SELLING ONLINE IN INDIA - BUSINESS SWEDEN October 2015 India
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AGENDA Background of this study Introduction to India E-retail market in India India entry cases Selling online for Swedish companies Business Sweden in India BUSINESS SWEDEN 10 DECEMBER, 2015 4
INDIA IS THE WORLD’S THIRD LARGEST ECONOMY BASED ON PURCHASING POWER World’s largest economies India’s GDP composition Nominal GDP at PPP, 2015 Share of total 1. China 18,9 2. USA 18,1 17% Agriculture 36% 3. India 7,9 30% 4. Japan 4,8 5. Germany 3,8 26% Industry 6. Russia 4,3 53% 7. Brazil 3,2 Services 38% 8. Indonesia 2,8 40. Sweden 0,4 1980-81 2014-15 India has surpassed Japan to become the world’s 3rd largest economy in PPP terms This has been enabled by a massive economical shift from agriculture to services over the course of thirty years Focus now on growing the manufacturing share of the economy – “Make in India” SOURCE: RESERVE BANK OF INDIA, IMF, ECONOMIC TIMES OF INDIA BUSINESS SWEDEN 10 DECEMBER, 2015 5
THE COUNTRY IS SET TO BECOME ONE OF THREE DOMINANT ECONOMIES GLOBALLY GDP at Purchasing Power Parity Share of world total 28% 23% 18% 2060: Second 17% 16% 17% only to China 2030: Parity with 9% Euro area 7% 4% 3% 4% 2% China India US Euro Area Brazil Russia 2011 2030 2060 SOURCE: OECD ECONOMIC POLICY PAPERS, 2012 BUSINESS SWEDEN 10 DECEMBER, 2015 6
INCREASED DISPOSABLE INCOME AMONG YOUNGER PEOPLE LEADS TO MORE DISCRETIONARY SPENDING Gross disposable income per household USD Sweet spot 6 000 +40% in 4 years 5 000 % of total earners in age 4 000 3 000 2 000 income band 1 000 0 2010 2011 2012 2013 2014 Increasing disposable income leading to more demand for discretionary items like fashion apparels, home décor etc. The population aged 25-39 have the highest ‘collective’ gross income In the coming five years, this age group will continue to have the highest gross income in India SOURCE: EUROMONITOR, INCOME AND EXPENDITURE: INDIA, DATAMONITOR BUSINESS SWEDEN 10 DECEMBER, 2015 7
INDIAN CONSUMERS ARE MOVING FROM PRICE CONSCIOUS TO BRAND CONSCIOUS India’s first H&M store opened on 02 Oct 2015 Shopping becoming an experience, not a necessity Higher income levels are increasing the interest in brands Shopping for basic goods and food is often done by servants and maids. Shopping for discretionary items is therefore more of an entertainment Brand consciousness and demonstration GUCCI store effect supports retail sales to a large extent in New Delhi, India Increased availability of credit and use of ‘plastic money’ have contributed to a strong and growing consumer culture in India SOURCE: ECONOMIC TIMES, GUCCI, BUSINESS SWEDEN ANALYSIS BUSINESS SWEDEN 10 DECEMBER, 2015 9
CUSTOMERS ARE NOW SPREAD ACROSS THE COUNTRY AND NOT JUST RESTRICTED TO METROS Urban agglomeration / cities in India 19 cities with more than 2 million people and additional 34 cities above 1 million people Various strategies applied to reach right consumers “Skimming” in tier-I cities becoming less relevant (but can still work – e.g. Jimmy Choo in Chandigarh) Brand-building in metro’s and subsequent cascading to tier-II cities Some retailers have seen positive effects from focusing on a few tier-II cities instead of going for all-India Above 10 Mn inhabitants Lately, foreign retailers are using e-tailing to reach affluent customers spread across metros, tier I-IV Above 4 Mn inhabitants cities and small towns Above 2 Mn inhabitants SOURCE: CENSUS OF INDIA BUSINESS SWEDEN 10 DECEMBER, 2015 10
AGENDA Background of this study Introduction to India E-retail market in India India entry cases Selling online for Swedish companies Business Sweden in India BUSINESS SWEDEN 10 DECEMBER, 2015 11
