From Retail to Pre-Tail & E-Tail: Evolution of E-Commerce in India - ACS Publisher
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From Retail to Pre-Tail & E-Tail: Evolution of E-Commerce in India
Stuti Gupta * highlight the potential e-Commerce holds and the role it can play
ABSTRACT in context of emerging Indian consumers and economy.
Today online retail represents a small fraction of the e-Commerce space Pre-Tail
but it is one of the fastest growing segments in India; only in 2012 online Pre-tail is a sub-category of e-commerce and online retail. It
shopping e-Commerce site number has crossed 600 from 100. India is is meant for introducing new products by first selling online,
at the verge of a big digital revolution. Declining prices of broadband
sometimes in limited quantity, before the release, realization, or
subscription, aided by the launch of 3G services and the likely launch of
4G services is expected to significantly add up to the country’s internet commercial availability. Pre-tail includes pre-sale commerce,
user base. Because of India’s rising internet population, the trend of on- pre-order retailers, incubation marketplaces, and crowd funding
line shopping is set to see greater heights in coming years. Furthermore, communities. Retailers today are increasingly pre-tailing to test,
the Indian consumer’s perception of online shopping has undergone a scale, and monetize consumer demand in the initial phase of the
drastic change, and only for the good. In this paper, we discuss Pre-tail- new commerce pipeline. Consumers engaging in pre-tail activi-
ing: the need of the hour. Also the factors which are driving online retail ties are commonly referred to as pre-launch consumer.
consumption in India. We also talk about the popular trends in the online
retail industry and analyze other factors contributing to the growth of Pre-tailing owes its velocity to the ability to merge with supply
e-Commerce in India. and demand trends. Pre-tailing is a first step, but it’s not a guaran-
tee of success. Not all pre-tailers will become e-tailers just like not
KEYWORDS
all e-tailers will become retailers.
E-Commerce, E-Tail, Online Retail, Online Shopping, Pre-Tail
A company comes up with a product concept and puts together
a low-cost web-based presentation to pitch the idea directly to
1. INTRODUCTION
potential micro-investors and/or customers. The pitch is pub-
The macro outlook for India’s e-Commerce sector couldn’t be lished online, typically on a crowd funding site and promot-
more attractive: declining prices of broadband subscription, ed via social networks like Facebook, Twitter and Pinterest.
launch of 3G services, the likely launch of 4G services, favorable These products and services typically exist only as ideas or
demographics with two-thirds of the population younger than 35 prototypes. The proposition is that the product will only make
years, coupled with increased urbanization and the third largest it into customers’ hands if the developer reaches a defined
population of internet users globally. threshold of support. The developer has the luxury of refining
Against this backdrop, we think Indian e-Commerce is at an in- a product based on real customer feedback before deciding
flection point and has the potential to quadruple from about USD whether or not to ramp up production. It reduces waste and
10bn in 2013 to USD 43bn over the next five years, largely driven encourages innovation giving smaller players a shot at the
by online retail and increasing internet penetration. marketplace and ensuring a built-in community of customers
who will support entrepreneurs from the start.
Online retail, while today representing a small fraction of the
e-Commerce space is one of the fastest growing segments. The
essence of e-retailing is in its ability to transcend physical bound- 2. TOP CATEGORIES DRIVING ONLINE RETAIL
aries and reach customers in a manner different from the tradition-
al brick-and-mortar stores, to their very doorstep.
The major evolution in the e-Commerce industry can be attribut-
ed to lifestyle transformation of Indian consumers, spreading out
of online niche and accessibility of modern technology. The ease
and convenience that online shopping offer is probably the major
reason behind the flourishing e-Commerce industry in India.
Online shoppers in India are almost at par with their global peers
in their shopping habits despite online shopping being a recent
phenomenon in India. This is owing to the growing popularity of
technologies such as social media, smartphones and tablets.
In this article, we seek to provide an insight into India’s e-Com-
merce market. The article focuses on the various sub-segments of
the e-Commerce market and focuses on factors driving growth
across these segments. This article is an attempt to evaluate and
* Assistant Professor; Amity School of Insurance, Banking and Actuarial Science, Amity University, Noida
Trinity Journal of Management, IT & Media ISSN 2320 - 6470 December, 2015 / Page - 68I. INDIA’S INTERNET PENETRATION III. PENETRATION OF DEVICES THROUGH WHICH TO
ACCESS THE INTERNET
In any country where e-tailing has achieved reasonable success,
consumers have shown signs of evolution on two dimensions Access to the internet requires internet-supporting devices, which
which has enabled e-tailing market’s growth- access to internet can be broadly classified into PCs/laptops, mobile phones (smart-
and internet usage beyond browsing. In India, consumers are dis- phones), and tablets. The penetration of these devices is rapidly
playing positive traction on both of these. Despite 4x+ growth in increasing. In India, desktop-based internet access has largely been
internet users over the past five years, Internet penetration in India bypassed with the preferred mode of accessing internet now being
is less than half of China’s rate. Indian internet user projection mobiles. Currently, ~85% of internet connections in India are wire-
(mn) is ~0.5bn users by 2018F, recording an 18% CAGR over less resulting in ~61% of users accessing through their mobiles.
