Ecommerce market in India

E-commerce is growing at 35-40 per cent CAGR.Consumption trends across the country indicate it could be poised for a boom, but not without its concomitant bust and consolidation story. What are the synergies expected especially following the explicit policy declaration barring FDI in e-commerce? Bhavya Misra explores

Shutterstock

Dot OutDot In

LEAD FEATURE E-Commerce

66 SHOES & ACCESSORIES / october 2012

▶ A pair of footwear sells every 33 minutes ▶ A piece of jewellery sells every 3 minutes ▶ A watch sells every 7 minutes ▶ Ebay India has over 3 million registered

users from 3,311 cities covering all 28 states and 7 Union Territories

Ebay

▶ Top 5 non-metro cities which generate maximum orders are Shillong, Jaipur, Chandigarh, Hyderabad, Cochin

Yebhi

▶ 10,000+ SKUs of shoes on the website ▶ 200+ footwear brands ▶ 100+ accessory brands

Jabong ▶ Footwear is the largest and most popular

category followed by clothing and accessories

▶ Sells the maximum number of footwear online every single day to over 480 cities.

▶ Retails over 500 footwear and accessory brands

▶ Top non-metro cities (apart from Bangalore) which generate maximum orders are Hyderabad, Pune, Ernakulum, Jaipur, Ahmedabad, Guwahati and Chandigarh

Myntra

▶ 25-35 pairs of footwear sold per day ▶ Top 10 non-metro cities (including

Bangalore) which generate maximum orders are Hyderabad, Pune, Ernakulam, Jaipur, Ahmedabad, Guwahati and Chandigarh

▶ Top five most selling categories in non-metros are jewellery, tops, shoes, dresses, belts

Shopnineteen

▶ Receive orders from more than 580 cities across the country.

Yepme

Ebay

Top 10 brands that receive max traffic on eBay: Bata, Reebok, Puma, Fastrack, Ray BanBrands most searched on eBay: Ray Ban, Reebok, Puma, FastrackMost selling footwear brands: Reebok, Bata, PumaTotal nos of footwear & accessory listings: More than 38,000 listings in shoes & accessories live on eBay India presently. A piece of footwear sells every 33 minutes.Total manpower: 100 | Customer service & business development teams: OutsourcedTechnology & supply chain partners: Inhouse team of global technology experts

The aforementioned pointers indicate the reach and increasing popularity of e-commerce. But, this is only the tip of the iceberg. E-tailing in the country is poised for a boom, but not without its concomitant bust and consolidation story. There is a big question mark on whether e-commerce sites are actually making money. The pitch actually turned queer following the government notification that “retail trading, in any form, by means of e-commerce, would not be permissible, for companies with FDI, engaged in the activity of singlebrand or multibrand retail trading,” However attempts to elicit response from the players quoted hereafter remained futile.

A recent report by Forrester Research, ‘Trends in India’s eCommerce’ states, “E-commerce revenues in India will increase by more than five times by 2016, jumping from US$1.6 billion in 2012 to US$8.8 billion in 2016. While US$8.8 billion is still less than other countries in Asia-Pacific, such as China and Japan, India’s CAGR is much higher than any other country that we forecast in the region.”

“India is one of the fastest growing internet markets in the world and is currently at 120 million. It is expected to touch 300 million by 2015. The online retail market stands at around `3,000 crore and is growing at an annual rate of 35 per cent. According to Assocham, the market size of online retail in India is likely to touch `7,000 crore by 2015 owing to increasing internet penetration,” says Ashutosh Lawania, Co-Founder & Head-Sales and Marketing at Myntra.com, which was incepted in 2007.

“Considering the participation of small towns in the big consumption story of India, increasing urge to find better value for money products and lack of infrastructure and financial support to mainstream retail channel (offline), I anticipate a growth of around five times from 2012 to 2016 in e-commerce space which would mean a projected revenue of more than $8bn with a CAGR of 57 per cent. Online apparel contribution is anticipated at 30 per cent to this figure which would mean somewhere close to US$2.5bn,” Gobind Singh Pahwa, Founder and Chairman of Shopnineteen.com states. Shopnineteen.com was founded in March this year.

