This document discusses the growth of e-commerce in India. It notes that while online shopping currently accounts for only 0.8% of the total retail market in India, this share is expected to rapidly increase as more people shop online. Electronics and mobile phones are currently the largest categories purchased online, followed by apparel. The average online shopper in India is between 25-30 years old and located in tier 2 or 3 cities. E-commerce companies are seeing high growth rates and increasing numbers of orders.

1. www.Peshwaacharya.com
Peshwa@thinkasconsumer.com
• Founder www.Thinkasconsumer.com
• Associated with www.housing.com
1
Peshwa Acharya

2. Contents
• Indian Real Estate Market
• Housing.com – Some Snippets
• E-commerce in India
• Emerging Categories in E-Commerce
• Start-up slide
• Q & A
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3. $180 billion (INR 1.12 Lac Cr) Industry : CAGR 19%
Market Size of Real Estate in India ( $billion)
Real Estate Industry Size In India
As Per Google Study
3
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4. Role Of Internet In Buying Decisions
ZMOT is now a reality in online Real Estate buying 4
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5. Emerging Trends in Indian Real Estate
 Internet influence on real estate transaction value amounts $43bn
i.e. approx 40% of market
 The expected internet influence CAGR in 2014 is 25%
 Listings in top 50 cities were 2 lakhs (’12), 5 lakhs (’13) and 14 lakhs
('14)* growth of 250%
Influence of internet is rapidly increasing in Real Estate because of
convenience & greater options
As Per Google Study
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6. Role of Internet in Real Estate
Internet is a key influencer in Real Estate Research As Per Google Study
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7. Offline to Online Value Migration in Real Estate Business
SOUFUN (CHN)
Revenue : $638 mn
CAGR : 50%
Valuation : $4.2 bn
Online Real Estate Revenue Market Size:
US : $1.5 bn
UK : $ 750 mn
China : $850 mn
Australia : $500 mn
India Online Real Estate Revenue market size : $80 mn …. On The
Cusp Of Explosion
RIGHTMOVE (UK)
Revenue : $210 mn
CAGR : 20%
Valuation : $4 bn
REA (AUS)
Revenue : $300 mn
CAGR : 20%
Valuation : $5.9 bn
ZILLOW (US)
Revenue : $350 mn
CAGR: 69 %
Valuation : $6 bn
As Per Google Study
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8. The Power of Platforms
Changed the way we socialize
Changed the way INDIA shops
Changed the way we search
Changed the way INDIA travels
Changing the way we do Real Estate
As Per Google Study
Valuation $341 bn
Valuation $212bn Valuation $19 bn
Valuation $2 bnValuation $11 bn
Valuation $ 150 mnValuation $ 1 bn
Valuation $250 mn
Platforms Command Valuation 8
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9. Housing
Real Photos - Real Locations
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10. HOUSING
-Website Tour
How we do it:
-https://www.youtube.com/watch?v=_gVDIYxzVp4
Platform which connects Buyers
and Sellers for their
Real Estate/Property Needs
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11. 11
Housing - Journey So Far
• Investment coming from strategic International Investors
• Pan India Franchise Expansion Planned-2015
2011
Seed funding
Funding : $2.5 million
Funding : $118 million
2013
2014
2012
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12. Google Map based search
Aerial View100% Real Photos.Real Location
100% verified
information Detailed info of
all properties
Shortlist your property sitting at home .. Virtual site visit .. Enabled through
technology .. Best in the world
How we are different from others
Slice View
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13. How Our Platform Helps Users
Discovery of genuine sellers 100% verified listings
Discovery of genuine buyers Each lead verified & then given to sellers
Pain Points How we Resolve
Lack of enough verified options at one place More than 2.5 Lac verified listings & increasing
Detailed property information
- Google Map based interface (Location)
- Real photographs
- Neighbourhood and property details
- 360 deg. Views
- Aerial views
- Slice Views
Physical site visit for checking each option Virtual tour
Insufficient tech at Developers/Broker level Hi-tech microsite with detailed information
Limited reach for sellers Visibilty across the globe 13
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14. All India Figures
Housing - 2X better in each parameter that matters
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16. 1616
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17. 17
© 2014 Think as ConsumerPeshwa Acharya

18. © 2014 Think as Consumer
OMNI-CHANNEL LEADER
HOUSING poised the become India’s biggest Omnichannel Real Estate
Platform with 4 crucial consumer touchpoints:
03-333-333-333
Website
Mobile
app
Helpline
Office
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19. Housing.com : Category
• Rental
• Online Rental agreement
• PG/ Hostel
• Buy- NP – Developer / builder
• Home loan- Best offer / choice
• Service apt
• PP
• Sell / Rent out
Peshwa
Acharya

20. E-Commerce
E-Commerce is mostly about
Commerce with a great E /
technology backbone
Some of the business
parameters to focus on:
• RGM
• Market Size
• CLTV
Peshwa
Acharya

21. E-Commerce
Supply Side – what to sell?
Demand side – who will buy?
Platform - Is it discovery + Transaction
How can you make the offline / online combination easy?
Peshwa
Acharya

22. Strategic Constructs
What is the problem which we are trying to solve?
Can we organize a disorganized market?
How can we use technology to the hilt?
How do we develop a great UI/ UX?
How can we do it profitably?
Sustain the cycle and business
Peshwa
Acharya

23. What can be bought and sold on E-Commerce
Actually, anything can be bought and sold via E-Commerce:
Real Estate Car
Travel/Holidays BFSI
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Acharya

24. Making the Offline-Online Transition Easier
• Payments - sticky area - COD / Mobile wallet can help
• Choice process - AR / VR can help
• Use of SLICE VIEW / RETINA in home choice used
• Language barrier – the next big jump
(http://www.newswala.com/India-National-News/Indian-developers-
design-vernacular-operating-system-OS-49116.html )
Peshwa
Acharya

25. India…
Mobile - 1100- 1200 Million
TV - 750-800 Million
Internet – 500-600 Million
Smart Phone - 300-350 Million
Shoppers - 65-100 Million
E tailing - 75-100 Bn. $
Peshwa
Acharya