IN 3 YEARS, APAC RETAIL SALES IS EXPECTED TO OVERTAKE EUROPE AND N. AMERICA COMBINED Retail sales (USD trillion) 2012 16.2 2015F 18.4 2018F 22.8 CAGR % 4 4,9 5 4,3 11 5,0 4,1 4,3 10,3 3,8 7,6 6,3 2012 2015F 2018F 2012 2015F 2018F 10 0,5 0,6 0,8 2012 2015F 2018F 4 2012 2015F 2018F 1,4 1,5 1,7 2012 2015F 2018F SOURCE: PWC BUSINESS SWEDEN 10 DECEMBER, 2015 12
INDIAN RETAIL MARKET SIZE IS SIMILAR TO THAT OF GERMANY Retail sector market size 2013-2014, USD billion, selected major markets 3 190 3 080 1 600 534 518 495 234 Market size USA China Japan India Germany UK Nordic 318 1,393 126 1,267 82 64 25 Population (million) 10.0 2.2 12.7 0.4 6.3 7.7 9.3 Per capita spend on retail (USD’ thousand) Highest Lowest SOURCE: STATISTA, GFK, GTAI, IBEF, BUSINESS SWEDEN ANALYSIS NORDIC: SWEDEN (81), NORWAY (62), DENMARK (49), FINLAND (42) BUSINESS SWEDEN 10 DECEMBER, 2015 13
E-RETAIL MARKET IS WITNESSING ROBUST GROWTH AND WILL QUADRUPLE IN THE NEXT 6 YEARS E-tailing industry in India (USD billion) Infancy Rapid growth 22,2 19,9 CAGR 17,5 27% 14,1 CAGR 10,6 52% 7,6 5,3 3,5 1,5 2,3 1,0 2010 2011 2012 2013 2014 2015 E 2016 E 2017 E 2018 E 2019 E 2020 E E-tailing industry in India is estimated to reach USD 22-30 billion by 2020 During the past decade, e-retail sector was held back due to factors such as lower internet penetration, poor mobile internet connection, Indian retail consumers’ can’t touch, won’t buy mentality, trust on genuinity of products sold online, and limited availability of product categories online SOURCE: PWC, BCG, TECHNOPAK, STATISTA, BUSINESS SWEDEN ANALYSIS BUSINESS SWEDEN 10 DECEMBER, 2015 16
E-TAILING WILL BE DRIVEN BY INCREASING ACCESS, LOWER ONLINE PRICE & HIGHER DISPOSABLE INCOME 1 Increase in the number of internet users and internet penetration 2 Leapfrog from no internet to mobile 3 Demographic shift towards higher disposable income 4 Online lower prices, deals and discounts 5 Positive PE / VC sentiment and inflow of investments 6 Innovative tweaks to retail business model BUSINESS SWEDEN 10 DECEMBER, 2015 17
INCREASING NUMBER OF INTERNET USERS WILL OPEN UP NON-TRADITIONAL CATEGORIES How is it shaping e-retail E-retail drivers Description industry 243 E-retailers are able to sell Internet users (million) more number of units of Internet penetration (%) current products Adding new product lines 155 to satisfy wider consumers 1 needs Finding niche segments to Increase in the 90 garner first-mover- number of advantage internet users and internet 51 Entry of new e-retailers penetration 32 with innovate business 16 21 5 19,9 concepts 7,5 12,5 0,5 1,5 1,9 2,8 4,3 2000 2002 2004 2006 2008 2010 2012 2014 Internet users has grown 11 times in the past decade By 2018, internet users will double and cross 500 million users SOURCE: KPMG, INTERNET LIVE STATS, BUSINESS SWEDEN ANALYSIS BUSINESS SWEDEN 10 DECEMBER, 2015 18
‘SHOPPING ON THE GO’ USING MOBILE HAS SHAPED APP-ONLY MODEL How is it shaping e-retail E-retail drivers Description industry E-retailers are experimenting with and Mobile internet users (million) enhancing their App- 314 platforms Myntra, India's largest 236 online fashion retailer has 213 2 shut down its website and 159 switched to an app-only Leapfrog from channel since May 2015 no internet to 110 News reports suggest mobile Flipkart, India’s largest ecommerce player is planning to go app-only from September 2015 2013 2014 2015 E 2016 E 2017 E Indian consumers in rural areas and tier-III cities are leapfrogging from no internet to mobile towards smartphone revolution, skipping the desktop PC and laptop steps SOURCE: KPMG, IAMAI, STATISTA, BUSINESS SWEDEN ANALYSIS BUSINESS SWEDEN 10 DECEMBER, 2015 19
