E commerce india


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E commerce india

  1. 1. Ecommerce Sector IndiaIndia Ecommerce Sector ResearchDecember 2010 1
  2. 2. Agenda • India Analysis: Internet, Broadband, Mobile ,Retail, credit card overview • Definition, Value Chain ,Key Drivers ,Challenges of eCommerce • Key Business Models in Ecommerce segment • Analysis of each eCommerce Segment 2
  3. 3. India Internet Usage: Internet and PCPenetration Internet Penetration Sep 2009 Source: Internet World Stats Sep 2009 • Internet penetration in India is low though 6.9% equates to 7.1 million. • Claimed Internet users have grown 24.2 p.a from 46 mn in 2008 to 71 mn in 2009. • Active Internet Users have grown 27.5% from 42 mn in 2008 to 52 mn in 2009. Findings • Out of 818 mn population, 87 mn are PC literate. 71 Mn claim to use internet but only 52 mn are active Internet Users. • Rural Internet Penetration is about 5.5 Mn 3
  4. 4. India Internet Usage: Constitution and TimeSpent • Small town users constitute 36% of the total Urban Internet User population • School and College Students, Young men constitute 72% of the total users Summary • With 81 million Internet users in India (roughly 1/3 of US) and time spent per week at 15 hrs, (comparable to US), has Indian market has hit its tipping point? • Cyber cafes (37%), Office (30%), Home (23%) are major access points. 4
  5. 5. India Internet Usage: Mobile & BroadbandPenetration in India •) Mobile subscriber market : 471 mn •Definition of Broadband,TRAI: Min. 2 Capable of accessing Internet : 127mn mbps. Compared to 10 mbps in Singapore Regd. Mobile Internet Users :12Mn. Active Mobile Users: 8 Mn •Broadband penetration is very low : 11 mn IMRB estimates: 25 mn active users by 2012 in 2010 (1% of total population,15% of the and 50 mn active users by 2014 total Internet Penetration Growth driven by launch of 3G network in India, reduction in 3G and GPRS prices) 5
  6. 6. India Internet Scenario: Time spent on internet,eCommerce and eCommerce total volumes I • Internet usage has gone up from 9.3 hrs/week in 2008 to 15.7 hrs/week in 2009 • Time Spent on eCommerce Activities is around 10% ( 1.5-2 hrs) Findings • Volume of eCommerce Transactions was around USD 2.8 bn in 2009, estimated to be around USD 4.1bn in 2010 6
  7. 7. India: Retail Sector growth • India is the 5th largest destination retail destination in retail globally ( AT Kearney GRDI report 2008) • India retailing industry is at 390 bn and growing at 7% • Heavy growth is expected post GFC, with single brand retail stores, increased number of malls, growth in Tier 2 and Tier 3 citiesFindings • Many of the big retailers have forayed into the on-line mode without much success. • On-line retail forms a meager 0.47% of the total retail market. Gift Items, Books, mobile phone accessories, small eletronic goods form the bulk 7 of sales
  8. 8. India: Potential of Tier2 and Tier cities • 300 mega malls and 100+ hyper city malls are being opened in Tier 2 and Tier 3 cities (Source: Business World 04/2010,Business India 01/2010) • Tier 2 and Tier 3 cities have promising potential due to growth in IT/ITES/BPO/retail job growthFindings • Tier 2 and Tier 3 cities have high internet, credit card ,loan and insurance coverage with a megacity like income distribution 8
  9. 9. India: Credit Card /Debit Card Penetration rate Source: Credit Bureau India, India retail banking research 2009 • 90 mn cards under circulation :40 mn credit and 52 mn debit. 30% year-on-year growth. Estimated 55 mn cc cards by 2012 (2009 Indian credit bureau) • Under penetrated: Less than 1 per cent of personal consumption expenditure (PCE) happening on cards. (global average of 5 per centFindings PCE on cards) • Spend pattern is similar to international spends: travel, entertainment, retail shopping and jewellery being the top categories. • Alternative Payment mechanisms have an important role 9
  10. 10. eCommerce Categories and Value Chain Analysis Software E- Payment Logistics & Customer Service Platform/Tech products/Services integration Fulfillments and CRM toolsSource: Emerald Insight, Definition: Buying and selling of products & services on the Internet or on any other application that relies on the Internet. Combinations are: • Paying online & Consuming Online ( e.g. B2B networks, Online gaming)Findings • Consuming online & Paying offline ( e.g. Matrimonial,Classifieds,Ad Networks) • Contracting & Paying online & Consuming offline (e.g. Travel, Books) Value Chain: consists of E-Products and Services, Software platform and Tech tools, Payment integration , Logistic & Fulfilment mechanisms, ERP &CRM providers 10
