Business Club Project Ecommerce in India By Ayush

Business Club Project E-commerce in India By: Ayush Agrawal Tarun Tiwari Mohd. Rafshan

Case Study Amazon’s Entry To Indian e-commerce Market

Intro To Amazon �Amazon is a multinational company incorporated in 1994 by Jeff Bezos. �It started as a online bookstore. �Proving its worth and success in USA, Amazon head to compete in Indian ecommerce market

Before Entering to India �Amazon entered India in 2012 and launched its website in June 2013. �At that time the key players in e-retail market were Flipkart, Snapdeal, Myntra and Jabong. �With Flipkart acquiring the large percentage of market share(>60%).

Strategic Issues �The most significant strategy was to gain market share. �Since India is has huge diversity and culture, and tastes, desires and demands changes quickly from a region to another, so its a complete new market for Amazon to explore. �Compete with a monopolist. Flipkart had a huge market share (more than 60%) and over the year it was gaining monopoly on eretail market.

Advantages for Amazon �Groundwork already done by others The advantage for Amazon was that before its commencement in Indian e-retail market, a lot of work had already been done by the likes of Flipkart, Snapdeal, Myntra to raise the e-commerce industry. Their work paid off, in 2012 according to Forrester it was estimated that Indian market will grow at a compounded growth rate faster than any other country in the Asia-Pacific region to reach $8. 8 billion in 2016.

�An exhausted competition Amazon was also entering India at a time when almost every player was struggling to conserve cash and yet grow business. After a boom in ecommerce venture funding, the two years(2011 -12) had seen a progressive withering away of additional rounds. Smaller players have had to shut shop, while even larger ones were realising that catching the chimera of profit requires an almost endless source of funding.

�“Take Flipkart, the industry’s leader by far. After having grown at a breakneck speed using over $180 million in venture funding, the company has in recent times been forced to lay off employees, streamline operations, reduce discounts and shipping subsidies, and slash categories in an attempt to bring down the amount of money it loses every month, or ‘burn rate’. Sources say it managed to bring that down from the $8 million to about $6 million over the last six months, with around $80 -85 million still left in the bank. ”

�Brand Value Though not much of an advantage but still would have helped Amazon a bit. Being a successful retailer in USA and a huge experience and brand value in e-commerce market would certainly help in to collect a small customer base easily.

Flipkart Vs Amazon �The largest competitor for Amazon was Flipkart. Amazon knowing it, started marketing techniques to acquire market share. Amazon started with books, because globally, Amazon was known as the biggest bookseller.

�Having launched with books, movies and TV shows to begin with, it was attacking Flipkart’s undisputed area of strength by throwing in ‘introductory’ offers of free shipping; higher referral commissions (10 percent versus the industry’s 5 -6 percent) and lower prices on many books.

�Amazon launched 15 categories in seven months, and already had the largest catalogue of books, e-books, watches, toys and games, and fashion jewellery. �Amazon India made a quiet entry on 5 June 2013, with two categories – books, movies and TV shows, but followed up with a very splashy blitz two months later in August (it offered 66 percent discounts on many books to mark India’s 66 years of Indian independence).

�The first seven months of Amazon (in 2013) and its marketing strategy can be summarised as: 1. 6 June : Launches India Operations as a marketplace, sells only books. 2. 25 June : Launches mobile and accessories, cameras and portable media player stores. 3. 12 August : Computer and accessories stores. 4. 19 September : Entry into fashion and lifestyle.

�It also received government approvals to provide Amazon logistics services in India. This solves and allows Amazon to compete with Flipkart by offering 1 -2 day delivery options. �Amazon India started running front- page spreads touting its next-day delivery service and easy return policy.

�Closer to home, in India, it launched Kirana. Now in March 2015, in Bengaluru, promising delivery of groceries and related items in four hours.

Junglee. com �the offline piece is what gives Junglee its main relevance. Statistics: more than 90% of retail in India is unorganised; e-commerce accounts for less than 1% and organised retail is just 8% of the $500 billion Indian retail sector. Via junglee. com, Amazon is trying to organise retail in India, and bring offline stores to list online. �The big marketplaces like Flipkart and Snapdeal allow only those sellers who are capable of doing business online. Junglee is different in that it also allows sellers who operate only in the offline mode.

Results So far. . . �Amazon, which entered India in June 2013, has stepped up the competition by cutting prices, increasing product categories, launching next-day delivery and kicking-off a high-voltage advertisement blitz. �Launched in June 2013 Amazon has acquired half the number of visitors as on Flipkart in just a small span of six months.

�Amazon started fashion segment in the last quarter of 2014. Amazon India saw phenomenal growth in the watch segment with sales jumping 700% in 16 months. The accessories segment saw a growth of 3000 percent in 16 months, Amazon said. �The Flipkart-Myntra deal comes amid a strong revival of interest in the Indian ecommerce market, but the trigger clearly is the need for consolidation to fight global majors Amazon.