26. Category Evolution
Delivery / Grocery / Food
Car/ Real Estate
Furniture
Apparel / Fashion
Electronics / CDIT
Books / low value item
Travel / booking
Content / Discovery / Research
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Acharya

27. Present Growth Drivers
Pricing
Discounts /
Coupons
Branding /
Marketing
Technology
Platform
Logistics /
Other
Infrastructure
Peshwa
Acharya

28. New Phenomenon of ROPO
Research Offline, and Purchase Online
Happening in CDIT / Mobile / Electronics / Homeware / Furniture etc
May happen in Automobile / Real Estate
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Acharya

29. Travel / Ticket booking
Electronics
Apparel
BFSI / Stocks / Bill payments
Classified ( car , real estate , B2B )
Online Food / Delivery
E-Commerce: Present category
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Acharya

30. Basic Principles of E-Commerce
Business Plan
Web analytics
Responsive E-shop
Wow the customer
Automate operation
Idiot proof shipping price
Use many payment methods
Beware of returns
Price engine optimisation
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Acharya

31. Basic Principles of E-Commerce
Packaging cost – 1-2 % of cost/ price
Don’t stock
Localise
Customer Long term Value
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Acharya

32. The 2 big areas in BTC
CDIT / Electronics /
Mobile ( Over crowded )
Fashion
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Acharya

33. Example of Niche E-Commerce
BABY products & services
ECommerce 2.0
• 3 Key parameters
• CONTENT
• COMMUNITY
• COMMERCE
• Success Story - HONEST COMPANY -
Jessica Alba - 1.7 billion $ valuation
• Integrate the mom’s story
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Acharya

34. Other Emerging Categories
BTB logistics
BTB components / Industrial products
Furniture & Home ware
Home Interiors : Houzz.com
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Acharya

35. Other Emerging Categories
CAR SALES : beepi.com / trubil.com
Car related services : car wash / car rental / self driven cars / on demand services
BTB/ BTC 2nd had car : UXIN PAI china
Tech enabled logistics : Freightos.com / Delhivery, porter.in …..
Rural : Lite apps : AGRO STAR ..
Peshwa
Acharya

36. Other Emerging Categories
Farm inputs business …… seeds/fertilisers
HOLIDAY TRAVEL – airbnb / oyo rooms / travel studio / 77room / white
hippie / grass route travel / uberized resorts
Peshwa
Acharya

37. •Cut out the middleman
•Go online
•Selective Platforms
•Create latent consumer pull
•Very high price/quality equation
Xiaomi in
Cars (Trade
chain value
extraction:
5-10%)
37
Doing a Xiaomi
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Acharya

38. Fashion – Mobile Social Fashion Commerce
• Fashion incubators / International brands
• Myntra – selling looks ( look good blog )
• Internationally - FB of fashion
• Lime road- Create & earn ( own design )
• Local language ( ZARA example )
• Accessorize in a big way ( Bombaybead.com)
Peshwa
Acharya

39. REAL ESTATE (Crowded)
• Economy / value / affordable home segment:
• New segments : Commercial office / No broker.com, grabhouse.com
/ SINGLES affordable home / Moving services
Discovery Choice Sliceview Payment Transaction
Peshwa
Acharya

40. E-Commerce Organization
Category / Business
Content Editors
Marketing / Promotion
Technology / App
Sales – offline if any
Vendor on boarding
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Acharya

41. Organization building
• Product platform : Product manager + Eng manager
• Category Management : Sell side ( demand / pricing / merchandizing )
+ Buy side ( supply , channel )
• Seller Acquisition/ Horizontal channel : Market place model
• Logistics
• Operations : Demand , Seller metrics , customer feedback . Tier 2
base , Seller education
• Central marketing + Performance marketing + Call centre + Strategy +
Call centre etc
Peshwa
Acharya

42. E-COMMERCE IN INDIA
Drivers of e-biz models: opportunities and discounts galore
Growthdriversforecommerce—growing internetusers
Current online spending
Source:EuromonitorInternational
Source: KPMG
he words ‘retail therapy’ or ‘going
shopping’ were long associated with
physical, brick-and-mortar retail. But
Twith stores and brands going clicky
(websites) and appy (mobile apps) these terms
have already widened to accommodate online
shopping. Over the last couple of years, the
Indian ecommerce space has filled up with home-
grown players such as Flipkart, Snapdeal, and the
big daddy of ecommerce, Amazon. Online shop-
ping has captured the imagination and attention
of consumers, media, brick-and-mortar players,
brands, and of late, even the tax authorities and
the government.
Various studies estimate Indian ecommerce to
be about US$ 3bn as of now, which is just 0.8%
of the Indian retail market. However, this share is
expected to increase rapidly as more people shop
online. Of the 200mn people in India who access the
internet, 28-30mn (less than 3% of India’s pop- ulation)
shop online. However, this number can move up to
touch 100mn by 2015 and a whopping 200mn by 2017,
which is the same as the num-
ber of Indian internet users in India today. Nitin
Bawankule, Director, Google India Ecommerce, says
that, “Even now, there at least 200mn people who can
purchase online in India”. The market is redefining itself
rapidly as etailers advertise, reach out, and offer deals
and discounts to consumers.
So how big is the
Indian Retail market?
During GOSF 2013 (held overthree days in December
2013), over 60mn people visited online shopping sites
and 16mn unique customers shopped at the event.
Myntra.com claimed that it made over100,000
shipments for orders placed in those three days.
Peshwa Acharya 42