  11. 11. India: eCommerce growth 1. eCommerce Industry is estimated at USD 4.1 bn (2010). Projected growth is 40% Y-Y Indian e-commerce market at INRI 9200 core is heavily tilted towards travel sites. About 12% of the rest is contributed by on- line classifieds like matrimonial and jobSource: India retail research 2010 portals. 2. Drivers of eCommerce growth:  Increasing Internet user base Findings  Technology advancements  Bigger web presence of Corporates  Longer reach in the Tier II & Tier III cities 2. Challenges to eCommerce growth  Low Internet and credit card penetration  Lack of strong discounts for buying online  Limited vernacular content  Reliable payment mechanisms 11
  12. 12. India eCommerce: Business Models Merchant Model: Online wholesale/retail of consumer products. Sales transactions are executed on pre-determined prices or auctions. E.g.: Indiaplaza.com,futurebazaar.com, flipkart.com, egully.com Direct Model: model harnesses the power of the Internet and reach out to potential customers directly by compressing the distribution chain. Eg makemytrip.com, cleartrip.com Brokerage Model:Brokers create markets by providing a common platform for buyers and sellers to facilitate transactions, charging commissions for transactions. Eg CCAvenue, BillDesk Advertising (Portal) Model: Here the website acts as the broadcaster by providing free (not always) content and services such as emails, chats and blogs that are intermingledFindings with advertising displays or banner ads .g. rediff.com, indiatimes.com Infomediary Model: These are subscription based and provide extensive data analysis. E.g. Indiainfoline.com, Affiliate Model: This model offers purchase opportunities to web surfer done through affiliated partner websites by providing them monetary incentives in terms of percentage of revenue. Eg Flipkart.com, rediffbooks.com Community Model: social networks,free content providers. This model can have multiple revenue streams in the form of sale of ancillary items or services; voluntary contributions; service subscriptions and contextual advertising e.g. ibibo.com 12
  13. 13. India eCommerce: Quick Snapshot  Ecommerce: The Indian e-commerce market at USD 18.4 bn (INRI 9200 crore) is heavily tilted towards travel sites.  80% of this market is constituted by travel portals like Makemytrip.com, Yatra.com etc.Findings  About 10% of the rest is contributed by on-line classifieds like matrimonial and job portals.  Online retailing is estimated at USD 2.2 Bn (INRI 1100) cores market which is set to see tectonic growth given the right environment is built. This market is poised to grow at 30% per year for next 5 years 13
  14. 14. Online Travel • India’s travel industry was pegged at over USD 2.8 Bn (Rs. 140 bn) by end of March 2010, comprising of Tour Operators, Railways, Hotels and other such entities. • The online travel industry size currently is about 25% amounting to USD 700 mn by year 2010. • Top 5 players: MakeMyTrip, Cleartrip, Yatra, Travelguru,IRCTC • The current growth rate of India’s online travel industry is 45%. The operating margins of most online travel operators are about 8-12%. Makemytrip had a successful IPO in July2010 • The current growth rate of India’s online travel industry is 45%. The operating margins of mostCompany Revenues online travel operators are about 8-12%Make My US 83.56 mn • Growth is driven by Indian professionals travelingTrip within India and abroad,Travel Guru US 4 mnClearTrip US 9.6 mnYatra US 15.6 mnIRCTC US 34mn 14
  15. 15. Online Matrimony Online matrimony segment is driven by 2 main factors: 1) Arranged Marriages is still a norm in India 2) Online matrimony provides a much larger database of grooms/brides unlike local match makers. Dominated by 4 key players: 63 million by 2010-11( Empower research 2010) Shaadi.com – is the leader with maximum visitor traffic in FY 2010.Revenues (USD 18 mn) Jeevansathi.com – is second in terms of unique visitor traffic in the same year however, it is the leader in terms of page-views (133 million) asCompany Revenues compared to Shaadi (75 million). (USD 14 mn)Shaadi.com 18 mn Bharatmatrimony.com – is number 3 in terms of unique visitors but it is also experiencing a declineJeevanSathi 14mn in traffic like Shaadi.com (USD 10 mn).com Indiamatrimony.com with over 1 million profilesBharatmatri 10 mn is a significant player. (USD 4 mn)mony.comIndiamatrim 4mn Simplymarry.com, LifepartnerIndia.com,ony.com Indiabestmatch.com, vivahabandhan.com, shubhlagan.in are some of the other upcoming sites. 15
  16. 16. Online Jobs USD 0.5 bn (1000 cr market) Dominated by a few big players such as: Naukri.com – leader with over 10 million unique visitors during FY 2008. Monster.com – 2nd website in terms of visitor traffic with around 6.5 million unique visitors in fiscal 2010. Timesjobs.com – fastest growing recorded a 40% jump in visitor traffic during FY 2010. Clickjobs.com- Fourth largest with 2 mn unique visitors Driven by: Strong growth in India’s Services sector, IT/ITES/ boom. (Naukri is part of infoedge, monster is not listed in India , Times jobs is part of Times of India group. Individual revenue numbers are not available directly) 16