LOWER ONLINE PRICES AND DISCOUNTS TO PULL MORE CONSUMERS TOWARDS E-TAIL How is it shaping e-retail E-retail drivers Description industry In order to attract new customers and capture a larger market share, e- retailers have come up with lower pricing on products vis-a-vis brick-and-mortar stores, flash sales, 4 seasonal sales and more Online lower Bonus discounts for prices, deals purchases made through and discounts App-only SOURCE: AMAZON, FLIPKART, SNAPDEAL, BUSINESS SWEDEN ANALYSIS BUSINESS SWEDEN 10 DECEMBER, 2015 21
INNOVATIVE TWEAKS TO FILL-IN THE BUSINESS MODEL GAPS SUCH AS… E-retail drivers Description How is it shaping e-retail industry Indian customers have started Major e-retailers are expanding their delivery Free and to expect door delivery of reach to interior parts of India quick goods, from small pocket book For instance, Amazon India has chosen India home to a large furniture, free of Post as its primary delivery partner servicing delivery charge or at a minimal cost over 19,000 pin-codes through 140,000 post- offices across the country 6 Certain consumers might want E-retailers have come-up with a friendly return Innovative Friendly to return damaged/ defective policy, wherein consumers can return tweaks to retail return goods, whereas others might damaged/defective goods with 7-30 days business policy have a second thought about timeframe depending on the product category model purchasing a particular product India has lower credit and debit E-retailers gambled and introduced ‘Cash on card penetration Delivery’ system, a unique collection process Cash on that allowed the customer to make cash 350 million debit cards and 19 delivery payments upon receiving the goods million credit cards in 2014, as per Reserve Bank of India Today, all major e-retailers have cash on delivery as a payment option SOURCE: BUSINESS SWEDEN ANALYSIS BUSINESS SWEDEN 10 DECEMBER, 2015 23
…CASH ON DELIVERY, MAKING IT THE MOST WIDELY USED PAYMENT MODE Mode of payment in Indian e-tailing industry 2014 Cash on delivery is a popular mode of 45% payment and has been one of the defining pillars of India's ecommerce boom. Every 1 out of 2 payments are made through cash on delivery 37% of online Indian shoppers pay through debit and credit card mode of 21% payment 16% Mobile wallets, which have seen a surge of activity in the last few 10% 8% months, contribute 8% of all payments In India, many customers tend to prefer cash on delivery as the online Cash on Debit card Credit card Internet Mobile wallet payment modes are yet to catch up in delivery banking many parts of the country SOURCE: TRAK.IN, IAMAI, BUSINESS SWEDEN ANALYSIS BUSINESS SWEDEN 10 DECEMBER, 2015 24
OVERALL, INDIAN CONSUMERS SEEM WILLING TO BUY MOST THINGS ONLINE % respondents who said they have bought category online during 3 month period (May-July 2014) Product categories Global avg. India US UK Germany Japan China Electronics 77% 79% 83% 84% 90% 53% 96% Home appliances 59% 67% 46% 65% 58% 41% 83% Home furnishings 53% 59% 56% 65% 66% 53% 65% Apparel & fashion 76% 84% 87% 85% 88% 66% 97% Sports & outdoor 52% 52% 56% 53% 66% 36% 78% Beauty products 57% 68% 50% 56% 62% 48% 85% Household items 45% 60% 36% 48% 40% 41% 84% Groceries 45% 52% 26% 60% 36% 68% 90% Toys, kids, babies 49% 61% 48% 53% 49% 32% 75% Music & games 62% 65% 74% 75% 66% 46% 69% Books 73% 70% 82% 82% 80% 65% 89% >75% have bought the category online 50%-75% have bought the category online
INDIA’S E-TAILING ECOSYSTEM HAS PLATFORMS FOR EVERY CATEGORY Big 3 Horizontal online market place Apparel and fashion Furnishing Vertical product category champions Grocery Beauty and wellness . . and more SOURCE: BUSINESS SWEDEN ANALYSIS BUSINESS SWEDEN 10 DECEMBER, 2015 27