43. An interesting example of increasing online shop- ping is the
Great Online Shopping Festival (GOSF) hosted by Google.
During GOSF 2013 (held over three days in December 2013),
over 60mn people visited online shopping sites and 16mn
unique cus- tomers shopped at the event. Myntra.com claimed
that it made over 100,000 shipments for orders placed in those
three days.
The average Indian online buyer is between the ages of 25 and 30 and
‘affluent’ — he/she has access to websites seamlessly through personal
computers and smart phones. Interestingly, the share of tier-2 and tier-3
cities is higher for most online players. Snapdeal claims that over 60% of the
orders to its website are from tier-2 and tier-3 cities. Even in the case of
pure-play apparel players such as Jabong, these statistics hold true — 62%
of Jabong’s shipments in Q1FY14 were to tier-2 and tier-3 markets. This
demand is driven by the fact that many of the brands have limited presence
in tier-2 and tier-3 markets due to shortage of quality retail space or unviable
economics, given limited popula- tion in a location.
Rise in internetpenetration
Industry growth forecast for e-commerce
Who is buying online?
Interestingly, the share of tier-2 and tier-3
cities is higher for most online players .
62% of Jabong’s shipments in Q1FY14
were to tier-2 and
tier-3 markets.
Snapshot of Jabong’soperations
No.ofSKUs 139,000
Brands 1,600
LifestyleCategory 9
Facebookfollowers(mn) 3.2
Postalcodes 12,000
Orderrateonsamedaydelivery 70%
Tier-2&3 62%
Currentshareofsmartphones sales 27%
Monthlyaverage visits using mobiledevices (mn) 14
Source:Company,PhillipCapital research
Growingordersper day
Source:KPMG
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44. What are Indians
buying online?
Electronics and CDIT (consumer durables informa-
tion technology) products dominate the current
online buying space. In terms of value, electronics is
the largest category — it has a 47% share of the on-
line retail market. Within electronics, mobile phones,
laptops, tablets, and cameras are big purchases. A
large logistics company that partners with ecom-
merce players for deliveries said that electronics (and
particularly mobiles) form a very large share of their
deliveries. Reports said that Flipkart sold over half a
million mobiles in just one day on its Big Billion Day
sale on 6th October. Flipkart and Snapdeal list over
3,000 stock-keeping units (SKUs) and 5,000 SKUs of
mobiles on their portals. The average ticket size in
electronics is estimated to be Rs 5,000.
Apparels, footwear, and accessories are the next
largest categories bought online, with a 31% share.
While this category has a lower share (in value
terms) than electronics, it clocks the highest volume
amongst all categories. The average ticket size in
this segment is around Rs 2,000. The rest of the
online pie is fragmented between books, home
furnishing, baby products and others.
Shareofoverallretail market,2013
Online retail market-Categorybreak-up(byvalue),2014
Jabonghashadthe numberofits unique visitors double
in the last2 years
Source:Company,PhillipCapital
research
Source:KPMG
Source:TechnopakAnalysis
Jabong’scategory wiserevenue-mix
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45. Reports said that Flipkart sold over half a million
mobiles in just one day on its Big Billion Daysale
on6thOctober.
Number of SKUs on offer by Flipkart
Large number of
SKUs on offer
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46. India’s online market comprises of various players
with different models. Players that retail pretty much
everything from electronics to FMCG products
follow a version of the ‘marketplace’ model. Amazon
and Snapdeal operate on this kind of a model where
their role is to facilitate the sale and fulfil it — that is
handle logistics, deliveries, and returns. In this mod-
el, the portals do not hold any inventory on their
books. Flipkart used to operate on a hybrid model,
where it held its own inventory and also acted as a
The categories, the
major players, and
business models
marketplace. However, it has now moved to a mar-
ketplace model, albeit with far lower sellers/vendors
than Amazon or Snapdeal, since WSRetail (erstwhile
Flipkart group company) still contributes a significant
portion of its sales. Vendors and sellers usually sign
up with these marketplace online retailers for a fee,
depending on the category.
Players such as Myntra and Jabong, which are
primarily apparel portals, have an inventory model.
They have moved to a hybrid market place, but it is
still skewed towards the inventory-led model.
Number of SKUs on offer by Snapdeal
Mobiles is a major
category here as well
Vendorsandsellersusually sign up withthesemarketplace
online retailers forafee,depending onthecategory.
Peshwa Acharya
46

47. So what is the revenue
model?
The marketplace etailers in India operate on a
commission-based model, under which they receive
a fee for listing plus commission on sales depending
on the category. Amazon calls it referral fee. The fee
is charged when an order is placed and the amount
is disbursed a few days after shipping.
“These portals are not retailers but technology
companies and are built on sound technology
platforms”, says a senior executive of one of India’s
largest retail chains. “Being pure technology com-
panies, their platforms are well integrated with their
backend”. he adds.
Commissions are usually a function of Gross Mer-
chandise Value (GMV) — the value of goods listed
(note inventory is not carried by the companies) and
sold on these portals. In a hybrid model, the reve-
nues are more conventional as far as the e-tailers
own inventory goes.
GMV is one of the benchmarks that retailers use for
equity funding. But the GMV is seldom reflected in
Online retailers: Different operating models
Mobile Phones 4% 5%
PersonalComputers,Laptops&Tablets 4% 5%
Toys&BabyProducts 5% 15%
PersonalCareAppliances 5% 15%
PetSupplies 5% 15%
FashionJewellery 8% 15%
Watches 8% 15%
Home&Kitchen 5% 15%
Shoes 8% 15%
Sporting Goods 5% 15%
Apparel 8% 15%
Handbags&Luggage 8% 15%
Eyewear 8% 15%
Consumable PhysicalGiftCards 5% 5%
Fees charged by Amazon.in
Sell onAmazonFees /Rate *Promotional Standard
MonthlySubscription Free Rs.499
ClosingFee(per UnitSold) Rs.10 Rs.10
Referral Fee
Books,Music&Movies 5% 12%
VideoGames-Console 5% 8%
*till31stDec
2014
Source:KPMG
Source:
amazon.in
Video Games- Games 5% 12%
Consumer Electronics (includes Camera) 5% 8%
Electronic Accessories 5% 12%
Health & Personal Care 5% 15%
Beauty 5% 15%
Peshwa Acharya 47