Stop Press: Government Notification• Retailtrading,inanyform,bymeansofe-commerce,wouldnotbepermissible,forcompanieswithFDI,engagedintheactivityofsinglebrandretailtrading.• Retailtrading,inanyform,bymeansofe-commerce,wouldnotbepermissible,forcompanieswithFDI,engagedintheactivityofmultibrandretailtrading.

Anwendung auf dunklem Untergrund Anwendung auf weißem bzw. sehr hellem Untergrund

67october 2012 / SHOES & ACCESSORIES

Mukul Jain, managing director of Jabong.com corroborates Lawania: “The e-commerce space in India is at a very nascent stage currently. With internet population expected to grow from current 100-120 million to 300-400 million users in next 4-5 years, and with increasing share on online shoppers within this population, e-commerce is expected to grow exponentially.”

Investments, mergers & acquisitionsAccording to the Forrester research report, “In 2011, venture capitalists invested US$177 million in

e-commerce in India — more than recent estimates of eCommerce investment in Russia in 2011, for example.”

“From a revenue perspective, India is on par with other early stage e-commerce markets such as Mexico, while substantially smaller than more mature online retail markets such as Brazil and China,” the report adds.

“From the point of view of investments, I believe, the honeymoon phase is over. Investors are no more investing in every second venture and laying a strong emphasis on a sustaining business model with adorable passion to make it successful,” says Pahwa of Shopnineteen.com.

“E-commerce is one of the hottest and fastest growing industries in the country today and has generated a lot of attention. Almost 15-20 new e-commerce firms are setting up shop every alternate month. Having said that, we expect consolidation in the market in the next 10-12 months as most of them will not make it big. Investors are closely tracking this industry and will be keen to partner with companies that have a strong business model in place,” Lawania says.

Manmohan Aggarwal, CEO of Bigshoebazaar.com and Yebhi.com states, “The e-commerce space in India will see consolidation with emergence of few giants and several niche portals catering to specific needs and consumer base. India will remain attractive from an investment point of view as the consumer market is huge and is nowhere close to saturation point.”

Jain from Jabong states, “A number of players have entered the Indian e-commerce space even though it is a volatile market as consumer preferences are changing on an everyday basis. The right approach will be to sustain consumer interest in order to maintain the investment attractiveness of this market. Being a new entrant we have witnessed tremendous growth in a very short span of time. In a highly competitive market like this, being selective on the medium that you choose and adopting innovative and creative strategies is the key.”

Growth storyHaving said that, how many of these players are actually looking at a prospective organic or inorganic growth?

Lawania states, “Myntra has received three rounds of funding so far totaling upto $40 million from Tiger Global, Accel Partners, Indo US and IDG. While it is too soon to comment on the M&A scenario in e-commerce, we are open to inorganic growth opportunities.”

Pics

:Sho

pnin

etee

n

Bagskart

Shopnineteen



Amrinder Dhaliwal, CEO, Donebynone states, “M&A is a strategic and business decision driven by the need to grow inorganically and to provide a reasonable upside/exit to investors. We do not see a wave of such deals, but there certainly would be opportunity buys and exits.”

“We have a long-term vision for our brand and would continue to invest in its growth,” he further informs.

Ishita Swaroop, CEO & Co-founder of 99Labels.com says, “We have received a funding of $3.5 million from Info Edge in the past. Info Edge owns and manages some of the best known brands on the internet in India— Naukri.com, Jeevansathi.com, 99acres.com, Shiksha.com apart from Quadrangle – an offline executive search firm as well as Naukri

Gulf. There is always consolidation in spaces where there is non linear fast growth and this industry is rapidly growing and changing. We haven’t given acquisition or stake sale a thought as of now.”

