Upload
disembrains
View
220
Download
0
Embed Size (px)
Citation preview
8/6/2019 College Mid Term Report
1/27
Manipal Institute of Technology
Department of Mechanical & Manufacturing Engineering
Name: Anuj Agarwal
Reg. no. : 70909238
Branch : Mechanical
Date of commencement of project: 17 th Jan 2011
Project Title: Online Retail Market UK
Company Name: Global Analytics
External Guide (Company) : G.Karthikeyan
Internal Guide: Amar Murthy
Contact number: (Present) +91-8056133497
Mail Id.: [email protected]
8/6/2019 College Mid Term Report
2/27
Online Consumer Credit Market
In UK
SYNOPSIS
1.Topic:
Online Consumer Credit Market in UK
2. Need for the project:
According to various estimate, nearly 4 Billion individuals living in the world are
underbanked i.e. a marginal access to banked facilities & often rejects by banks for
8/6/2019 College Mid Term Report
3/27
various bank products The underbanked buy money orders at convenience stores, cash
checks at check-cashing services, and borrow money through payday lending services or
rely on alternate financial services In each case they pay very high fees.
Through this project I would like study the customer credit market in UK and develop
various financial tools to enable the underbanked people avail loan at affordable rate of
interest and through flexible repayment modes.
3. Objective :
Research the financial needs of the underbanked people and develop tools to satisfy the
needs by providing short-term loans with multiple benefits, including flexible payment
alternative and access to credit at fair terms.
4. Methodology:
Analysis of Market Trends & Distribution Channels.
Applications of Statistical Methodology in Market Research
Applied Business Forecasting.
As a part of my project I would be required to thoroughly make use of concepts learned
in subjects like Discrete Mathematics, Management Information System, Operations
Research & Management, Engineering Economics and Organizational Behavior.
8/6/2019 College Mid Term Report
4/27
Market Research
Brief description about Underbanked :
The underbanked population is that segment of the market which does not
have access to regular bank services. These customers generally have an
insufficient credit rating due to which they are unable to get credit from
the regular financing institutions (like Banks etc.)
8/6/2019 College Mid Term Report
5/27
This segment of the market is mostly untapped, and has huge potential.
Since these customers are unable to get credit, they are willing to take high
interest loans to make purchases to satisfy their requirements.
In seeking ways to serve the under-banked, institutions are likely to derive
both financial and social benefits. The under-banked represent a large
marketas many as 40 million householdsand many under-banked
consumers have a strong interest in developing or expanding relationships
with mainstream financial institutions. Many want to improve their
financial health. For example, they want to get out of debt.
We would be targeting these customers specifically and provide them with
alternative ways to purchase products online.
UK demographics: A glance
Table 1 : Household expenditure by income, UK
8/6/2019 College Mid Term Report
6/27
8/6/2019 College Mid Term Report
7/27
Chart 1: Alternative Financial products usage
Source: Research report "Illegal lending in UK"
8/6/2019 College Mid Term Report
8/27
8/6/2019 College Mid Term Report
9/27
UK unbanked demographics: A glanceChart 2: Income Declines of Underbanked
Household type
Chart 3: Composition of Unbanked Households
8/6/2019 College Mid Term Report
10/27
8/6/2019 College Mid Term Report
11/27
Benefit types
Chart 5: Benefits Received by Underbanked
8/6/2019 College Mid Term Report
12/27
Understanding the Under-banked and Need for Alternate Payment Options:
Various studies say that there are 40 millions households which are under-banked.
The under-banked community behaves differently from their banked counterparts
and represents a different set of markets, likes and dislikes, financial situations.
They live in a cash economy, with many of their financial decisions driven by the
realities of their daily happening . Incomes are uncertain and they do not posses
strong assests and having cash in hand is comfortable for many.
Under-banked consumers are interested to learn in ways in which their finances
can be managed. Under-banked consumers need help getting out of debt and
learning how to use loans to build productive assets
In seeking ways to serve the under-banked, institutions are likely to derive both
financial and social benefits. The under-banked represent a large marketas
many as 40 million householdsand many under-banked consumers have a
strong interest in developing or expanding relationships with mainstream financial
institutions. Many want to improve their financial health. For example, they want
to get out of debt.
The under-banked have a marginal access to banked facilities & often rejects by
banks for various bank products The underbanked buy money orders at convenience
stores, cash checks at check-cashing services, and borrow money through payday
lending services or rely on alternate financial services In each case they pay very high
fees.