48. their books of accounts due to either the holding
structure (complicated in the case of Flipkart and
Myntra) or because revenue recognised is purely
commission based (Snapdeal). However, numbers
do talk and the numbers of some of the players talk
more and give us an interesting insight into the
operations of the sector.
GMV - Grossly misstated value?
GMV is before all discounts, couponing, vouchers,
and taxes. So when we read about GMV of US$
100mn in a day or US$ 1bn, it is the gross value
of products before discounting and couponing. But
what the customer pays is net of all discounts,
vouchers, and coupons. GMV is open to interpreta-
tion and different retailers may compute the same
GMV differently. India, unlike many developed coun-
tries, follows a maximum retail price (MRP) regime for
sale of goods. Discounts are offered on MRPs.
But then, one company may choose to compute
GMV on MRPwhile another may compute GMV on
the list price (MRPminus discounts that the brands/
seller offers). While MRP is relevant in most consum-
er products sold anywhere in the country, it’sthe
least relevant in electronics. When was the last time
anyone sold a mobile or a television or home appli-
ance at MRP? Since electronics form nearly 50% of
the e-tail in India, it is natural that the GMV calculat-
ed on MRP will be skewed. GMV is reported on the
current run rate rather than the achieved figure. So
GMVs for Flipkart and Snapdeal could be misleading
given the high mix of electronics.
In e-tail shopping, there is almost always a coupon –
a coupon or a voucher code is essentially a discount
over and above the listed price, which may or may
not be discounted. These are at the discretion of the
e-tailer and not under the control of the brand. It’s
more commonly used by apparel e-tailers such as
Jabong and Myntra. It’s noteworthy that Flipkart and
Amazon seldom use couponing. One of the industry
observers said that, “Coupons are a mechanism of
customer acquisition and in apparels, the customer
doesn’t necessarily visit the website very frequently,
and to get him/her to do this, coupons are offered
regularly.”
Marketplaces such as Flipkart and Amazon, catering
to a large variety of products, rarely offer coupons
as the customer ends up visiting the site for some
category or the other. Apparels/fashion have the
maximum margin. Interestingly, GMV includes the
value of vouchers/coupons as well, which means
it is calculated before any coupons are offered to the
customer. As one of India’s largest retailers puts it, “If
it were net of any of these discounts then it should
be called net merchandising value not GMV.”
Asone of India’s largestretailers puts it,“If it were net
of anyof thesediscounts thenit shouldbecallednet
merchandising value notGMV.”“If youdon’twantagood
price,wewillstillofferyouacoupon.”
Source:Similarweb.com,mediareports,PhillipCapital research
Website traffic for Indian e-commerce websites and product offering
Portal Alexa
Rankings
for India
Categories Model No of Registered
users
(mn)
No of
products
on offer
(mn)
GM
V
Rs mn)
Flipkart.com 5 Electonics,Apparel,Accessories,
Footwear, General Merchandise,
FMCG
Marketplac
e
22 15 15,000
Amazon.in 7 Electonics,Apparel,Accessories,
Footwear, General Merchandise,
FMCG
Marketplac
e
15 17 na
Snapdeal.com 10 Electonics,Apparel,Accessories,
Footwear, General Merchandise,
FMCG
Marketplac
e
20 5 30,000
Jabong.com 14 Apparel,Footwear andAccessories Hybrid 2.9 0.139 5,114
ebay.in 16 Electonics,Apparel,Accessories,
Footwear, General Merchandise,
FMCG
Marketplac
e
2.1 NA na
Myntra.com 30 Apparel,Footwear andAccessories Hybrid 1mn 0.05 4,000
Peshwa Acharya 48