2013-18F, more than double the pace of China. First, the internet Internet through mobile is rapidly becoming a part of more and
is rapidly becoming a part of more and more Indian lives across more Indian lives across the spectrum of “online” activities.
the spectrum of “online” activities. Second, India’s internet users
are rapidly graduating to complex and interactive internet usage,
from merely accessing e-mails and casual browsing in the past.
Over time, they are becoming more transactional online; this is
only expected to grow.
Source: FICCI-KPMG
Mobile share of transaction is increasing across categories and
improving their mobile interface remains a big area of investment
Source: FICCI-KPMG for most companies.
II. AGE PROFILE OF INTERNET USERS
Demographics in India with ~2/3rd of the population being below
35 years of age and changing consumer lifestyles seeking conve-
nience, more variety, a better price and greater flexibility, make
the internet businesses attractive. The second factor likely to drive
internet businesses in India is increasing urbanization driving as-
pirations higher and infrastructural challenges leading to an un-
derdeveloped organized retail market with low access to brands. Note: OTA – Online Travel Agency
Source: Company, Industry data, Newsreports
India is predominantly young with a median age ~26 years. This
will continue to be the case for the next ten years, projected me-
dian age of 29 years in 2020. By 2020, 40% of India would have IV. PROLIFERATION OF TECHNOLOGIES ENABLING
been born after the launch of internet and mobile phones in the INTERNET ACCESS
country. Thus, for a sizeable mass of Indians, access to internet Smartphones have revolutionized the way people access inter-
and the use of mobile phones will be a norm to which they won’t net and communicate. India’s mobile internetusers are shifting to
have to make transition to, unlike previous generations. For these more complex activities like travel booking, job hunting, shop-
young consumers, spending time on internet will be as normal as ping, event booking, matrimonial website and more. They have
watching television is for today’s consumers. This key pillar is higher penetration due to easy and cheap availability. Consum-
thus quickly falling into place to facilitate the growth of India’s ers are swapping their feature phones for smartphones, which
e-tailing sector. are much faster and provide a better user experience. 57% of the
India’s internet users’ age profile is lower than its BRIC counter- smartphones sold in India are below Rs. 10,000, making them af-
parts, with 75% of internet users in India being below 35 years fordable for a large number of people.
of age.
Source: Comscore Source: IAMAI-IMRB
Trinity Journal of Management, IT & Media ISSN 2320 - 6470 December, 2015 / Page - 69India being the second largest mobile phone market in the world, VII. CONVENIENCE, SPEED AND 24-HOUR AC-
is poised to record a manifold increase in the penetration of high CESSIBILITY IN PURCHASING PRODUCTS IS BEING
speed internet, primarily driven by the rollout of 3G and 4G wire- VALUED INCREASINGLY
less technology. 3G services are a key driver of internet access
through mobile phones, providing high data speeds for down- VIII. BUSY LIFESTYLES, URBAN TRAFFIC CON-
loads, content streaming, making video calls, etc. GESTION AND LACK OF TIME FOR OFFLINE SHOP-
PING
CHARACTERISTICS OF INDIA’S E-COMMERCE IN-
DUSTRY
India’s e-Commerce industry is ~USD 10bn in terms of revenue
size and has been growing at 30%+ growth rates in INR terms over
the past four years. E-tailing is a subset of e-commerce, which en-
capsulates all “commerce” conducted via internet. It refers to that
part of e-commerce which entails the sale of product merchandise
and does not include sale of services viz. railway tickets, airlines
tickets, job portals, etc. For India’s e-Commerce industry, ~70% of
Source: FICCI-KPMG the revenues come from travel e-Commerce, with e-tailing being
the second largest component at 16% of revenues at ~USD 2bn in
V. INCREASING URBANIZATION TO DRIVE INTERNET 2013. This is an opportunity which remains fairly attractive and is
ADOPTION all set to grow 4x by 2018F to USD 43bn, driven significantly by
the e-tailing business which we believe will grow 11x during the
Today urban consumers look for convenience in all modes of liv- same timeframe to become the largest component of the industry.
