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Study of e-commerce market for smartphones in India

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This is a subset of a market assessment done by IBM in early 2014. The assessment looked at the potential for e-commerce for the smartphone market in India. IBM colleagues, Sanjay Panikkar and Murali Tirupati, worked with me on this study.

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Study of e-commerce market for smartphones in India

  1. 1. March 2014 India: e-commerce for smartphone market
  2. 2. e-commerce in India is growing at a CAGR of 53% • Online retail revenue in India is expected to grow from US$1.6B in 2012 to US$8.8B in 2016 • Mobile phones are in the Top 3 of products/services purchased online • Consumers who use internet to make buying decisions spend more than less-connected peers. For instance, digitally influenced mobile phone buyers, buy products that are, on average, 46% more expensive than others.* *Source: BCG study, Apr 2013 Page 2 Online retail market size (US$ Bn) 1.6 2.4 3.7 5.7 8.8 2012 2013 2014 2015 2016 Source: Forrester study. Revenues for intermediate years are projected based on overall CAGR
  3. 3. In India, a high percentage of Online, as well as Offline, buyers publish their opinions online Source: GlobalWebIndex Q2 2012 E-Commerce Engagement: LOCAL SPLIT Post Purchase Influence at a local Level (% of Indian internet users) 91% of multi-platform publish opinion online 75% of online buyers publish opinion online 79% of “offline fulfilment”” publish opinion online 20% of rejecters publish opinion online Page 3 Multi-platform: Phone & Tablet. Online: PC only
  4. 4. A Global comparison of Influence vs. Online Purchase shows that India is positioned quite well with respect to its peers Markets mapped by % purchase online via a PC / Mobile / Tablet V % influence post purchase Source: GlobalWebIndex, GWI.7 Q2 2012. E-Commerce Segmentation HOW TO READ: 65% OF USERS IN POLAND ARE ONLINE BUYERS (PC / MOBILE / TABLET) , EQUATING TO 12M. 77% OF INTERNET USERS IN THE MARKET HAVE PUBLISHED ONLINE ABOUT A PUCHASE IN THE PAST MONTH. Page 4
  5. 5. Although the India Mobile Phone market is still dominated by Feature phones, fast transition to Smartphones has started Source: IDC Worldwide Mobile Phone Tracker, March 2013 Page 5
  6. 6. India is expected to have the highest growth rate in Smartphone shipments Source: IDC Worldwide Mobile Phone Tracker, March 2013 Page 6
  7. 7. There are challenges to e-commerce in India, but these can be mitigated by the right strategies Source: survey results cited in Abhinav Journal report Volume II Oct 2013 Forrester blog says returns between 5 and 25%. % depends on category and is higher for COD (Cash on Delivery). FDI: Foreign Direct Investment • Product returns between 5 and 25%* • High where CoD* is offered • Product delivery challenges • Consumer concerns • 37% cite delivery issues (late, quality) • 30% cite inability to touch/feel • 8% cite website complexity • Payment gateway issues • High failure rate (20-40%) • Number of hops a key reason • Regulatory issues • FDI* companies cannot do direct B2C online • Have no CoD option in website and offer EMI options • Alternatively, charge customer additional cash handling charges for CoD • Partner with reliable logistics providers to address delivery concerns and reduce returns • Suggest stores or café chains to try out products • User experience focus in website design • Understand technical capabilities of gateway partners • New companies offering fewer hops leading to 15% increase in success Challenges Mitigation • Work with trusted partners to set up and run e- commerce operations Page 7
  8. 8. Low broadband speed is compounded by poor physical infrastructure (e.g. roads, ports) and complicated customs and inter-state tax rules Page 8
  9. 9. Indian government’s policy in the area of e-commerce is not clear and implementation is slow • The e-commerce sector is yet to open up fully in India, and no comprehensive set of laws exist for this sector • Retail trading (B2C) e-commerce not permitted for companies with Foreign Direct Investment (FDI)* • Compliance required with several other laws like Contract law, IT Act etc • FDI is permitted for brick and mortar Retail business • FDI is permitted up to 100% in B2B e-commerce activities Source: DIPP (Dept of Industrial Policy & Promotion), India Page 9
  10. 10. e-commerce prospects for Smartphones in the $160-565 (INR10-35K) price range looks very promising Overall purchase break up by price Online purchase break up by price 17.4% of all respondents purchased online (multi-brand online or company e-store) Source: IBM survey with 150 respondents 1 USD = 62 INR assumed 23.6% 21.4% 20.2% 28.6% 25.7% 28.6% 16.2% 4% 14.2% 17.9% $565+ $400-$565 $290-$400 $160-$290 <$160 Page 10
  11. 11. We conducted a survey of web influence on smartphone purchase in India Which brand of smartphone do you Own? What is the price you paid for your smartphone? Samsung HTC 40% 6% Apple 14.5% Sony 9.4% How did you purchase the phone? 35K + 25K – 35K 18K – 25K 10K – 18K < 10K Multi-brand physical Retail store Multi-brand online retail Company’s physical brand store Company e-store 48% 14.4% 5% Source: IBM survey Page 11
  12. 12. A very high proportion of people surveyed went online to research product and price Before buying the phone, did you research the product online for product and price information? If you used the web for product research, what sources did you rely on? 0.0% 50.0% 100.0% 91.4% Co Website/ e-store 61% 3rd party website/blog 88% Social Other 25% The company website/store is a trusted source of product info 52% of respondents felt the online experience was very important in influencing phone purchase Page 12 Source: IBM survey
  13. 13. Among those who used the company website, primary reasons for revisits are product info, deals and customer service If you used a company website or e-store (like samsungindiaestore.com or Lenovo's thedostore.com), what would be your primary reason for visiting the company website/e-store again? Product info and price Deals and discounts Customer service 61% 19% 8% Page 13 Source: IBM survey
  14. 14. The company website is one of the key “Go-To” options for customers requiring support If you required customer service, where would you go? (select all that apply) 0.0% 50.0% 100.0% Co physical store Co website Co call center 3rd party retailer 3rd party service center Online forums 62% 51% 64% 13% 18% Page 14 Source: IBM survey
  15. 15. But of the people visiting the company website for support, more than half felt the site was useful “sometimes” or “not at all” Yes 38% No 17% Sometimes 45% If you used co. website for support, did it help in resolving your problem? If you have used the company website support, which aspects of the website did you find helpful Troubleshooting guides 37% Firmware/ Software 25% Forums 18% Ticket Logging 15% Page 15 Source: IBM survey
  16. 16. The survey also found that a high proportion of respondents were inclined to consider buying their next smartphone online Yes 76% No 24% Will you consider buying your next smartphone online? Which brand of smartphone do you think you will buy next? Samsung 24% Apple 33% Micromax 8% HTC 4% Sony 7% Page 16 Source: IBM survey

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