapidly Indian E-Tailing Market- Gross GMV (For Each Year, In USD Bn )
  9. 9. | 14,0 13,0 13,5 17,0 14,7 Q1 CY16 Q2 CY16 Q3 CY16 Q4 CY16 Q1 CY17 9 Source: RedSeer analysis Industry continued its flattish growth trajectory in Q1-CY17 as well, with just 5% y-o-y growth Indian E-Tailing Market- Gross GMV Annualized Run-Rate (For Each Quarter, In USD Bn ) GMV Performance  DIPP regulations released in March lead to a growth slowdown  Players scramble to adapt to new discounting and seller management regulations  A quiet quarter for the sector as players work on sales and seller strategy  June sees the launch of the first sales events in the quarter  Highly promoted sales events in July/Aug drive growth in industry GMV  Slow growth in September as industry prepares for festive season  Highest ever GMV of USD 26 bn in Oct  20% GMV fall in 3 weeks of Nov after demonetization  Year ends on a strong note in December  Negligible y-o-y growth in online shoppers or total volumes  On supply side, limited growth is also due to steep y- o-y GMV drop for erstwhile number 2 player Snapdeal 5%
  10. 10. | 0 150 Q2'16 Q3 Q4 Q1'17 10 Source: RedSeer analysis Key reason for flat growth- Industry’s continued lack of success in onboarding new customers in Q1’17 Customer Adoption Sub-Dimension Key Takeaways Time Trend Sub-Dimension Rating: Q1-CY17 There was only a small y-o-y growth in monthly shoppers count for the industry in Q1’17 • Monthly active consumer count has shown limited growth from 15-17 Mn mark per month • This leads to a lack of growth in transaction volumes, leading to flatlining industry GMV Monthly Active Shoppers Count (Millions) 1 No: of transactions for industry has remained fairly stagnant, with a small tumble seen post the festive season in Q4 • Heavy discounting across categories drove industry GMV and transactions to their highest every levels in Q4 • For the other quarters, high focus on low volume high value categories and flat growth in new consumers has led to stagnant transactions count Total no: of Transactions (In Mn) 2 0 30 Q1'16 Q2 Q3 Q4 Q1'17
  11. 11. | 11 Source: RedSeer analysis Flat growth is also a result of higher industry focus on mobiles and stagnant share of high-revenue, high volume non-mobile categories Category Mix Sub-Dimension Key Takeaways Time Trend Sub-Dimension Rating: Q1-CY17 % of non-mobile categories has remained broadly stagnant throughout the past year • On the supply side, this trend was driven by lesser e-tailer focus on promoting these categories vis-à-vis other categories like mobiles • On the demand side, barriers like lack of confidence in fashion product fit/quality and challenges in delivery of large appliances has resulted in low adoption Sales performance of high revenue (non-mobile) categories 1 Fashion saw a small uptick in volume in Q1’17 while FMCG was flat • End-of-season sale in fashion for many players was the primary reason for higher volumes in Q1’17 • FMCG remains a small category in volume terms even as players experiment with various business models Sales performance of high repeat (fashion and FMCG) categories 2 0% 100% Q1'16 Q2 Q3 Q4 Q1'17 % non mobiles orders % non mobiles GMV 0% 50% Q1'16 Q2 Q3 Q4 Q1'17 % Fashion orders % FMCG orders
  12. 12. | -20% -5% Q1'16 Q2 Q3 Q4 Q1'17 0% 15% Q1'16 Q2 Q3 Q4 Q1'17 12 Limited volume growth in high margin categories has seen industry revenues flatten; however, lower costs have improved CM and reduced burn Source: RedSeer analysis -50% -10% Q1'16 Q2 Q3 Q4 Q1'17 Revenues through seller commissions remained flat in Q1’17  Share high commission categories showed limited growth in Q1’17  Also major players did not make any significant change on commission models for sellers in this period Q1’17 saw an improvement in contribution margins for the industry vs Q3 and q4  Reduced discounting spends due to relative lack of sales events in Q1 primarily contributed to lower spends  Continuously reducing logistics costs has also led to improvement Industry saw a reduction in cash burn in Q1’17  With the festive period having just ended, the most players lowered their advertising expenses, directly contributing to lower burn Bearish Bullish Neutral Cash burn levels (as a % of NMV) Contribution Margins (as a % of NMV) 3 2 Revenues from commissions (as a % of NMV) 1 Unit Economics Sub-Dimension Key Takeaways Time Trend Sub-Dimension Rating: Q1-CY17