Peyush Bansal, Founder & CEO, Valyoo Technologies the owner of Bagskart.com, Lenskart.com, Jewelkart.com and Watchkart.com states, “Valyoo is backed by IDG Ventures, a US$150 million technology venture capital fund in India that is behind companies like Myntra.com, Ozone Media and others. We have got initial funding from IDG Ventures and have raised US$4 million to work on additional brands as well as to train customer service representatives. We don’t have any plans to do the same as of now, but if we ever do, we would do it for

the company and not for a particular brand.”Chaitanya Aggarwal, Founder & CEO, Juvalia

& You, a recently launched portal for fashion jewellery under the Smile Group, says, “We have been incubated by Springstar and have received a comprehensive seed round of funding. The opportunity for us to acquire a brand is limited in this category as there are really no national level players. If that was the case, we would definitely be interested.”

Aggarwal of Yebhi.com, which recently acquired Stylishyou.com — which shut down post one month of acquisition — says, “Mergers and acquisitions are on the rise as the space consolidates; these changes are good as major players with

Myntra

Top selling footwear brands: Puma and Nike closely followed by Adidas and FilaTop selling accessory brands: Ray Ban, Fossil, Fcuk, American Tourister, Boss, Baggit, EspritLargest selling category: Footwear, closely followed by clothing and accessories.Total nos of footwear & accessory brands selling online: Over 150 footwear and accessory brands.Total nos of SKUs: Stock over 25,000 products.Top 10 non-metro cities generating maximum orders: Hyderabad, Pune, Ernakulam, Jaipur, Ahmedabad, Guwahati and ChandigarhTop 5 brands which sell the most in non-metro cities: Nike, Puma, Fila, Adidas and United

Colours of BenettonTop 5 categories which sell the most in non-metro cities: Footwear is the most popular category and amounts to approximately 45% of the entire sales. This is followed by apparel for men and women and accessories such as watches, perfumes, bags and wallets. Also recently launched cosmetics and sarees, are seeing fast uptake.Top 5 footwear brands which sell the most in non-metro cities: Nike, Puma, Fila, Adidas and ConverseTop 5 most sold accessory brands in non-metro cities: Nike, American Tourister, Fastrack and Baggit

Shutterstock



superior technology and processes will be able to provide superior service quality and experience.”

“Each acquisition that we make is carefully considered. We have to ensure that the benefits in technology, consumer base, personnel and services is justified by the cost of acquisition,” he adds.

Abhimanyu Lal, Head-Category Management, Ebay India, states, “Globally, Ebay only looks at acquisitions that help us enhance our technological expertise, helps us gain geographic expansion or helps us enter or enhance a new business area.” It may be mentioned that Ebay has a different business model and operates as a marketplace or an online person-to-person trading platform where sellers list their products to reach out to wider masses. The portal essentially operates on volume of demand and consequent capability to indulge in discount selling.

“If you look at the e-commerce industry, sustainability is a major

challenge unless companies have a clear business model. Multiple players engage in deep discounting that gets them initial traction and volumes but at the cost of margins. Eventually, to recover from the hit, companies need to increase their price which drives deal hunters away. Non sustainable business models and reduced margins force companies to merge with larger players who have financial muscle and expertise to make this business profitable and sustainable. The industry will see a lot more consolidation in the near future. This has happened in a large way in daily deal sites,” Lal further states.

ChallengesAfter pumping nearly half a billion dollars in the sector last year, the ‘Group Buying bubble’ went bust with the exit of some of the most renowned brands. While the reasons for that may have been different, the fact remains that any e-commerce business, worldwide, is prone to a peculiar set of challenges.