Flipkart-myntra

�Amazon has covered a good percentage of share of the market in a short time. Amazon India sales as of January 2015 is about $200 million (1200 crore). It took Flipkart 7 years to achieve this sales numbers. �Amazon is a financially sound company and Flipkart stands nowhere in front of them. �When Flipkart received $1 billion in funding, Amazon India very next day announced additional $2 billion investment in India, to compete and remain neck-to-neck.

�Amazon , with its deep pockets and uncharacteristically long-term stock investors (who give it a really long rope, compared to most other ecommerce investors), can easily keep increasing its investment in India with nary a blip on its financial operations.

By end of 2014

Still In the Red �Globally, while its sales have been rising, Amazon has been posting huge losses. In the April-June quarter, it posted a net loss of $126 million as against a loss of $7 million in the year-ago period. �Flipkart, which has so far raised ₹ 15, 000 crore, is also yet to turn profitable. Analysts feel that the Indian e-commerce outfit’s gross sales will touch $3 billion this fiscal year. With the market pegged to touch $30 billion by 2020, the stakes are high.

Figures are in INR Crore

Case Study Paytm, Journey from Mobile Recharge to e-commerce market

History �Founded in 2010, Paytm started as a prepaid mobile recharge website. �Currently its business is not only limited to recharge but has expanded as online payment platform including mobile recharges, utility bill payment, wallet payment and wallet to wallet and wallet to bank transfers for many leading internet based companies like Bookmyshow, Makemytrip, Food. Panda, IRCTC and many others.

�It was founded under the implemented idea of Vijay Shekhar Sharma and has got the first mover advantage in the mobile industry. �The name Paytm is supposedly an acronym for Pay Through Mobile. �The company has been backed up by Alibaba group and Ratan Tata. The firm raised $575 million from Alibaba group for a share of 25% in the company.

Recognitions �In 2012, Paytm was recognized as the ‘Most Innovative Startup of the Year’ at the Entrepreneur India event organized by Franchise India. In 2013, the company received several awards, such as Knowledge Faber Best Mobile Wallet Program Award, a special mention in m Billionth Awards in m. Commerce/m. Business category, and MMA Smarties Award for m. Commerce.

What's 'Virtual' about this wallet? �The basic concept is really simple - a virtual wallet just serves as a place to hold some of your money online. You make payments using the money stored in your wallet instead of using a credit card, debit card or net banking, which means your bank account doesn't need to be accessed. Of course, adding money to the wallet still requires you to use one of those methods.

Why would you want to do this? �The biggest reason is probably ease of use - something that is particularly true for mobile users. Unless the site you want to make a payment on lets you save your credit or debit card details, you're going to have to spend a fair bit of time typing them in every time you need to make a payment.

How paytm makes money through mobile recharge? �The primary revenue source is commissions from Telcos which ranges from 2%(for large & Established operators) to as high as 5% (for new & small operators). This again depends on whether you are directly connected to the Telco's recharge platform or are using an Aggregator (like Oxigen, Euronet, Cyberplat). The margins would be lower in case of the latter.

�Since the large operators contribute to the bulk of the txn volume, the average commission earned per txn would typically be in the 2. 5 -3% range. �The average payment gateway charges are typically in the 1. 8 -2% range (will be lower now after the recent 1% cap on debit card MDR by RBI). �The net revenue per txn would therefore be around 0. 5 -1%. And that's the revenue (not profit) a recharge site makes.

Reasons for exponential growth: - Huge untapped market - Convenience - Lure of free coupons - Google ads

Number of searches comparison

New features �Paytm Wallet �Zero commission based mobile marketplace �Online Bargain �Slide and share

Our new Paytm Wallet features are here: transfer money online or deposit cash �The Paytm Wallet makes your life easier! You can load your Paytm Wallet by depositing cash in all Axis and Yes bank branches and by online transferring your money through your bank account at many banks across India.

How it works offline: �All you’ve to do is to fill in the“Pay-in- Slip” (available at all branches) with your mobile phone number that is registered with Paytm as reference number, then submit the deposit slip at the cash counter, and money will be credited into your Paytm Wallet. Important – always mention clearly PAYTM EASYPAY and your registered mobile number on the slip!

How it works online: �The process is simply done through a normal NEFT/RTGS transaction. Access your net banking account, select ‘Bank transfer’ and use your Paytm Wallet as payee. For this, you need to submit a virtual account number (PAYTM + User Mobile Number) and IFSC code with amount and your Paytm wallet account would be credited instantly

A zero commission marketplace �Paytm launched the mobile based markeplace in February 2014 and has now come up with the Seller App with a zero commission model. �What this means is that sellers on the platform don’t need to give a commission to Paytm on sales. Merchants keep all of what they sell. �Other marketplaces like Flipkart and Snapdeal work on a commission based model.