  13. 13. | 0,0 10,0 Q1'16 Q2 Q3 Q4 Q1'17 13 Average delivery speeds and share of fast deliveries continued to improve for the industry in past quarter Source: RedSeer analysis 0% 50% Q1'16 Q2 Q3 Q4 Q1'17 Reduced operational load on the industry in Q1’17 led to shorter delivery times  Shipments handled by industry in Q1’17 were ~20% lower than Q4, leading to faster delivery performance from both captives and 3PLs O2D differences between players have reduced significantly y-o-y  With the industry having invested heavily in supply chain processes, the delivery consistency from customer perspective has improved Orders getting delivered within 2 days in Q1’17 continued to increase  Reduced load on supply in Q1’17 ensured players were able to deliver more products within 2 days  Growing share of Amazon Prime orders also played a key role Bearish Bullish Neutral Share of fast deliveries (% of orders delivered within 2 days) Delivery Reliability (days) (O2D difference between fastest and slowest e-tailer) 3 2 Average Delivery Time (days) 1 Delivery Excellence Sub-Dimension Key Takeaways Time Trend Sub-Dimension Rating: Q1-CY17 0,0 10,0 Q1'16 Q2 Q3 Q4 Q1'17
  14. 14. | H2-2016: Satisfaction hit by sales events  As the industry moved into Q3’16, sales became aggressive on all platforms through customer discounting  The increase in volumes led to issues in delivery performance which led to lower NPS in H2-16 14 Source: RedSeer analysis 17% 29% 25% 21% 24% Q1'16 Q2 Q3 Q4 Q1'17 H1-2016: Strong growth in customer satisfaction  Players throughout the industry improved on key performance metrics like product assortment, product quality and delivery performance  This improvement started in Q1’16 and continued throughout Q2’16 +700 Bps Bearish Bullish Neutral Driven by better delivery experience along with improvement in other key areas, consumer satisfaction improved y-o-y and q-o-q Customer Satisfaction Q1-2017: Consumer NPS improved post sales period  Recovering from Q4’16 and the festive sales period, the industry improved on key metrics like delivery performance and post delivery experience  This resulted in higher customer satisfaction reflected in NPS Consumer NPS with E-Tailers
  15. 15. | 15 SN Seller Experience Parameter Q-o-Q NPS improvement Assessment Rationale 1 Online Sales growth Online sales satisfaction did not see any growth in Q1’17 because of decreased activity post the festive season  As the volume of orders in Q1’17 fell post festive season, the overall satisfaction with sales remained flat 2 Cost of selling online Cost of selling online went down for sellers in Q1’17 leading to an increase in satisfaction  Flipkart has reduced seller commissions across some categories in Q1’17 while Amazon reduced the flat fee and payment gateway fee for sellers in the last quarter 3 First mile and warehousing First mile experience improved, resulting in an improved warehousing experience in Q1’17  Q1’17 saw a decrease in dependency on 3PL for major players, which resulted in improved experience and first mile speeds 4 Logistics experience Overall logistics experience saw an increase in Q1’17 post festive season period  Lesser order volumes and higher captive deliveries after the festive period saw an improvement in supply chain processes, which improved the logistics experience for sellers 5 Seller Panel experience Seller panel experience has increased as compared to Q4’16  Amazon has worked towards improving various seller processes which has contributed to improved seller panel experience 6 Payment Speeds Payment speeds have also consistently increased throughout the last 4 quarters  Faster payment cycles have resulted in constant increase in seller satisfaction on payment experience Bearish Bullish Neutral Seller satisfaction also improved- driven by improved supply chain and seller panel experience along with faster payment speeds Seller Satisfaction