Jabong

Total nos. of footwear and accessory brands: 200+ brands of shoes on our website and around 100+ brands for accessoriesTop selling footwear and accessory brands: Some of the major brands are Adidas, Puma, Reebok, Nike, Red Tape, Clarks, UCB,Dolce & Gabbana, DKNY, FCUK, Calvin Klein, Nautica, Burberry.Technology & supply chain partners: InhouseTotal nos of SKUs: 4,000+ SKUs of accessories and 10,000+ SKUs of shoesTop 10 non-metros generating maximum demand: Bangalore, Hyderabad, Pune, Ghaziabad, Gurgaon, Kamrup, North Goa, Khorda, Chandigarh, LucknowTop 5 most selling categories in non-metros: Women’s apparel, accessories, men’s apparel, men’s footwear, women’s footwear

Yebhi

Top selling footwear and accessory brands: Puma, Adidas, Casio, Blanca, Guess, Aiva and SamsungTop 5 brands which sell most in non-metros: Adidas, Fila, Aiva, Navyfont, BlancaTop 5 most selling accessory brands: Arrow, Aiva, HiDesign, Fastrack, LavieTop 5 most selling categories in non-metros: Sports shoes, mobiles & tablets, electronics & home appliances, women wear, handbags & backpacksTop 5 non metros generating maximum orders: Shillong, Jaipur, Chandigarh, Hyderabad, Cochin

Shutterstock



Shopnineteen

Most selling category: Apparel (tops, dresses and bottoms) sell the maximum contributing close to 40% of the entire sales.Top 10 non-metros generating maximum orders: Bangalore, Hyderabad, Pune, Chandigarh, Jaipur, Bhubaneshwar, Lucknow, Ahmedabad, Guwahati, DehradunTop 5 most selling categories in non-metros: Jewellery, tops, shoes, dresses, beltsTotal nos of SKUs: 750 different styles across 8 product categories. Shoes form close to 23% of overall sales figure.Total manpower: 16 employees including executive level staffTechnology & supply chain partners: Working with renowned courier companies such as Blue Dart, DTDC, Aramex, First Flight, Chhotu Couriers

99Labels

Total nos of footwear and accessory brands selling online: 500+ brand partners Top selling footwear and accessory brands: Ed Hardy, Miss Sixty, D&G, Red Tape, Nike, Puma, Catwalk, Reebok, Adidas and accessories from Coach, Guess, Michael Kors, D&G, DKNY, Satya Paul, Valentino, Christian Lacroix Brands receiving max traffic: Ed Hardy, Miss Sixty, D&G, Red Tape, Nike, Puma, Catwalk, Reebok, Adidas and accessories from Coach, Guess, Michael Kors, Ferre’, D&G, DKNY, Satya Paul, Valentino, Christian LacroixTotal manpower: 100+Technology & supply chain partners: Inhouse

“Inventory based e-commerce in India is extremely capital inefficient,” Avnish Bajaj, boss of Matrix partners, a VC firm was quoted as saying in a media report.

“In India, stocking inventory for 60 to 90 days with an annual sales target of US$200m requires working capital of about US$40m-US$50m,” he further added.

To top it all, banks are still reluctant to lend to companies with untested business models, almost all of it being financed by fickle equity. To secure repeat business, most portals offer incredibly low prices, payment by cash on delivery and, nearly always, free shipping. Consumers love it, but companies are scratching around for ways to shed the operational burden. Ironically, the very things that have propelled e-commerce in India could lead to its downfall.

Cash on delivery (CoD), as a matter of fact is by far the most popular mode of selling online. These range from almost 50-80 per cent of the total orders placed online. This also leads to a considerable rate of return and consequent revenue loss for online retailers. For Yepme.com, CoD constitutes 80 per cent of the total orders placed. For Myntra, it constitutes almost 60 per cent while for Juvalia & You and Donebynone it is 80 per cent and 50 per cent respectively.

According to Jain of Jabong.com, CoD method has a direct correlation with consumer trust. “Cash

on Delivery is a special feature created to gain trust of customers. Even today, a lot of people are not comfortable giving out credit card details over the internet. The first time users generally use CoD but we have seen that repeat buyers generally use credit cards as by then they have already built trust on the brand,” he says.

Jabong.com, Jain informs, has also introduced a ‘Card on Delivery’ method to battle out the lack of trust related to security of online payments prevailing among Indian consumers. “We have noticed that a person may not be confident revealing the card details online but is confident swiping the card.”