HEATING COMPETITION BETWEEN BIG THREE HORIZONTAL ONLINE MARKETPLACES E-retailing market share by players Year started Oct 2007 Jun 2013 Feb 2010 2014, by GMV* Marketplace since Apr 2013 Jun 2013 Sep 2011 Rest Revenue (2013-14) USD 451 million USD 27 million USD 26 million 9% Annual GMV * USD 4.5 billion USD 2.0 billion USD 3.5 billion Amazon 15% Unique visitors Flipkart 23.5 million 23.6 million 17.9 million (UV)** 44% % change in UV*** 80% 142% 90% Registered 45 million 25 million 40 million customers Snapdeal # of sellers 30,000 18,000 100,000 32% Product range 10+ million 17 million 10+ million Funding so far USD 3.2 billion USD 2.0 billion USD 1.1 billion * GMV: Gross Merchandise Value - total sales value of the merchandise sold in 2014-15 SOURCE: MORGAN STANLEY IN BUSINESS STANDARD , ECONOMIC TIMES, CRUSHBASE.COM, FINANCIAL ** For the month of May 2015 EXPRESS, BUSINESS TODAY *** % change in in the number of unique visitors since May 2014 to May 2015 BUSINESS SWEDEN 10 DECEMBER, 2015 28
FOUR TYPES OF ONLINE RETAILERS AND MARKETPLACES Pure inventory led model Hybrid model Managed marketplace Pure marketplace Sells only owned inventory Sells owned inventory No owned inventory No owned inventory Does not sell 3rd party Sells 3rd party products Sells only 3rd party Sells only 3rd party products also products products No used goods No used goods No used goods Used goods are allowed Prices are fixed Prices are fixed Prices are fixed Prices are discovered Control on fulfillment and Control on fulfillment and Control on fulfillment and No control over fulfillment return return return and returns SOURCE: INFOSYS, PWC BUSINESS SWEDEN 10 DECEMBER, 2015 29
MYNTRA: AMBITIOUS PLANS TO TIE-UP WITH 40-50 FOREIGN BRANDS OVER THE COMING 6-12 MONTHS Foreign brand tie up Myntra International Private label Multiple brands business For in-house designed Caters to brands Caters to foreign brands currently sold in India brands with no through brick-and- presence in India mortar 2016 Target of adding 40-50 2015 international brands by first half of 2016 Currently 20 global 2014 brands sell through Started international this platform business division with Major brands are from a focus on brining the US, UK and foreign retailers into Europe India SOURCE: INTERVIEW WITH MYNTRA BUSINESS SWEDEN 10 DECEMBER, 2015 31
AGENDA Background of this study Introduction to India E-retail market in India India entry cases Selling online for Swedish companies Business Sweden in India BUSINESS SWEDEN 10 DECEMBER, 2015 33
MOTOROLA: THE TREND SETTER IN E-TAILING ONLY ROUTE Motorola Mobility re-entered the Indian FLIPKART WEB-PAGE DURING THE LAUNCH OF MOTOROLA PHONE market in February 2014 (after shutting down its Indian website in Nov 2012) Selected e-retail only channel for re-entry Tied-up an exclusive agreement with Flipkart Sold 2.5 million handsets over 9 month period or 9,200 units per day (Feb-Oct 2014) Witnessed a sharp turnaround within 9 months, based solely on ecommerce platform So far launched multiple products through this route: Moto G, Moto E, Moto X, Moto G (2nd gen), Moto X (2nd gen) and Moto G (3rd gen) Will continue to be an online-only player and partner exclusively with Flipkart SOURCE: THE HINDU, BUSINESS INSIDER, TECH CIRCLE, TRAK.IN, BGR MEDIA BUSINESS SWEDEN 10 DECEMBER, 2015 34
ENTERING INDIA THROUGH ONLINE-ONLY CHANNEL: BRITISH BRAND DOROTHY PERKINS Dorothy Perkins, a UK-based fast fashion and apparel brand, entered the Indian market through Jabong in March 2014 Signed a three year exclusive contract In less than a year (February 2015), Dorothy Perkins emerged as one of the top three women apparel brands selling on Jabong 70% of its sales in India comes from dresses and the rest from bags, shoes and accessories Products are priced at par with global pricing at INR 1,500-5,000 (SEK 185-650) "Print ads and bloggers' opinion writing would be our next step to promote the brand. A brand ambassador programme is also in our priority list“ - Alex Maw Marketing Director, Dorothy Perkins SOURCE: INFOSYS, PWC BUSINESS SWEDEN 10 DECEMBER, 2015 35