  17. 17. Online Real Estate Indiaproperty.com– maximum number of unique visitors in FY 2010 (65 mn ) unique visitors,150 mn page views 99acres.com – is number two in terms of visitor traffic but leads in terms of page-views. 58 mn unique visitors, 180 mn page views Magicbricks.com – 45 mn unique visitors,120 mn page views Makaan.com – 35 mn unique visitors,102 mn page views Driven by: Strong growth in India’s Services sector, IT/ITES/ boom, real estate boom in boom towns. (99acres is part of infoedge. ) 17
  18. 18. B2B biz Networks/Directories Free and cost-effective online applications are available for all typical business processes of SMEs. Revenue Model: Bulk Purchase orders and Product search listing. Registered with more than 40,000 product listings and 10,000 vendors Top 3 leading b2b networks are: • IndiaMART.com: Biggest B2B Market place. Comprehensive directory of all major B2B players with the contact details. • Tradeindia.com: Second largest B2B Market place. Registered with more than 25,000 product listings and 8,000 vendors • BizXchange.in: Third largest B2B Market place. Registered with more than 20,000 product listings and 6,000 vendors • 18
  19. 19. Online Retail Portals Driven by India’s increasing internet and credit card penetration. Provide a wider reach and even cover tier2 and tier 3 cities. Primarily cater to professional working class and youth. Top 5 players are: IndiaPlaza: Revenues of US$ 12mn in 2010 ( to be confirmed). Claims to have the largest collection of books and gift items Infibeam: Launched India’s first ereader. Major source of revenue from books though they started out a shopping siteMark across all categories Rediff Shopping: Overall rediff revenues in March 2010 USD 18.84 mn. Claim that 25% revenues come from shopping (to be verified) eGully India: Online retailer across all categories (launched in 2008). Revenues of 4 crores. Naaptol India: Online retailer across all categories (launched in 2007). Expected Revenues of 3.5 crores in 2010 19
  20. 20. Online books Sachin Bansal,CEO FlipKart India: Market size of whole of book industry in India is estimated at 6000 crores and is growing at a very quick pace. Market size for online book shopping in India is expected to be between Rs. 70 crore for 2010 and growing at a healthy rate 50-60% Year on Year ( to be verified). It is driven by growing middle class, better internet access and higher comfort of Indians with online shopping Top 5 players (Based on Alexa rankings) are: FlipKart: Aims to be Amazon of India. Posted revenue of Rs 5 crore in 2008-09 and its site attracts 5 million visitors a month. In 2009,Mark grew to 8 crores with 8.5-9 mn visitors. they Bookshopindia: Claim to be second largerst book store. In 2009, they claim to post revenues of 3 crores with 4.5 mn visitors. IndiaPlaza: Largest shopping portal of India. Claim to have the biggest collection of books (8 lakh titles ) Indiatimes shopping: Largest information portal of India. Claim to get over 30% of total revenues by books (to be verified) 20
  21. 21. Online Gifts Driven by India’s increasing internet and credit card penetration. India’s corporate gifts market is over US$ 1.2 billion with online gifting constituting 1% of overall share (Source: Business India news, Jan 2010) Top 5 players (Based on Alexa rankings) are: India Gifts Portal: Claim to have the largest market share (20%) of Corporate gifting market. Expected Revenues of over 20 crores in 2010 (to be confirmed) GiftsIndia.com: Expected revenues of 6-7 crores in 2010. claim to be the second largest player IndiaPlaza: Indiatimes shopping: Rediff Shopping: 21
  22. 22. Online Shoes India’s online footmarket is estimated to be 800 cr+ (Business world April 2009). Online shoe selling constitutes only 1% of the total market. Driven by increasing internet and credit card penetration BigShoeBazaar: Claim to be Largest online authorized shoe store in South Asia. Claim Revenues of 8.5 crores in 2009 (to be confirmed) IndiFootwear: Claim Revenues of 4.5 crores in 2009 and seem to have highest number of unique visitors in their category (requires confirmation) Playgroundonline: Cater to sports and outdoor apparel market. Likely to do 1.3 crores this year 22
  23. 23. Online Kids shopping India’s online baby care is estimated to be 1000 cr+ (Business India Dec 2009). Online segment constitutes less than 3% of the total market. Driven by increasing internet and credit card penetration BabyIndia: Claim to be fastest growing online babycare store in India. Expected revenues 4 crores 2010 (to be confirmed). Shopmania: Claim to derive largest share of revenues from baby care segment (40% ). Revenues for 2010: 2.8-3 crores KidStudtio: Expected revenues of 1.5 crores in 2010 23