For Ebay however, the scenario is surprisingly different and would bode well for those aiming to stick around in the e-commerce business. “Ebay India offers various options such as payments via debit cards, credit cards, net banking, EMIs and cash on delivery. Out of all these methods, cash on delivery is the least used method, comprising less than 5 per cent of all our payments. This suggests the trust levels of consumers and their willingness to shop on trusted sources such as Ebay,” Lal says.

Online vs OfflineThe next moot point is whether Indian online retail industry, growing at an annual rate of 35-40

per cent, can possibly take on brick and mortar retailing which is growing at 15-20 per cent CAGR. Early March this year, American consumer electronics retailer Best Buy shut down 50 stores to open 100 small mobile locations across the USA. The move was primarily motivated by two emerging trends in the US – sales of TVs, digital cameras and videogame consoles had weakened, and sales of tablet computers, smartphones and e-readers had increased. Secondly, with the rise of competition from internet rivals like Amazon.com, shoppers weren’t flocking to big-box stores like they used to.

Having said that, physical stores still accounted for more than 95 per cent of retail as Best Buy sold $45.9 billion through its stores in 2011 compared to $48 billion for Amazon.

This trend, however, might become relevant even in nascent markets such as India. Certain merchandise categories might face special competition from online retailers specially those who indulge in discount selling in those specific categories. Another significant advantage that online retail would have over brick and mortar is the ability to reach out to wider masses, where there is absence of store brands. Vivek Gaur, CEO, Yepme.com states, “In India, physical organised retail for products is not taking off too well in smaller



towns due to high retail cost. Online shopping is convenient and is picking up fast even in non-metros; hence e-commerce is the perfect route to deliver products. We are getting orders from more than 580 cities across India. Online shopping portals expect the number of orders coming in from these areas to go up further due to rising internet penetration, growing purchasing power and adoption of latest mobile devices.”

Ebay’s Lal states, “Over the past few years, we have seen acceleration in sales from tier II and tier III locations. For the many Indians located outside the few cities where modern retail has penetrated, online shopping provides access to brands and products which are not available in their city or town, bridging distribution inefficiencies. Non-metro consumers increasingly aspire to consume brands and lifestyle products. They have the spending power, but no access to products in their city. We see these aspiring consumers from smaller cities latching onto online shopping like never before.”

“Ebay India has over 3 million registered users from 3,311 cities covering all 28 States and 7 Union Territories in India. Ebay India also has over 1.8 million fans on Facebook. E-commerce is still at a nascent stage in India with over 10 million internet

shoppers and over 100 million internet users. This is of a population of over 1.2 billion. The e-commerce ecosystem is still evolving here. Logistics companies are also focusing on e-commerce and increasing geographic coverage to cater to e-commerce merchant demand,” he further elaborates.

Leading department store chains such as Shoppers Stop, Lifestyle, Globus and Future Group’s Futurebazaar.com have ventured into online shopping, but there is a substantial difference between the attention that is paid to a department store’s online shopping platform and, retailers which are purely selling online.

That said, a tip-off might come handy, something that international store retailers such as Lowe and Home Depot and Walmart have been implementing as well. To encourage shoppers to buy online, a brick and mortar retailer, can provide for a ‘Store pick-up’ option of online ordering. Under this, if customers register giving their email and telephone number, the retailer would send an in-progress status update. This would let the shoppers know that their order is “in-process” (someone is walking around in the store and getting the items for them) and when the order is actually ready for pickup. Thus, if we place an order at 11 PM (when the store is closed), we would get an

“in-process” text message the next day around 7 AM and be notified that our order is ready to be picked up usually before 8 AM. This way customers would have the liberty to shop even after the closing hours of the store provided they are assured of the quality of merchandise and services of the retailer.

Back to the futureWhile internet and brick and mortar retailing are here to stay and as a matter of fact, peacefully coexist, online retailers still have a lot of pulling up of socks to do, yet. So what is each one of them planning to do?

“We want to take the technology enablement to the next level of making the products as close to reality as possible. In next five years, as the scale goes up, there will be deployment of advanced ERPs, product lifecycle management softwares, advanced CRM softwares, etc,” says Pahwa of Shopnineteen.com.