SWEDEN’S SCA: SALES RAMP-UP THROUGH E-TAILING CHANNEL SCA is present in India since 2011 Selling major brands such as Libero (diapers), Tempo (tissues), Tork (paper hand towels) and Tena (adult diapers) In 2014, SCA decided to ramp-up its India operations and to become a significant player Focus on e-commerce channel to distribute products Tied up with leading e-tailing portals such as Snapdeal, Firstcry, Amazon, and PayTM to reach out to the Indian consumers in the tier 2 and 3 cities “Currently, online sales account for more than 20% of India sales and is exploding” - Cecilia Edebo Managing Director at SCA India SOURCE: FORBES INDIA, SCA, BUSINESS LINE, INDIA RETAILING BUSINESS SWEDEN 10 DECEMBER, 2015 36
TESTING THRU E-TAIL AND EXPANSION TO BRICK-AND- MORTAR STORES: SPANISH BRAND DESIGUAL Desigual entered the Indian market through an exculsive deal with etailer Jabong India entry thru e-tail route in December 2012 Inked an exclusive tie-up with Myntra in April 2014, following contract expiry with Change of e-tailing partner Jabong Entered brick-and-mortar space by partnering with Shoppers Stop in April 2015 Launch of brick-and-mortar format Launched a first-of-its-kind Desigual shop-in-shop located at the Shoppers Stop store in Mumbai Scale-up of brick-and-mortar presence through ‘travel retail stores’ in partnership Scaling-up of brick-and-mortar with The Nuance Group Opened duty free outlets at Mumbai and Bangalore international airports SOURCE: INDIAN RETAILER, FASHION UNITED, FIRST REPORT, FRONTIER MAGAZINE BUSINESS SWEDEN 10 DECEMBER, 2015 37
AGENDA Background of this study Introduction to India E-retail market in India India entry cases Selling online for Swedish companies Business Sweden in India BUSINESS SWEDEN 10 DECEMBER, 2015 38
ADVANTAGES FROM GOING THE E-RETAIL ROUTE Get instant access to (almost) the entire Indian sub-continent Reach Reach affluent customers with high spending power in tier I-IV cities and small towns accounting for 40-70% of e-tail sales Take advantage of marketing support for promoting brand visibility, Marketing and analytics sales promotion, and product launch assistance support Make use of analytics for optimizing and focusing sales effort Lower investment and low working capital requirement vis-à-vis Working capital traditional brick-and-mortar route Try new markets while focusing on your core markets and activities SOURCE: BUSINESS SWEDEN ANALYSIS BUSINESS SWEDEN 10 DECEMBER, 2015 39
THREE WAYS TO GET ONLINE FOR SWEDISH BRANDS Go through local distributor with significant online 1 presence (Flipkart) (Amazon India) 2 Direct tie-up with e-retailer Go through an international market place via boutique / 3 authorized reseller in Europe BUSINESS SWEDEN 10 DECEMBER, 2015 40
1. GO THROUGH LOCAL DISTRIBUTOR WITH SIGNIFICANT ONLINE PRESENCE Sweden India Local distributor E-retail platform Swedish brand (WS Retail) (Flipkart) Swedish brand ships Inventory maintained Products picked from Places order for goods to WS Retail by WS Retail WS Retail, packed products and delivered Shipping time of 10- 2-5 days 1-4 days 15 days Receives money Deducts warehousing Deducts commission, Customer makes less all costs from charges, commission out-bound logistics total bill payment distributor and in-bound logistics and payment charges to Flipkart from payment from the total received by Flipkart payment made by customer BUSINESS SWEDEN 10 DECEMBER, 2015 41
2. DIRECT TIE-UP WITH E-RETAILER Sweden India E-retail platform Swedish brand (Myntra) Swedish brand ships Inventory maintained by Places order for goods to Myntra Myntra products warehouse Products shipped to customers Shipping time of 10- 1-5 days 15 days Receives money Deducts commission, Customer makes less all costs from logistics, warehousing total bill payment Myntra and payment charges to Myntra from the total payment made by customer BUSINESS SWEDEN 10 DECEMBER, 2015 42