  16. 16. | Player-wise consumer satisfaction 16 21 21 10 8 5 1 25 25 24 24 24 23 49 49 46 46 41 44 F li p… A m a… P a y… S n a… S h o… E b a… Most Trusted Brand Best Value Great Experience 95 95 80 79 70 68
  17. 17. | Agenda 17 Appendix – RedSeer Offerings B Industry Review – Q1’17 A
  18. 18. | List of Paid Reports on E-tailing Market – Q1 CY17 List of Paid Reports Report Description (Price available on request) Comprehensive Performance Assessment 1 The report comprises of a comprehensive assessment of the key players Indian E-tailing Industry in Q1 CY17. The performance of the key players have been judged using seven key dimensions and the areas where each of the players performed well vs where they struggled have been identified. Business Metrics Assessment 2 The report comprises of the performance of the players in terms of GMV and the category mix in Q1 CY17. The quarterly trends of change in the GMV and share of high vs low margin categories has been identified along with revenues, contribution margins and cash-burns of the key players. And key reasons for the same have been stated along with what the future holds for the players. Delivery Excellence 3 The report assesses delivery performance of the key players in the industry in Q1 CY17. It broadly covers the quarterly trends in overall O2D time, O2S & S2D times of the players along with compliance to promise days. And key reasons for the same have been stated along with what the future holds for the players. Customer Perspective 4 The report comprises of the customer adoption and satisfaction with the players in Q1 CY17. On the adoption side it covers the quarterly trends in growth in monthly active shoppers and the growth in order share from tier 2+ cities. On the satisfaction side it covers the satisfaction with price and product along with ordering, delivery and post delivery experience and the key reasons for the same. Seller Perspective 5 The report comprises of the seller behaviour and satisfaction in Q1 CY17 on parameters like sales growth, cost of selling online and first mile warehouse experience. It also includes the satisfaction with logistics experience seller panel experience and payment process speeds. And key reasons for the same have been stated along with what the future holds for the players. All paid reports include data for all horizontals for the quarter of Q1 CY171 1. Reports with historical data since Jan 2016 available on request 18
  19. 19. | 19 Our Consumer Internet Sector Coverage – we cover 20+ sectors across the Internet industry J A B C D E F G H I C. Classifieds E. Fintech B. Online Mobility D. Hyperlocal A. E-tailing 1. Horizontals 2. Verticals (Fashion, Furniture, etc.) 3. E-Logistics 1. Online Cabs 2. Bike Taxi 3. Inter City Buses 1. Horizontals 2. Verticals (Real Estate, Jobs etc.) 1. Groceries 2. Services A B C D E G. Food Tech H. Health I. Education J. Entertainment F. Travel Online Hotel Aggregators and OTAs Food Delivery 1. Booking Service 2. Online Medicine/Treatment Home Delivery 1. Online Testing 2. Online Tutoring F G H I J 1. Mobile Wallets 2. Alternative Lending Media and Video Aggregation
  20. 20. | www.redseerconsulting.com Query@redseerconsulting.com 2017 RedSeer Consulting Confidential and Proprietary Information © Flexible in Approach, Firm on Results Thank You ! query@redseerconsulting.com 20 Bangalore HQ: Indiqube Sigma, Plot 3/B, 7th C Main, 3rd Block Koramangala, Bangalore - 560034 Mumbai Office: 25/b 4th Floor Usha Sadan Near Colaba PO, Colaba Mumbai - 400005 Dubai Office: 42Seer Technologies FZE G-D-Flex G089 C-Thub Dubai Silicon Oasis, Dubai, UAE Delhi Office: INHWA Business Center Sector 48, Sohana Road Gurgaon -122018 RedSeer is the leader in the internet advisory space 90% Indian GMV as clientele >USD 5 Bn Investments Diligence Completed 400+ Engagements in internet space 50+ Leading global funds as clientele

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