“We plan to add shades and frames, more sub-categories of accessories and workout wear in near future,” he further informs adding “we are India’s first e-commerce site to have video content for each apparel and India’s first site to allow people to make wishlists of multiple products and share them with friends to take opinion on what to buy.”

Juvalia & You

Total nos of SKUs: Total number of SKUs online is about 300Total manpower: 100 + employeesTechnology & supply chain partners: Microsoft Navision and a host of international freight operators for incoming SCM

Donebynone

Top 5 categories selling most in non-metro towns: Topwear, footwear, handbags, jewelleryTotal nos of SKUs: A fast fashion brand bringing new styles every week. Have more than 300 styles across categories for the customer to choose from.Total manpower: 35 employeesTechnology & supply chain partners: Inhouse



Valyoo Technologies (Bagskart.com, Lenskart.com, Jewelkart.com, Watchkart.com)

“We are planning to revamp our offerings in the near future and we are constantly revamping back-end technology,” Bansal of Valyoo technologies says.

Swaroop of 99Labels.com states, “Our aim is to increase product offerings on 99labels.com by bringing in diverse brands, better sales, more variety and may even increase our categories. As far as technology goes, we are constantly upgrading ours as we understand the industry is changing and all efforts are going into improving the online shopping experience, benefits and usability. We want to also work towards improving the look, feel and functionality of our site.”

“We are running a pilot project ‘Try Karo Phir Buy karo’ where we provide risk free shopping to our users. Under this project, we collect money seven days after delivery and only on the assurance that customers like our product. Lest, we take our

order back. We have received positive response from our shoppers and are planning to expand our services to other cities as well,” Yepme.com’s Gaur describes.

“One of the hurdles that most online shopping portals face today in reaching out to non-metro consumers is the language barrier. We at Yepme.com have gone a step ahead by introducing our portal in Hindi followed by launch of other regional languages viz: Tamil, Telugu, Malayalam and Kannada, to cater to a wide range of customers pan India,” he adds.

“We are in the planning stages of launching our private label primarily to fill existing gaps in the market. We are targeting the third quarter to launch our inhouse label and already in talks with manufacturers to source materials,” Ashutosh Lawania of Myntra.com informs.

Most selling categories: Eyewear, watchesTotal manpower: 100Total nos of SKUs: 10,000 + SKUsTechnology & supply chain partners: Inhouse warehousing. Work with logistics partners and courier companies for deliveries, especially in tier 2 and tier 3 cities.

Shutterstock

“We will be further introducing a host of features to enhance the online shopping experience. Tools like virtual wardrobe and virtual dressing room will be added to the existing features,” he adds.

Aggarwal of Yebhi.com says, “We have introduced many an initiative all focused at ensuring world class shopping experience for our consumers. We have introduced Yebhi Champs – B School graduates who are the face of Yebhi.com helping with the last mile logistics.”

“The automations, technology and policies of Yebhi.com like one-click automatic returns, our colossal state-of-art fulfillment centre, in-house courier and logistics, 100 days return policy, ‘Try and Buy’ policy, EMI etc are all to ensure that consumers are 100 percent satisfied and recommend the Yebhi.com experience.”

For Ebay, the future centres around electronic gadgets, specially smartphones. “Globally, Ebay has been at the forefront of commerce on mobiles. It is very likely that a majority of the next 100 million internet users in India, will have their first and pre-dominant experience of internet on mobile devices, either smartphones or tablets,” says Abhimanyu Lal of Ebay.

“We have been at the forefront of pioneering e-commerce in India and continue to scale our business at a very rapid growth rate. We have established strong brand equity, large and loyal user base and are a strong global technology platform and are bullish about further strengthening our leadership position in the market.”

“We plan to continue focusing on evangelising e-commerce to Indian consumers and continue expanding the market, focus on enhancing user experience. Pioneering mobile commerce, which is an area of great focus for eBay,” Lal concludes.

Shutterstock



Documents

Ecommerce market in India