ing, including shopping. Each day is increasingly packed with an
ever greater range of activities such as 66% of the urban Indian’s
time is taken up by sleep, time spent at work, and commuting
to work, resulting in just a third of their time for other activities
like socializing, household chores, spending time with children,
health, leisure and entertainment and shopping. These consumers
are therefore seeking alternatives that can free up more time in
their crunched schedules but at the same time offer them more va-
riety and better quality. This trend is accentuated by the increasing
participation of women in the workforce. Most of these consum- Source: IAMAI-IMRB
ers also spend significant time at work and home with access to India’s Digital e-Commerce market has been growing at a strong
both the internet and internet-enabled devices. Thus, there is an pace, recording ~34% CAGR over 2009-13.
enhanced growth in the adoption of internet and mobile banking,
Segment 2009 2010 2011 2012 2013 CAGR
online travel bookings, etc. (2009-
By 2020, 35% of Indians will reside in urban India, compared to 13)
the current 31%. The scale and quality of urban living will result
Travel In- 150 204 266 345 449 32%
in a compelling case for the growth of e-tailing. 75% + of India’s dustry
internet users are located in urban locations and increase in ur-
banization will be a positive trigger for the expansion of internet Non Trav- 43 58 86 128 181 43%
adoption in India. el Industry
E-tailing 16 24 38 65 100 59%
Financial 15 18 23 29 36 24%
Services
Classi- 8 11 17 24 31 41%
fieds
Source: CIA World Factbook
Other On- 4 5 8 11 14 34%
line ser-
VI. GLOBAL AND LOCAL E-COMMERCE PARTICI- vices
PANTS HAVE LAUNCHED WEBSITES THAT OFFER
INDIAN CONSUMERS A RANGE OF PRODUCTS (AP- Total 192 263 351 473 630 34%
PAREL, BABY PRODUCTS, ELECTRONICS, ETC.) Source: IAMAI-IMRB
Trinity Journal of Management, IT & Media ISSN 2320 - 6470 December, 2015 / Page - 703. KEY E-COMMERCE SEGMENTS AND PLAYERS than global averages which entails significant marketing costs to
WITHIN EACH OF THE SEGMENTS: entice customers to the web.
Category Sub-category Players II. Low data speeds
Travel OTA (Online travel Makemytrip, Goibibo, The data speeds in India remain among the lowest globally and
agents) Cleartrip, Yatra, IRCTC act as a constraint to high engagement in online buying. Internet
(rail bookings) penetration in India is still a small fraction of what you would
find in several western countries. On top of that, the quality of
Full Service Flipkart, Snapdeal,
connectivity is poor in several regions. But both of these problems
Amazon, eBay,
are fast disappearing.
Niche retailers Homeshop18 Myntra
- Fashion (acquired by Flipkart), III. Well-funded players in each category causing intense
- Child care Jabong, Yepme, competition
- Health Zovi, Zivame, Yebhi, The increase in investors’ interest in India’s e-Commerce sector is
- Furniture Fashionandyou a positive trend. The trend is manifested by:
Etailers
- Jewellery Babyoye, Firstcry,
1. Increased funding activity by private equity (PE) players/
Hopscotch Healthkart,
venture capitalists (VC) in India
Lenskart, Healthadda,
Healthgenie 2. An increase in the number of deals in the internet space
Pepperfry, Fabfurnish, This, however, has a negative consequence in terms of every cat-
Urbanladder, Zansaar egory having many well funded players and that is leading to in-
Caratlane, Bluestone tense competition to grab traffic/transaction share, thus pushing
Horizontal OLX, Quikr, Justdial profitability out for players.
Vertical Naukri, Timesjob, Top 10 PE/VC investments in E-Commerce space:
- Jobs Shine, Linkedin Company Investors Amount Date
- Matrimony Bharatmatrimony, (USD mn)
- Real Estate Shaadi, Jeevansathi
* advertising 99acres, Magicbricks, Flipkart Tiger Global, Iconiq 210 May-14
Classified Capital, DST Global,
led Commonfloor, Housing
* transaction Proptiger, Indiaproperty, others
led Indiahomes Flipkart Tiger Global, Accel India, 200 Jul-13
- Auto Carwale, Cardekho, Iconiq Capital, others
- Food Gaadi
Zomato, Burrp, Yelp Flipkart Morgan Stanley, Tiger 160 Oct-13
Global, Dragoneer In-
Online food Foodpanda, vestment Group, Vulcan
Online entertainment Deliverychef, Capital, others
Others Online grocery Butlerbhai, Tastykhana
Bookmyshow Snapdeal. Kalaari Capital, Intel 134 Feb-14
Localbaniya, Bigbasket com Capital, Nexus Ventures,
Bessemer, Saama Capi-
Payment services Ccavenue, Payzippy, tal, others
Logistic services Payu, Direcpay
Digital advertising Bluedart, Gati or own Snapdeal. Temasek, PremjInvest, 100 May-14
Enablers com others
logistics etc.