Conclusion :It is seen that due to this inability to be eligible to get loans from the traditional banks the
under-banked population isnt able to buy retail products. So by the research of the
current available financing options and retail scenario we can develop tools to satisfy the
needs by providing short-term loans with multiple benefits, including flexible payment
alternative and access to credit at fair terms.
8/6/2019 College Mid Term Report
13/27
UK Online Retail Market Overview
Over 50% of UK adults shop online
Online shopping constitutes about 10% of total retail sales in UK
UK online consumers spend about three times as that of US consumers
Currently 28 million people shop online in UK
Expected to grow with a CAGR of 10% for next five years
By 2014, about 37 million consumers shop online worth 56 billion pounds
Around 48% of UK consumers use the internet to make monthly purchases
Books, event tickets and clothing are top three categories in Europe
Three new emerging trends in online retail market in UK are: multichannelshopping, social commerce and mobile commerce
More than two-thirds of UK online consumers have a mobile phone that could be
connected to Internet
Around 50% of mobile internet shoppers in UK have purchased computers and
laptops
Retail Market
The UK retail market is set to increase in size by 15% over the next five years, taking its
value to just over 312bn.
Source: Datamonitor
UK Online Retail Market
According to the research conducted by the Centre for Retail Research for Kelkoo, UK
Retail sales totaled 38bn in 2009 , compared with a total for the whole of Europe of
127.7bn in 2009 .
According to Verdict research, 56.8% of online spenders are middle class and upper-
middle-class consumer in UK.
8/6/2019 College Mid Term Report
14/27
Retail Sales in UK
Between December 2009 and January 2010 total retail sales volume decreased by
1.8%, the largest decrease since June 2008.
Household goods stores showed the largest decrease since January 1988,
decreased by 18.9%.
Non-store retailing decreased by 3.2%.
The volume of retail sales in January 2010 was 0.9% higher than in January 2009.
Non-store retailing increased by 17%, the largest increase since, September 2004.
Retail Market Forecast UK
Retailing is the larger indicator of the economy recovery. It is expected that by
April/May'10 the retail sales would revive. Here is the forecast from Center for Retail
Research, UK ( http://www.retailresearch.org/ ):
Retail spending April/May 2010 - increases by 50%
Retail spending 2011 - increases by 20%
Forecast (2009-10, in volume, allowing for inflation)Category Increase/Decrease (%)Retail sales decrease by 0.8%-1.4%Food & drink increase by 0.4%Clothing and Footwear decrease by 2.8%Household, consumer goods decrease by 4.7%DIY/hardware decrease by 6.0%Entertainment decrease by 1.9%Books & stationery decrease by 1.9%Other decrease by 1.0%
Internet sales increase 55%*
*(includes retail merchandise only, not tickets or travel )
Online Retail Spending 1997-2013
http://www.retailresearch.org/http://www.retailresearch.org/8/6/2019 College Mid Term Report
15/27
8/6/2019 College Mid Term Report
16/27
Online Retail advantages:
The main advantage of shopping online was the ability to use it at any time (55%)
and that it was less time-consuming (51%)
Online areas for improvement
Nearly a third of respondents highlighted that there was nothing to improve on the
websites that they were using to shop online. The main concern expressed was
regarding the need for better security of websites
Online Retailing Trends
The BRC-Nielsen Shop Price Index shows the price of shop goods were up 1.2%
from a year ago.
Sales over the internet account for less than 7% of total retail sales, despite strong
growth in recent years.
Coremetrics publishes some interesting aggregate data showing that the average
conversion rate across all industries in the UK is 3.04% with conversion rates
from natural search slightly higher at 3.16% for March 2009.
Average no. of items 2.35Average order value 57.09 pounds
Shopping cart conversion rate49.90%
Shopping cart abandonment 50.10% (65.61% in the US)
New visitor conversion rate 3.04%
People in the US people are buying 5.8 items per order compared to only 2.3 in the
UK.
Online shoppers were growing in confidence, with the proportion of them prepared tospend more than 1,000 or more on a single transaction rising from 12% in 2008 to
25% in 2009
UK consumers spent 38bn online in 2009, or an average of 1,102 per shopper,
according to the Centre for Retail Research (CRR).