AGENDA Background of this study Introduction to India E-retail market in India India entry cases Selling online for Swedish companies Business Sweden in India BUSINESS SWEDEN 10 DECEMBER, 2015 45
BUSINESS SWEDEN INCREASES BUSINESS ABROAD WHILE ATTRACTING INVESTMENTS TO SWEDEN OUR VISION GROWING SWEDEN BY BEING A WORLD CLASS PROMOTER OF TRADE AND INVESTMENTS OUR MISSION WE ACCELERATE AND FACILITATE BUSINESS WITH SWEDEN OUR OWNERSHIP JOINTLY OWNED BY THE SWEDISH GOVERNMENT AND BUSINESS SECTOR, WE OFFER THE BEST OF BOTH WORLDS BUSINESS SWEDEN 10 DECEMBER, 2015 46
WITH OFFICES IN 57 COUNTRIES, BUSINESS SWEDEN IS WELL POSITIONED TO GROW SWEDEN BUSINESS SWEDEN 10 DECEMBER, 2015 47
BUSINESS SWEDEN HELPS SWEDISH COMPANIES FULFIL THEIR INTERNATIONAL POTENTIAL BUSINESS SWEDEN INTERNATIONALISATION SERVICES EVALUATE CHOOSE ESTABLISH GROW OPPORTUNITIES STRATEGY PRESENCE BUSINESS Examine opportunities Understand market and Establish presence in Develop and grow your and choose market define entry strategy foreign markets international business Export Information Market Analysis Incorporation Sales and Marketing Steps to Export Business Support Office Support Visiting Program Trade Facilitation Acquisition Support Operational Support Market Entry Strategy Market Selection Analysis Recruitment Services Business Development Partner Search Sourcing Services BSO Connect Bus. Opportunity Project PROMOTIONAL ACTIVITIES Swedish companies can use the official brand of Sweden to open doors and acquire new contacts. Business Sweden arranges seminars, site visits, trade fairs, delegations, conferences and many other activities to strengthen brands and to increase the visibility for Swedish companies BUSINESS SWEDEN 10 DECEMBER, 2015 48
25 COLLEAGUES ACROSS TWO OFFICES IN INDIA Experience Presence Knowledge Network Established in 1996 Two offices 25 experienced Represent Official Export support New Delhi and Bangalore consultants Sweden in India activities in India since Additional support Focus on international Dual ownership the 1950s in Kolkata through Swedish business development between Swedish Gov and Mumbai Consulates in Mumbai, Mainly locally employed and Industry Yearly Track Record: Chennai and Kolkata Speak 10 languages Brand Sweden 250 projects Support across South combined Swedish Embassy 20 incorporations Asia through Swedish Combination of industrial Swedish companies 600 queries Consulates in and consulting Indian business and, Four experienced Bangladesh and Sri experience government bodies investment advisers Lanka BUSINESS SWEDEN 10 DECEMBER, 2015 49
WE CAN HELP YOU FROM PLANNING TO EXECUTION Conduct a brief market check on the Indian market Market check A deep-dive study aimed at understanding the Indian market Market analysis Local partner / distributor identification that fits your requirement Partner search Support you in meeting distributors / e-retailers through visiting program Visiting program Presentation by Business Sweden representative to selected prominent three to five Local representation e-retailers Express your brand interest in India Marketing support Collection of product catalogues from e-retailers BUSINESS SWEDEN 10 DECEMBER, 2015 50
CONTACT US BUSINESS SWEDEN IN INDIA NEW DELHI BANGALORE We are located in India since Business Sweden Business Sweden 1995 and have offices in Embassy of Sweden, Nyaya Marg, Kheny Chambers, 4/2 Cunningham Bangalore and New Delhi. Chanakya Puri, New Delhi-110021, INDIA Road, Bangalore 560052 From our offices in India, we also T +91 11 46067100 T: +91 80 415 29100 cover Afghanistan, Bangladesh, Indien@business-sweden.se Indien@business-sweden.se Bhutan, Maldives, Nepal, www.business-sweden.se/indien www.business-sweden.se/indien Pakistan and Sri Lanka
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