49. Industry on an upturn
In 2013, Asia-Pacific emerged as the strongest business-to-
consumer (B2C) eCommerce region in the world with sales of
around 567.3 billion USD, a growth of 45% over 2012, ranking
ahead of Europe (482.3 billion USD) and North America (452.4
billion USD). The top three were followed by Latin America, and
the Middle East and North Africa (MENA) region, according to
Ecommerce Europe1. Globally, B2C eCommerce sales increased by
24% over 2012. This reflects the huge untapped potential of
eCommerce by retail companies, both in their country of origin
and across borders.
eCommerce or electronic commerce, deals with the buying and
selling of goods and services, or the transmitting of funds or data,
over an electronic platform, mainly the internet. These business
transactions are categorised into either business-to-business
(B2B), business-to-consumer (B2C), consumer-to-consumer
(C2C), consumer-to-business (C2B) or the recently evolved
business-to-business-to-consumer (B2B2C). eCommerce
processes are conducted using applications, such as email, fax,
online catalogues and shopping carts, electronic data interchange
(EDI), file transfer protocol and web services and e-newsletters to
subscribers. eTravel is the most popular form of eCommerce,
followed by eTail which essentially means selling of retail goods
on the internet conducted by the B2C category.
According to Ecommerce Europe, country-wise, the US, UK and
China together account for 57% of the world’s total B2C
eCommerce sales in 2013, with China having total sales of 328.4
billion USD. As against this, India had sales of only 10.7 billion
USD, 3.3% of that of China in 2013 with fifth position in Asia-
Pacific. This is despite the fact that India enjoys high demographic
dividends just like China. India’s internet penetration with total
e-households at 46 million against China’s 207 million is one of
the reasons behind India’s poor B2C sales growth.
0 500 1,000 1,500 2,000 2,500
China
India
USA
Indonesia
Brazil
Russia
Japan
Mexico
Egypt
Germany
Total population
(million) Number of
householdsNumber of e-households
Top 10 countries in terms of population and corresponding e-
households
Source: Ecommerce Foundation, 2014
1
Ecommerce Europe and Ecommerce Foundation are independent non-profit
organisations, started by national eCommerce associations and online and
omni-channel selling companies from industries such as retail, travel and finance.
49
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50. India’s eCommerce and eTail growth
According to Forrester Research, an independent technology and
market research firm, only 16% of India’s total population was
online in 2013 and of the online users only 14% or 28 million were
online buyers. India, therefore, was still in a nascent or immature
stage of evolution of online retail spending. China was in
ascending stage at 50%, whereas Japan (69%), Australia (57%)
and South Korea (70%) were in mature stage.
India’s growth potential
Since the eCommerce industry is fast rising, changes can be seen
over a year. The sector in India has grown by 34% (CAGR) since
2009 to touch 16.4 billion USD in 20142. The sector is expected to
be in the range of 22 billion USD in 2015.
21.3
1 1.5 2.3 3.5
63.8
0.4
5.3
0.6
7
9.5
16.4
12.6
21.3
2009 2010 2011 2012 2013 2014 2015
(estimated)
eCommerce (including eTail)
eTail
eCommerce ecosystem
Online travel, ticketing, etc.
Ticketing for air, rail, bus, movies, events
Online retail
Retail products sold through online route
Online marketplace
Platform where sellers and buyers transact online
Online deals
Deals purchased online, redemption may or may not happen online
Online portals classified
Includes car, job, property and matrimonial portals
Source: IAMAI, CRISIL, Gartner, PwC analysis and industry experts
Currently, eTravel comprises 70%of the total eCommerce
market. eTailing, which comprises of online retail and online
marketplaces, has become the fastest-growing segment in the
larger market having grown at a CAGR of around 56% over
2009-2014. The size of the eTail market is pegged at 6 billion
USD in 2015. Books, apparel and accessories and electronics are
the largest selling products through eTailing, constituting
around 80% of product distribution. The increasing use of
smartphones, tablets and internet broadband and 3G has led to
developing a strong consumer base likely to increase further.
This, combined with a larger number of homegrown eTail
companies with their innovative business models has led to a
robust eTail market in India rearing to expand at high speed.
2
Internet and Mobile Association of India (IAMAI), CRISIL, Gartner, PwC analysis and
industry experts
50
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51. 279
243
109 107 84
China US India Japan Brazil Russia
46%
19%
53%
59%
China US India Japan Brazil Russia
Factors that will fuel growth
A significantly low (19%) but fast-growing internet population of
243 million in 2014 is an indicator of the sector’s huge growth
potential in India.
Internet users by country: In million (2014)
641
Internet penetration as percentage of population
(2014)
87% 86%
Source: Internet Live Stats website accessed on 9 December 2014
It is evident that in absolute terms India’s internet users are short
by only 36 million as compared with 279 million in the US and
higher than that in Japan, Brazil and Russia. However, in relation
with its population, only 19% Indians use the internet. This
indicates the potential of internet use in India and as internet
penetration increases, the potential of growth for the eCommerce
industry will also increase.
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52. Source: Statista website accessed on 9 Dec 2014
Geographical distribution of internet users in India
(million)
Source: IAMAI-IMRB
An analysis of the demographic profile of internet users further
testifies that eCommerce will rise rapidly in India in coming
years. Around 75% of Indian internet users are in the age group
of 15 to 34 years. This category shops more than the remaining
population. Peer pressure, rising aspirations with career
growth, fashion and trends encourage this segment to shop
more than any other category and India, therefore, clearly
enjoys a demographic dividend that favours the growth of
eCommerce. In coming years, as internet presence increases in
rural areas, rural India will yield more eCommerce business.
Demographic profile of India online users (as on September 2013)
99
130
165
21638
92
60
138
June 2012 June 2013 June 2014 June 2015 (estimated)
Urban Rural
15-24 year olds 37%
25-34 year olds 38%
35-44 year olds 16%
Other 9%
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53. Share of eTail in Indian retail
Orders per month (in million)
Source: Technopak; Accel Partners
By 2020, eTail in India is expected to account for 3% of total
retail. Further, orders per million are expected to more than
double from five million in 2013 to 12 million by 2016, which will
mean more opportunities for both consumers and eTail
companies. While the share of online shopping in total retail has
increased at a fast pace in the last few years, it is still miniscule
compared to the figure in China, where the share is 8-10%.
0.4%
3%
2014
2020
Independent retail Brick and mortar retail eTail
12
5
4
2016
Estimated
2013
2012
Online business models
To get the maximum benefit from eCommerce business, a
large number of companies are adopting different innovative
ideas and operating models including partnering with online
marketplaces or setting up their own online stores. Some key
operating models include the following:
• Marketplace and pick-up & drop is a model where sellers
often partner with leading marketplaces to set up a
dedicated online store on the latter’s website. Here sellers
play a key role of managing inventory and driving sales.
They leverage on high traffic on the marketplaces’ website
and access their distribution network. However, the sellers
have limited say on pricing and customer experience.
• Self-owned inventory is a model where the eCommerce
player owns the inventory. The model provides better post-
purchase customer experience and fulfilment. It provides
smoother operations due to ready information on the
inventory, location, supply chain and shipments, effectively
leading to better control over inventory. On the flipside,
however, there are risks of potential mark downs and
working capital getting tied up in inventory.
• Private label reflects a business where an eCommerce
company sets up its own brand goods, which it sells
through its own website. This model offers a wide-ranging
products and pricing to its customers and competes with
branded labels. Here, margins are typically higher than
third-party branded goods.
• White label involves the setting up of a branded online
store managed by the eCommerce player or a third party.
The brand takes the responsibility of generating website
traffic and providing services by partnering with payment
gateways. It helps build trust, customer affinity and
loyalty and provides better control of brand and product
experience.
83% 14%
91.6%
8
.0%
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54. Top 20 PE deals in the eCommerce sector in 2014
Source: Venture Intelligence
Investments in the eCommerce sector
With the new government being elected, business confidence has
significantly improved. In 2014, investors aggressively funded the
eCommerce sector due to strong growth prospects. Apart from the
traditional online formats of retail and lifestyle, newer online
business segments such as classifieds, real estate, grocery and
healthcare were also tapped.
Date Company Amount (million USD) Key investors
The eCommerce businesses will continue to attract investor
interest. Several of India’s blue-chip PE firms, which previously
avoided investing in eCommerce, are now looking for
opportunities in the sector. The focus is mainly on ancillary
service providers—companies involved in support functions
ranging from delivery, logistics and payments—with investments
largely driven by the relatively lower valuations and smaller
amounts of capital required.
Jul-14 Flipkart 1,000 Morgan Stanley, GIC, Tiger Global, Accel India, Iconiq Capital, DST Global
Dec-14 Flipkart 700 Tiger Global, Iconiq Capital, DST Global, Steadview, Qatar Investment Authority
Oct-14 Snapdeal.com 637 Temasek, PremjiInvest, SoftBank Corp
May-14 Flipkart 210 Tiger Global, Iconiq Capital, DST Global
Oct-14 Olacabs 210 Tiger Global, Matrix Partners India, SoftBank Corp, Steadview
Feb-14 Snapdeal.com 134 Kalaari Capital, Intel Capital, Nexus Ventures, Bessemer, Saama Capital
May-14 Snapdeal.com 100 Temasek, PremjiInvest
Nov-14 Housing.com 90 Helion Ventures, Nexus Ventures, Qualcomm Ventures, SoftBank Corp, DST Global,
Falcon Edge Capital
Mar-14 Quikr 90 Warburg Pincus, Norwest, Matrix Partners India, Nokia Growth Partners, Omidyar Network,
Kinnevik
Sep-14 Quikr 60 Warburg Pincus, Norwest, Tiger Global, Matrix Partners India, Nokia Growth Partners,
Omidyar Network, Kinnevik
Nov-14 Zomato Media 60 Sequoia Capital India, Vy Capital
Feb-14 Myntra 50 Kalaari Capital, Tiger Global, IDG Ventures India, Accel India, PremjiInvest
Aug-14 Snapdeal.com 50 Ratan Tata
Jul-14 Olacabs 41.6 Sequoia Capital India, Tiger Global, Matrix Partners India, Steadview
Nov-14 Proptiger Realty 37 SAIF, Accel India, Horizen Ventures
Sep-14 Freecharge.in 33 Sequoia Capital India, Ru-Net Holdings
Sep-14 BigBasket 32.7 Helion Ventures, Ascent Capital, Zodius Capital, Lionrock Capital
Jun-14 Amazon.com India 30 Catamaran Ventures
Oct-14 CarTrade.com 30 Warburg Pincus, Tiger Global, Canaan Partners
Sep-14 CommonFloor 30 Tiger Global
54
Peshwa Acharya