Online sales now account for almost 10% of total retail sales in the UK
8/6/2019 College Mid Term Report
17/27
Additional stats on UK online retail market:
Online retail market in UK is expected t grow at a 10% CAGR over the next five
years, according to a recent Forrester study
UK online retail will hit 40 billion by 2014 and the number of online shoppers in
Britain will increase from 31 million to 40 million
By 2014, 37 million UK online buyers will spend 56 billion online (currently 28
million consumers)
48% of UK consumers use the internet to make a monthly online purchase thats
the highest number in Europe, with the European average being 32%
Over 50% of British adults shop online
Online shopping account for about 10% of total retail spending (excluding
groceries) in UK
Online shoppers in UK spend about three times that of US counterparts
Three emerging trends in UK online retail market:
1. Multichannel Shopping:
Social networking, gaming, text messaging, interactive TV, etc., are taking time
away from traditional media
2. Social Commerce:
With roughly 8% of all retailers' traffic coming from social networking sites in the
U.K. in fourth-quarter 2009 (and growing fast), marketers are starting to pay
attention. Retailers are engaging customers with reviews, ratings and referrals from
acquaintances, which seem to have a positive impact on conversions and loyalty
3. Mobile Commerce:
With faster networks and less apprehension around using online payments,
European consumers are likely to be ahead of their U.S. counterparts in this segment
8/6/2019 College Mid Term Report
18/27
The average UK household spends 980 a year online representing 10% of their
annual retail bill The most popular products are holidays music and films Research by Accenture found that poor customer service and limited product
offerings in the high street are increasing online shopping in the UK
Reasons for shopping online
65% avoid the queues/people
64% convenience
63% cheaper than the high street
60% less stressful
53% purchase from stores further away
54% easier to find bargains
91% have purchased an item before trying it on
71% happy to purchase from a non high street store
55% have purchased from a store they have never heard of before
8/6/2019 College Mid Term Report
19/27
Average six month spend per head online by category 1
Category
PayPal research
2009
PayPal research
2010
Year on year
differenceTravel 939 960 + 21
Financial services 764 748 - 16Grocery, food & drink 454 503 + 49Major purchases (e.g.
white goods, cars) 495 461
- 34
Technology 383 342 - 41Furniture and homewares 245 272 + 27Clothing 153 200 + 47General entertainment 132 131 - 1Small electrical appliances 101 122 + 27
Product Category Growth (2009)
Clothing, Footwear and Accessories
- Accessories
- Footwear
14%
68%
32%
Electricals 23%
Beers, Wines and Spirits 9%Gifts 56%
Source: Capgemini Report
Consumer Spending Patterns
Average Consumer spending in UK:
1 Source: https://www.paypal-press.co.uk/Latest-News/Over-five-million-adults-plan-to-
increase-their-spending-this-year-as-Britain-creeps-out-of-recession-cf.aspx
https://www.paypal-press.co.uk/Latest-News/Over-five-million-adults-plan-to-increase-their-spending-this-year-as-Britain-creeps-out-of-recession-cf.aspxhttps://www.paypal-press.co.uk/Latest-News/Over-five-million-adults-plan-to-increase-their-spending-this-year-as-Britain-creeps-out-of-recession-cf.aspxhttps://www.paypal-press.co.uk/Latest-News/Over-five-million-adults-plan-to-increase-their-spending-this-year-as-Britain-creeps-out-of-recession-cf.aspxhttps://www.paypal-press.co.uk/Latest-News/Over-five-million-adults-plan-to-increase-their-spending-this-year-as-Britain-creeps-out-of-recession-cf.aspx8/6/2019 College Mid Term Report
20/27
UK consumers topped the online retail spending in 2009 with an average annual spend of
1,102, (on an average 37 items each) compared to a European average of 774 on 20
items with an average cost per item of 39.
25% of UK shoppers are now prepared to spend 1,000 or more online in a single
transaction.
57% of UK consumers made online purchases, almost 20% higher than the
European average of 38%.
UK Retail Spending (using Debit cards)
2005 2006 2007 2008 %change 07-08
88.9bn 98.0bn 108.7bn 116.1bn 6.80%
UK Total Consumer Spending (using Debit cards)
2005 2006 2007 2008 %change 07-08169.5bn 195.5bn 224.0bn 245.4bn 9.50%
8/6/2019 College Mid Term Report
21/27
Major UK Retailers Finance Providers:
Retailer Finance Provider Year of Launch
Marks & Spencer M&S Money (in-house) (now
acquired by HSBC bank)
2003
John Lewis HSBC April 2004
Tesco Royal Bank of Scotland NA
Sainsbury HBOS NA
Debenhams GECF 2004
ASDA GECF 2004
Harrods GECF 2003
House of Fraser Barclay card June 2007
8/6/2019 College Mid Term Report
22/27
LAYAWAY
Key facts about market UK:
There are 24.5 million prepayment transactions made annually(2008-09) by 20
million UK consumers.