�According to this Firstpost report, Paytm claims to earn revenues of over $500 million now but it is expected that this will jump to $2 billion by December 2015. Half of Paytm’s run rate will then come from the mcommerce marketplace push. And the focus will be on getting more users.

Online Bargain �Paytm launched Shopping app with a revolutionary concept to bargain for a deal before you buy. �With an eye to change the game in mobile commerce in India, the app features shopping in various categories including Men, Women, Kids fashion and Home furnishing along with Mobile & DTH recharge options, which were already available on Paytm.

Slide and Share �A faster way to pay with Slide To Pay & Request Money Transferring money is one slide away! Say hello to slide to pay – transfer money to your friends wallet by simply sliding right. Upon sliding right, the payment will be initiated, all of your money transfers are ready to go at your fingertips.

�Saved cards – new on your Paytm Wallet App for Android. The new feature simply lets you view your credit or debit card simply whenever you make a purchase or payment which saves the payment details to your account for future use. �You’ll also notice, that every transaction becomes now a conversation, where you can directly chat with your friends! You can send reminder messages to anyone and easily type replies to your friends whenever you would like to transfer money or receive money.

E-commerce in India

What is e-commerce? �E-commerce (electronic commerce or EC) is the buying and selling of goods and services, or the transmitting of funds or data, over an electronic network, primarily the Internet. �These business transactions occur either business-to-business, business-toconsumer, consumer-to-consumer or consumer-to-business. The term e-tail is also sometimes used in reference to transactional processes around online retail.

E-commerce ecosystem �Online travel, ticketing etc. �Online Retail �Online marketplace �Online portals classifieds

Indian e-commerce �In terms of size, India’s online retail industry is very small compared with both organised and overall (organised + unorganised) retail in the country. �It is expected the industry’s revenues to go more than double to around 18 per cent of organised retail by 2016 from around 8 per cent in 2013. Yet, its share of the overall retail (organised + unorganised) pie will be just over 1 per cent.

Offline Vs Online Retail Markets

�India’s online retail industry has grown at a swift pace in the last 5 years from around Rs 15 billion revenues in 2007 -08 to Rs 139 billion in 2012 -13, translating into a compounded annual growth rate (CAGR) of over 56 per cent.

Growth of E-retail in India? �Growing Internet Penetration �Rising middle class with disposable income �Payment gateways & logistics �Smooth User Experience

Online Business Model �Marketplace �Self-owned inventory �Private Label �White label

Recent Innovation �Mobile to be the most influential aspect.

Myntra’s move. . .

Business Strategies �Exclusive partnership with leading brands �Expanding Product Basket �Aggressive Pricing �Co. D (Cash on Delivery) �Quicker delivery options �Return policies �Social Media

Concerns In India �Generation and sustenance of traffic �Co. D �Last mile Delivery �Low profitability �Lack of skilled human resource �Tax structuring and regulatory barriers �Cyber security �Customer loyalty

How to maintain visitors to websites? �Work on data from google analytics. Find reasons to improve your weak area through data analysis. �Be active on social media brings a positive outcome �Smooth transition through website plays a significant role.

LARGER REVENUE CONTRIBUTION FROM TIER I, II AND III CITIES �According to a study , Tier II and III cities accounted for almost 57. 0 per cent of the total revenue derived from the various ecommerce product sites, while the remaining 43. 0 per cent came from the eight metro cities. �Similarly, for the service sites as well, tier II and tier III cities accounted for 54. 0 per cent as against 46. 0 per cent by the eight metropolises.

Comparison �The Indian online retailing market is still evolving and certainly has room for growth; e-commerce accounts for just 0. 1 per cent of total retail sales vis -à-vis more than 2. 9 per cent in China. �This number is quite low compared to the online retail penetration enjoyed by developed markets such as the US (7. 0 per cent).

�Geographically, southern India leads with 41. 0 per cent share of the entire Indian e-commerce landscape, followed by western India (27. 0 per cent), as per 2011 numbers. This can be attributed to the high literacy rate in the south compared to the rest of India.

States with least e-commerce penetration Despite the potential of these markets, certain bigger states like the below generate less than 1% online sales each, either due to connectivity issues, laws and restrictions, or even cheating customers: �Kerala �Bihar �Orissa �Madhya Pradesh �Assam

Effect of E-commerce on traditional market

Online vs offline �Online stores are projected to account for only 3% of India's total retail market by 2020, Pw. C said in its report 'e. Commerce in India Accelerating growth'. �Issues such as poor last-mile connectivity, high payment cost, low profitability, regulatory barriers and a dearth of skilled manpower are weighing on online retailers in India, Pw. C said.