55. Key developments in 2014
The last year has seen several developments that have given a fillip to the eCommerce industry.
Mobile to be the most influential
aspect of eCommerce
With mobile apps being developedby most
eCommerce websites, smartphones are
increasinglyreplacing PCs for online shopping.
In 2013, only 10% of the mobile users used
smartphones, and only 5% of the eCommerce
transactions were made through a mobile
device. This figure has more than doubled, and
more than 13%of all eCommerce transactions
today happen via mobile3. According to some
industryplayers, over 50% of the orders are
being placed through mobile apps, which
is not only leading to substantial customer
acquisition but also building customer loyalty
for various brands. However, most mobile
transactions so far are for entertainment, such
as booking movie ticketsand music downloads.
This trend will change soon with more and
more merchandisebeing ordered online.
More business coming from smaller towns
eCommerce is increasinglyattracting customersfrom Tier 2 and 3 cities,
where people have limited access to brandsbut have high aspirations.
According to eCommerce companies, these cities have seen a 30% to
50% rise in transactions.
Enhanced shopping experience
Besidesgeneral online shopping, customers
are also shopping online for weddings and
festivals, thanks to wider range of products
being offered and aggressive advertisements.
The free and quick shipment and widerchoice
of products, along with the ease of shopping
online as compared to in-store shopping, is
also helping eCommerce gather momentum.4
Further, eCommerce companies are doing
rapid business due to sales.
New conceptssuch sales on weekends, holidays and festivalsare attracting a
3
IAMAI-IMRB
lot of new customersand building customer loyalty among existing customers.
Televisionand social media, particularlyFacebook, are playing a proactive role
in promoting eTailing through aggressive advertisements. This has helped
several eCommerce companies build substantial brand image.
4
Outlook 15: What Indian niche e-commerce companies plan to do in 2015, Medianama
http://www.medianama.com/2015/01/223-outlook15-niche-e-commerce/
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Peshwa Acharya

56. Exclusive partnerships with
leading brands
Over the year or so, there has been
a trend of exclusive tie-ups between
eTailers and established boutiques,
designers, and high-end lifestyleand
fashion brands. For instance, in 2014,
Jabong added international fashion
brandssuch as Dorothy Perkins, River
Island, Blue saint and Miss Selfridge,
along with local fashion brandsthrough
Jabong Boutiques. Similarly, Myntra
benefited from exclusive tie-ups with
brandssuch as Harvard Lifestyle,
Desigual and WROGN from Virat Kohli.
Expanding the product
basket
There is a recent trend of relatively
newer productssuch as grocery,
hygiene, and healthcare products
being purchased online. Similarly,
lingerie and Indian jewelleryhas
also been in great demand among
customersoutside India. Export
comprises 95% of cross-border
eCommerce, with the US, UK,
Australia, Canada and Germany
being the major markets.5
Key market factors to be evaluated before
entering a new eCommerce business
To achieve their vision, eCommerce companies will need to
understand the intricate landscapeof new marketsin
addition to their own internal capabilities and limitations.
The following factors must be considered:
• Market size: Before moving too aggressively into a new
market, it is important to consider how sizable the overall
opportunity is.
• eCommerce readiness: It is essential to fully
understanding the payment and logistical infrastructure,
consumer behaviour, retail opportunity and technological
developments.
• Scope of growth: It is also important to look at the
internet penetration, demographics of the online buying
population and understand which phaseof development
each market is in.
• Barriers to entry: Playersshould understand the
regulatory environment and connect with solution
providers, content distribution networks, and digital
agencies.
• Competition: There is also a need to do an in-depth
assessment of what competitorsare doing, their online
strategy and the nature of each offering.
4
The Paypers, Netherlands-based leading independent source of news and
intelligence for professionals in the global payment community
56
Peshwa Acharya