Nearly one in ten consumers who have made a prepayment over the last two
years(2008 and 2009) did not receive their order, which is around 1.8 million
people. Company insolvency is the reason given in one fifth of these cases.
The 1.8 million people who did not receive their order/product, just under half did
not receive any money back, with the average loss reported 242.17 each time.
The sectors where prepayment loss is most prevalent are:
1. Electrical goods, computers and domestic appliances (15 per cent of all
failed prepayments).
2. Books, music or other small personal entertainment items (15 per cent);
3. Clothing and textiles (12 per cent);
4. Furniture (11 per cent); and
5. Booking a flight, hotel or holiday (11 per cent).
6. Other sectors accounted for 25 per cent of all failed prepayments Overall, online sales account for 61 per cent of non-received prepayment
purchases.
Popular companies which went insolvent in the recent past.
Christmas Club savings firm Farepak, failed in Novemebre 2007 with some
38m of customers savings been taken.
Solar panel firm Solar Technik collapsed in March 2007, owing customers
around 265,000 in deposits and claims.
Money transfer firm First Solution Money Transfer was wound up in November
2007, owing some 3 million to 2,000 people in the Bangladeshi community of
east London, although a subsequent rescue package offers the promise of refunds.
8/6/2019 College Mid Term Report
23/27
Wedding list gift firm Wrapit ceased trading in August 2008, leaving 2,000
couples at risk of losing out on their wedding gifts and 100,000 guests at risk of
not getting their money back.
30,000 customers who booked holidays with XL Leisure Group , a travel
company which collapsed in September 2008, lost a total of 20 million.
Retailer MFI went into administration in November 2008, leaving around 30,000
customers with outstanding orders. Despite the company initially indicating that
customers would receive refunds, this now seems unlikely to happen.
Typical layaway plan in UK
Layaway period is 3-6 months
25% deposit (non-refundable)
Grace period of 7 days for customers who defaults in installments
Cancellation fee $25 (since no standard cancellation charges visible in uk, taking
reference from us market)
Monthly installments are based on purchase price.
Here's an example: laptop price - 300, deposit - 75 (25%), amount to be paid
in installment - 225, layaway period - 6 months, monthly installment - 37.50
( 75 for a 3 month plan)
Mark-up prices
Bluehippo was selling 'hp mini 5101' for $466.76, which was marked up by 10-15% (hp
mini 5101, which is sold in two configurations at $339 and $425)2
.
2 Reference: Http://Www.Robertjfunches.Com/Blog/2009/11/Putting-Computers-On-One-Year-Layaway/
http://www.robertjfunches.com/blog/2009/11/putting-computers-on-one-year-layaway/http://www.robertjfunches.com/blog/2009/11/putting-computers-on-one-year-layaway/8/6/2019 College Mid Term Report
24/27
Analytics
8/6/2019 College Mid Term Report
25/27
Process Flow Diagram
Customer Pre-validation Rules Identity data providers-Credit Data Providers -
Treatment Wise Strategy How much amount to be paid Signing of agreement
Payment Collections
Pre-Validation Rules :
Preliminary checks to ensure whether the data is as per the specifications. Some of the checks are as follows :
o All the mandatory fields are populated like name, address. D.o.b, accountnum, email-id ..etc
o Whether the customer is employed or not.
o Requested loan amount /monthly income meets the required values.
Identity data providers:
Identity data providers are companies that provide validation of the data provided
by the customer. Companies get the validation done to ensure that the customer is
who he says he is. Validating the information provided by the customer against
electoral roll, British telecom directory and their already stored data does this.
These companies display the results instantly and provide a lot of additional
details when available including length of residency, age, listed telephone
numbers, other occupants, property description and property purchase price
Credit data providers:
There are various companies like Experian, Callcredit.These data providers get
back to us with an aggregate credit score which we use in our underwriting.
8/6/2019 College Mid Term Report
26/27
Treatment wise strategy:
Various Models are put in place to calculate an aggregate score which predict whether the
customer is going to default on his loan or not.
Each model consists of several variables that reflect the credit history of the customer and
also his general behavior in the past. The following is our decision tree or a treatment
wise strategy.
8/6/2019 College Mid Term Report
27/27
Stern Checks: Employment Check and Debit Card Check A thorough Process
Moderate Checks: Either an Employment check or a Debit Card Check
Lenient Check: Only a simple manual Check