�Cash on delivery (Co. D) services impose substantial financial cost for online retailers, as unlike in developed markets, this continues to be a preferred mode of payment in India. Pw. C said profitability for online retailers in the country was affected by free shipping offered to customers and a high rejection rate on Co. D orders. Moreover, customer acquisition costs are rising due to competition by companies with more funds, it said.

Traditional market on backfoot �Over the past 4 -5 years, competition from online retailers such as Flipkart (in books, music and electronics), Myntra and Jabong (in apparel) has eaten into the revenues of physical retailers. Specifically, competition in the last three years has been intense compelling many to go online even as their net store additions slowed.

�At an aggregate level, operating and net margins of companies such as Shoppers Stop, Cantabil, Kewal Kiran, Provogue, and Trent have all shown a declining trend. Even Net Store Additions CRISIL Opinion parameters such as same-store sales growth, conversion ratio and sales per square feet have been on a decline. For example, in the case of Shoppers Stop, sales per square feet have declined from Rs 8, 518 in 2010 -11 to Rs 7, 837 in 2012 -13, while the conversion ratio has come down from 24 per cent to 22 per cent over the same period.

�To be sure, the surge in online retailing is not the only reason for the weak performance of traditional retailers. There are other factors such as economic slowdown and local competition, but what’s irrefutable is that the online upstarts are chomping away business.

�The fact that online discounts and sales have come to dictate pricing in India is widely known. While customers benefit from reduced pricing and increased convenience, the extent of the impact that online retailers like Flipkart and Amazon are having on the day-to-day operations of brick-and-mortar stores is something very few have paused to think about.

Traditional retailers being forced to move online �To stay in the game, traditional retailers have been working on their internet strategy. For instance, Shoppers Stop, which started its online store in 2008, has boosted presence and improved features and user interface to bring its online visage on a par with leading ecommerce websites. The company is also trying to leverage its physical network by giving customers the option to return products at its stores. Apart from Shoppers Stop, Croma has an online store with options such as store pickup and cash on delivery.

Info from USA �What we are witnessing in India today played out in the US about a decadeand-a-half back. That was when today’s big daddies such as e. Bay and Amazon debuted. In the next 4 -5 years, by the turn of the century, they had become big enough to pose a threat to traditional retailers such as Wal-Mart, forcing them to come up with online strategies of their own.

�Similarly, physical retailers in India will have to establish their presence online quickly. And, with the right strategies, they can even compete effectively. For instance, to tackle the queue problem at its stores, Wal. Mart allows customers to shop online and opt for either home delivery or store pick-up. Today, Wal-Mart is among the top 5 online retailers in the US with estimated revenues of USD 10 billion in 2013 from the online segment alone.

Things to look out before entering the Market �Market Size �E-commerce readiness �Scope of growth �Barriers to entry �Competition �Technical issues

FDI : How it matters? �In September 2012, the Indian government allowed 51% FDI in multibrand retail, subject to certain conditions. �However the Department of Industrial Policy and Promotion (“DIPP”) of the Ministry of Commerce and Industry later clarified that this mandate did not apply to B 2 C e-retail and would apply only to retailers with brick-and-mortar operations.

Disadvantages �there will be loss of jobs and creation of a monopoly by multinational companies. �Allowing the entry of inventory-based large foreign e-retailers like Amazon and e-Bay may shrink Indian entrepreneurship and the Micro, Small and Medium Enterprises (“MSMEs”) sector.

�It is apprehended that organized retailers would source their goods from cheaper markets abroad, which will adversely affect the Indian manufacturing sector.

Favouring FDI �creation of infrastructure, more jobs and better consumer service. �The move will reduce the need for middlemen, lower transaction costs, reduce overhead charges, and reduce inventory and labour costs.

�the spread of e-commerce in the rural and suburban India will provide choices to the growing number of customers there who have disposable income and are willing to spend for their choices. It will also help the rural economies integrate faster with the national economy. �The government‘s discussion paper observes that e-commerce has the potential to contribute more than 4% to India‘s GDP by 2020.

�If and when the new government introduces FDI in B 2 C e-retail, it will be interesting to see the entry routes, FDI caps and limits on the percentage of sourcing from domestic manufacturers. Supportive foreign investment regulations will help in easing capital constraint and building a constructive growth environment for the e-retail industry.

Bibliography : �Forbes. com �Google images �http: //www. pwc. in/assets/pdfs/publicati ons/2014/evolution-of-e-commerce-inindia. pdf �http: //www. crisil. com/pdf/research/CRI SIL-Research-Article-Online-Retail. Feb 14. pdf �https: //www. pwc. in/en_IN/in/assets/pd fs/publications/2015/ecommerce-inindia-accelerating-growth. pdf