57. Industry speak
Certain eCommerce playersand industryobservers have raised
concerns that deep discounts, free shipping, intensecompetition and
higher rejection rates due to cash on delivery(CoD) have impacted
online eTailing adversely. Some of these concerns are specificto India
and are more difficult to overcome than issues such as internet
penetration and getting more people to shop online.
Some of the key concerns are listed below:
• Generation and sustenanceof traffic: Competitionfrom established
eCommerceplayersismakingitdifficultfor privatelabelbrandsto
generatetrafficon theirwhite-labelwebsites.
• High customeracquisitioncost: Thecustomeracquisitioncostshave
beenrising dueto intensecompetitionbytherelativelybetteroff
companieswithmorefunds.
• Last-miledelivery: Poor last-mileconnectivity, especiallyin remote
areaswithlargerpopulation,isanotherproblem facedbyIndian
eTailers.
• High paymentcost: CoD servicesimposesubstantialfinancialcost.
In India,unlikein developedmarkets,CoD continuesto be a preferred
routeof payment.
• Low profitability: Profitabilityisnegativelyimpactedby highcustomer
acquisitioncosts,freeshipping andhigh rejectionrateof CoD orders.
• Regulatorybarriers: Regulatorybarriersin theIndianeCommerce
marketarehigherascomparedto morematuremarkets.
• Skilled manpower: Lack of talent availabilityand high attrition
are causing manpower crunch, which is fast becoming a hurdle.
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Peshwa Acharya

58. Our perspective
While the growth in this sector excitesentrepreneursand financial
investorsalike, some serious challenges are beginning to weigh down
on the sector. eCommerce players in India need to address eight
key aspects of their business, both internal and external.
Product and
market
strategy
Customer
and digital
experience
Payments and
transactions
FulfilmentOrganisation
scaling
Tax and
regulatory
structuring
Risk, fraud and
cyber security
Compliance
framework
eCommerce
Drivers and
Challenges
le
a
External challenges
External forces impact how eCommerce companies plan their growth
strategy and provide seamlesscustomer experience onsite and post-
transaction.
• Product and market strategy: eCommercecompanieshaveto address
issues pertainingto rapidlyevolvingcustomersegmentsandproduct
portfolios;accessinformationon marketintelligenceon growth,
sizeandshare;managemultiplecustomerengagementplatforms;
focuson expansioninto newgeographies,brandsandproducts;and
simultaneouslytacklea hypercompetitivepricingenvironment.
• Customerand digital experience:Companieshaveto providea rich,
freshandsimple customerexperience,notgearedtowardsdiscovery;
manageinconsistentbrand experienceacrossplatforms;manage
proliferationof technologies;andhandletime-to-marketpressurefor
newapplications.In therecentpast,social mediahasbecome more
influentialthanpaidmarketing.
• Paymentsand transactions:eCommercecompaniesmayface
issues aroundsecurityandprivacybreachandcontrollingfictitious
transactions.Further, RBIrestrictionsfor prepaidinstrumentsor
eWalletsactasimpediments.From a transactionsperspective,
cross-border tax andregulatoryissues, andbackendservicetax and
withholdingtax canhaveseriousimplications.
• Fulfilment: Companieswillneedto checkif thephysicalinfrastructure
getsaffectedby theinternetspeed.Also, thelackof an integrated
end-to-endlogisticsplatformand innovation-focusedfulfilmentoption
couldcausedeliveryissues. Challengesaroundreverselogistics
managementandthirdpartylogisticsinteractionscouldalsoactas
barriersto growth.
Internal challenges
Internal forces impact how eCommerce companies can organise to
drive and sustain growth.
• Organisationscaling:eCommercecompanieswill haveto make sure
organisationdesignkeepspacewiththerapidlyevolvingbusiness
strategy, along withfluidgovernance,strong leadershipand
managementdevelopment.From a growth perspective,identifying
acquisitionopportunities,fundraising andIPO readinessbecomes
necessary. From a technologyperspective,it isimportantto transform
IT asaninnovationhubandaddressthelackof synergy between
business, technologyandoperationsfunctionsof theenterprise.
• Tax and regulatorystructuring:Companieswillneedto addressissues
aroundsub-optimalwarehousetax planning; imbalancebetweenFDI
norms vis-à-visadequateentitycontrols; inefficientholding,IPR orentity
structures;and internationaltax inefficiencies.Futurechallengesinclude
thenewCompaniesAct, policyon related-partytransactionpricing, and
theuncertaintyaroundGST roadmap.
• Risk, fraud and cyber security: From a riskperspective,eCommerce
companiescouldfaceissuesaroundbrand risk, insiderthreatsand
websiteuptime.Issuesaroundemployee-vendornexus,briberyand
corruptionmakecompaniesvulnerableto fines.Cyber securityalso
raisessomeconcernsaroundwebsiteexploitationby externalentities.
• Complianceframework: eCommerce companies have to comply
with several laws, many of which are still evolving. Potential
issues around cyber law compliance, inefficient anti-corruption
framework, legal exposure in agreementsor arrangements, indirect
and direct tax compliance framework and FEMA contraventions and
regularisation could pose problems. Also, uncertaintyaround VAT
implications in different states due to peculiar business models
could cause issues.
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Peshwa Acharya