InMobi, Pubmatic, Myntra Kalaari Capital, Tiger 50 Feb-14
Komli Global, IDG Ventures (I),
Accel India, PremjiIn-
4. KEY CHALLENGES FACED BY E-COMMERCE SECTOR: vest, others
I. Enticing buyers to internet is an expensive affair J a b o n g . CDC Group 28 Jan-14
One of the biggest challenges currently facing India’s internet com
companies is the high costs of attracting users to the online retail UrbanLad- SAIF, Kalaari Capital, 21 Jul-14
platform through high marketing spends and consistent promo- der.com Steadview
tional schemes.
Cardekho Sequoia Capital India 15 Nov-13
Marketing currently remains the single biggest expense for
e-Commerce companies after the product itself. Both the reach FirstCry SAIF, IDG Ventures In- 15 Jan-14
and engagement of users on the online retail platform is lower dia, Vertex
Trinity Journal of Management, IT & Media ISSN 2320 - 6470 December, 2015 / Page - 71RECENT ACQUISITIONS: ward quite rapidly. Industry statistics talk of a 55-60 per cent year-
on-year growth, and moving from a USD 2.1 billion to a USD 3.2
billion market in 2014.
Over the last two decades, rising internet and mobile phone pen-
etration has changed the way we communicate and do business.
E-commerce is relatively a novel concept. It is, at present, heavily
leaning on the internet and mobile phone revolution to fundamen-
tally alter the way businesses reach their customers. It is also the
most challenging in fulfilling its fundamental proposition of tran-
IV. Cash on delivery remains high, which creates issues
scending physical boundaries to deliver a variety of products to
Given the hesitation of Indian consumers to use credit/debit cards the customer’s doorstep.
online, pervasiveness of cash in offline retail, low penetration of
Online shopping offers fast, easy, money saving and interesting
credit/debit cards and convenience, cash on delivery (COD) is a
shopping experience, it has many advantages like 24 hours shop-
predominant payment method for most Indian e-Commerce com-
ping, shopping with coupon to get discount, shopping from home,
panies. But on one hand COD helps entice customers to the web
rich product availability, specifications etc.
with a payment method they are more comfortable with, on the
other hand it creates issues for e-Commerce companies: The customer has embraced digital economy in a big way to dis-
cover, engage and transact.
• Negative working capital implications as it could take up to
two weeks to realize the cash. While the future is mobile and the present already on wheels, pot-
holes remain. These include enticing buyers which is expensive,
• Issues of handling cash such as pilferage and increased costs.
high data prices and low data speeds, intense competition caused
• In some states or locations, logistics companies do not enter- by well-funded players, the complexities of the cash-on-delivery
tain cash on delivery requests or there are regulatory issues model and the English-centric internet which restricts reach.
related to COD.
The future competitors and winners in the e-retailing space will be
• Returns are typically higher in COD vs. electronic payment. the ones who use both bricks and clicks and not bricks or clicks
V. India’s internet is English centric which restricts participa- alone.
tion for Hindi/regional language consumers
English-speaking population has been the biggest driver of inter- 6. REFERENCES
net adoption in India but there remains a limitation in taking the 1. Rebirth of e-Commerce in India, 2012, Ernst & Young
internet countrywide with requirement for more local language 2. http://www.fastcoexist.com/1681686/the-rise-of-pre-com-
content. merce
3. http://en.wikipedia.org/wiki/E-commerce
VI. Logistics issues are a big challenge for Indian e-Commerce
4. en.wikipedia.org/wiki/Pretail
In India, logistics and courier services require lots of improve- 5. Evolution of e-Commerce in India: Creating the bricks be-
ment. While, perfect and strong logistics service is one of the key hind the clicks, ASSOCHAM, PwC, August 2014
reasons behind the success of any online company, India is lagging 6. Retail 2014: The anytime anywhere universe, Retailers Asso-
far behind in this sector as most of the town and small villages are ciation of India, PwC, June 2014
still not covered under serviceable area of many of the courier and 7. E-tailing in India: Unlocking the Potential, Technopak
logistic companies. E-Commerce is hampered in a big way owing 8. http://www.technopak.com/Files/Cover%20Story%20
to the limited services offered by the courier service companies; on%20E-com%20-%20Business%20India.pdf
with just 20% of India’s pin codes being currently serviced by
them and only 5% of codes have cash-on-delivery options.
5. CONCLUSION
Internet has become an integral part of growing population seg-
ment for remaining connected with friends, accessing emails,
buying movie tickets and ordering food. The changing lifestyles
of the country’s urban population have also led many people re-
lying on the internet for their shopping needs. The convenience
of shopping from the comfort of one’s home and having a wide
product assortment to choose from has brought about increased
reliance on the online medium.
First we had organized big-box retail, then catalogue shopping,
then TV shopping, Internet and then mobile shopping. In India,
this entire journey is compressed into 15 years, and especially
e-Commerce has been compressed in nine years. It is moving for-
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