  24. 24. Payment Gateways Problem area: Low credit card penetration, also online payment is unreliable making ecommerce difficult. online fraud and account breaches are the biggest barriers to eCommerce. Online shoppers are apprehensive and unwilling to provide their credit card and bank details (Business world survey June 2008) Payment gateways provide a solution. Leading Payment gateways: CCAvenue: Biggest payment gateway provider in India. Revenues: 280 crores (March 2009).Tie-ups with all leading banks, 30,000 merchants. Part of Avenues group with multiple online business interests( Events, Online travel services EBS-Payments:online payments system offers payment options; credit cards, prepaid cards and online bank transfer. neonePay: Offer Pay Seal (from ICICI Bank) Axis Payment Gateway: 24
  25. 25. Customer Online Billing solutions Problem area: Enable individuals/customers to pay bills online.Top two players: 1) BillDesk: Direct relationship model. One time. Authentication of credit card/debit card. Small Fee for every transaction. Investors: SIDBI ventures 2) Bill Junction (Tech Process Solutions Ltd):Use Electronic Clearing Services where the customer specifies the amount to be debited in his account for every bill generated. Flat Subscription fee for users. Even allow Enterprise and Corporate Bill payment. Investors : ICICI Ventures, GreyLock Ventures 3) Timesofmoney.com: Allow bill payment through credit card/debit card services. Service product: “DirectPay”. Subscription based model for users. 4) Easy2Pay: electronic bill presentation and payment (EBPP) service. It enables the user to view, store and pay the bills. It is India’s first real- time EBPP service provider that offers multiple bill payment modes. It only charges a one-time fee and no annual charges. It has some big Corporate firms as its clientele. 25
  26. 26. mCommerceResearch conducted jointly by AC Nielsen and PayMate:1) India has currently around 5 mn M-Commerce users.2) Bangalore shows highest value spent on M-commerce followed by Delhi, Mumbai, Pune and Hyderabad. Intention of using M-commerce in future is significantly higher at 60 per cent in Bangalore as compared to 35 per cent in Mumbai and 52 per cent in Pune.3) Initial limit in 2008 by RBI :The per transaction (Rs 2,500) and daily (Rs 5,000) limits effectively narrow the scope of mobile payments to small ticket purchase. RBI has increased the limit to Rs.10,000 and Rs. 50,000 respectively (Dec. 2009)4) Mobile bus and movie ticket sales volumes rising significantly after RBI revision (VCCircle June 2010) 26
  27. 27. mPayments Problem area: PC and Internet on PC penetration in India is low but mobile penetration is high. For mCommerce to succeed, mobile payments platform should be successful. Recent regulation by RBI : Leading Mobile payment providers: 1) mChek: Signed up with all leading telcos, banks, ticket providers, insurance companies. Enable bill payments, ticket purchases. One time credit card authentications setup. Investors: DFJ 2) Paymate: Like mChek, allows users to link mobile phone with a credit card, bank account. Tie ups with mobile phone operators, banks but smaller coverage 3) Obopay India: Part of Obopay group,California. Partnered with Nokia for mobile payment platform. Revenues less than $1mn. 4) ATOM Tech: Part of Financial Technologies India group. Providing a mobile app which includes a credit card on mobile. Any payment requires a password authentication. 27
  28. 28. Challenges with order fulfillments:Logistics Problem area: Order Fulfillment is an important part of ecommerce Value chain. Most ecommerce providers use a combination of their own logistics teams and also tie-ups with leading local logistics. Based on Interviews, the following leading names in logistics names were revealed: 1. DTDC logistics (part of DHL ,all India presence) 2. Gati (Maharashtra, Karnataka) 3. BlueDart (part of DHL ,all India presence) 4. VRL Logistics (Karnataka) 5. Aramex logistics (Maharashtra, Karnataka) 6. Vichare courier( Maharashtra) Most of these provide tracking services for customers and people are willing to pay a premium for proper delivery. 28
  29. 29. Ecommerce Software/Solution Providers Many front-end ecommerce portals use ecommerce solution/platform providers for their services. Advantage is that these eCommerce solution providers have proven expertise and the front-end companies do not have to re-invent the wheel in all areas. Company Expertise Verchaska Travel platform. Clients: cleartrip,eezego,eToursOnline Binary Maruti Udyog Ltd, semantics automartindia.com ProSolutions India Plaza, rediff-shopping, Software indiatimes eStoreGroup Merchant integration 29
  30. 30. Conclusion• Ecommerce in India is at a nascent stage though the potential for growth is high.• Revenues are less than 1mn USD for identified• E-Ticketing, E-billing, payment gateways are areas of Interest• Mobile commerce and mobile payments space should be closely watched 30