59. As the customers progressfrom research to purchase
to fulfilment stages, theirexpectations change
fast. eCommercecompaniesneed to understand
these changedriversand adapt theirproposition
accordingly. Easy transitions betweenordering
on tablets, mobilephonesor PCs will have to be
facilitated. Besides, convenientmultichannel returns
and delivery options need to be developedalongwith
the provisions of touch and feelthe product before
buying. They should also ensuresufficientafter sales
serviceand support. Online product reviewsand
ratings, videos, moreadvanced sizingand fitting tools
should beprovided.
eCommercecompanies constantly have to upgrade
theirofferingswith changingtechnology. For instance,
shoppingthrough mobileshave truly arrived, they
need to devise easy to use mobileapps for their
websites. They need to ensurethat theirwebsiteshave
the requiredspeed to do fast business, especially during
sale, deals and discounts. Solutions enablingseamless
integrationof back-endand front-endinfrastructure,
customer experienceenhancement initiatives,
integratedinventory managementand analytics would
be crucial for the eCommercefirms.
Outlook 2015
In 2015, eCommerce playerssee mobile commerce as the most
preferred route with mobile wallet as the preferred way of payment.
With 4G services expected to be launched in 2015, internet
penetration is likely to take a significant leap, which is likely to
give another boost to mobile commerce. Changesin lifestyle and
shopping choices will see buyerspreferring online and mobile
channel over physical channel to save time and seek wider range and
possibly comparative pricing. For mobile wallets, improvementson
the paymentsfront with multiple payment instruments and increase
in payment gateways aided by enhanced security with multiple
authentication layers will help the consumerswith a seamless
mobile experience.
Niche categories are also expected to gather momentum including cars
and real estate. Premium and international brandsare likelyto join
eTail, purchases from Tier 2 and 3 cities will continue to rise and
differentiated products such as exclusivebrandsby designerswill
grow. Riding high on the growth prospectseCommerce companies will
look at more waysto raise fundssuch as IPOs. Some consolidation will
also happen with the leaders focusing on high growth and smaller
playersfinding their own niche.6
Top 10 things the eCommerce companies need to do to accelerate growth
Customer experience
Convergence of online
and off line channels
As the customers progressfrom research to purchase to fulfilment stages, their
expectations changefast. eCommercecompanies need to understand these
changedriversand adapt theirproposition accordingly. Easy transitions between
orderingon tablets, mobilephonesor PCs will have to be facilitated. Besides,
convenientmultichannel returns and delivery options need to be developedalong
with the provisionsof touch and feel the product beforebuying. They should also
ensuresufficientafter sales serviceand support. Onlineproduct reviews and
ratings, videos, moreadvanced sizingand fitting toolsshould be provided.
Technological
advancements
4
Outlook 15: What Indian niche e-commerce companies plan to do in 2015, Medianama
http://www.medianama.com/2015/01/223-outlook15-niche-e-commerce/
59
Peshwa Acharya

60. eCommerce in India 15
Delivery experience
With lack of integratedend to endlogistics platform,
the eCommerceindustry is facing issuesrelatedto
procurementoperations and transportation. Online
purchases from Tier-2 and Tier-3 cities areexpectedto
significantly increase, thanks to the emergenceof low cost
smartphones, however, poor lastmileconnectivity couldact
as a deterrent. Keepingcontrol on logistics and on ground
fleet management, especially courier companies,
is essential for growth.
Payments and
transactions
India continues to be a cash-based society due to limited
banking and credit card penetration. This, combinedwith a
lack of consumertrust in online merchants, has forced
companiesto offerCoD services, which imposes significant
financial cost for firms in the form of labour, cash handling
and higher returns of purchaseditems. Data protection and
the integrity of the system that handlesthe data and
transactions areserious concerns. Companiesshould take
necessary action for management even if this imposes a cost
on them.
Tax and regulatory
environment
Laws regulatingeCommercein India arestill evolvingand
lack clarity. Favourableregulatory environmentwould be
key towardsunleashingthe potential of eCommerceand
help in efficiency in operations, creation of jobs, growth of
the industry, and investmentsin back-endinfrastructure.
Furthermore, the interpretation of intricatetax norms
and complex inter-statetaxation rulesmake eCommerce
operations difficult to manageand to stay compliant to
the laws. With the widevariety of audiencethe eCommerce
companiescater to, compliance becomesa serious concern.
Companies will need to have stronganti-corruption
programs for sourcingand vendor management, as well
as robust compliance frameworks. It is important for the
eCommerce companies to keep a check at every stage and
adhereto the relevant laws, so as to avoid fines.
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Peshwa Acharya

61. Businessmodelshavebeenevolvingrapidly in theeCommerce
sectorlargelyduetoheightenedcompetitionandtheinability
ofplayerstosustainhigh costs. Companiesin eCommerce will
needtoadapt andinnovateconstantlytosustaintheir
businesses.Furthermore,severalof thesecompaniesentered
intotheeCommerceindustryas startupsandhavegrown to
a hugesizeaidedby thecontinuousgrowthin themarket
butlack welldefinedcapabilitiesandorganisationalstructure.
Systembuilding,financial andtalentmanagement
becomekey.
Thecustomeracquisitioncostsin IndianeCommercehave
beenclimbingrapidly duetointensecompetitionbetween
multiplewell-fundedplayers.Only 2%of websitevisits
currentlyresultintotransaction.Thus,thereisa gapbetween
potentialandactual buyers.Coupledwithhigh transaction
costs, thisareacouldposeseriousproblems.In theUS,
75% ofconsumershavestatedthat theywillusuallyswitch
betweenbrands,andfortherestoftheworld,thisrateis 60%,
accordingtoEcommerceFoundation.7 This suggests
companiesshouldconstantlyworkontheirbrandpositioning.
Operational
framework
Customer
acquisition
Digital disruptionhas drivenchangein the eCommerce
industry with shoppers embracing multipletouch
points in theirpurchase journeys. Companiesshould
spend enough resourceson technology development
as also advertisingand branding, especially because
the youngerpopulation is demanding. In the journey
toward digital businesstransformation, embedding
SMAC technologiesin the businessbecomescrucial.
To growtheirbusinesses, the Indian eCommercesector
needs to closely watch the growth of theirmarkets in the
Tier 2 and 3 cities. They need to improvetheirlogistics and
supply chain managementin these cities, do an effective
demand managementto keep an eyeon what products are
beingsoughtin these cities. With eCommercelargely being
a borderlessactivity companiesneed to keep in mind that
customers always have the option to buy across the border
if they cannot fulfil customers’ expectations.
Digital
infrastructure
Addressable
markets
7
Global B2C E-commerce Report, 2014
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