The state of E Commerce in india april 2014

India e-commerce

Accel Partners 2014

Contents

S.No. Content Slide Number

1. Summary 3 - 9

2. Current Market Information 10 - 18

3. Trends 19 - 21

4. Growth Factors 22 - 25

5. Payments 26 - 27

6. BRICs comparison 28 - 31

2

Contents


1. Summary 3 - 9


3. Trends 19 - 21


5. Payments 26 - 27


3

Executive summary

4

$2Bn 2013

$8.5Bn 2016P

Online Shopping defined in this presentation does not include travel, ticketing and food ordering – only physical goods commerce

Online shopping of physical goods in India, will grow to $8.5Bn in 2016. Number of online shoppers in India will more than double to 40M.

Key finding

2x Indian shoppers X 1.1x number of orders per year per shopper X 2x average order value

63% CAGR

KEY FINDING

25% CAGR

20M

40M

CY2013 CY2016P

Indian online shoppers will double

Accel estimates and Industry sources

$278 M $559 M

$2,811 M

CY2012 CY2013 CY2016P

Fashion + Footwear + Accessories GMV

INR 1,080

INR 1,860

INR 3,600

CY2012 CY2013 CY2016P

Increasing average order value

Executive summary Key findings

5

67%

25% CAGR

KEY FINDING

1.  Last year there was a significant jump in average order value as there was a penetration of new categories like jewellery, home décor etc.

2. Also, users are becoming more comfortable buying higher priced items online.

100% Growth

71% CAGR

1.  Last year was the rise of the fashion category – fashion e-commerce GMV doubled since 2012.

2. Given the young demographic which is shopping for latest looks online and increasing choice online – we estimate that this category will see 400% growth in the next 3 years and rival electronics and mobile category in GMV.

Accel estimates and Industry sources

Average order values climbing up rapidly

Fashion category doubled last year

Executive summary

6

1x 8x

27x

2012 2013 2016P

Online Shopping defined in this presentation does not include travel, ticketing and food ordering

1x

4x

24x

Mobile shopping is seeing phenomenal growth

Women influenced sales will grow 5x in next 3 years

1.  Mobile shopping infrastructure is improving – smartphones, connectivity, mobile websites and apps

2.  People are becoming more comfortable in ordering higher priced items online

1.  35% of online GMV in 2016 will be influenced by women

2.  Key factor in this growth is increasing supply of women specific categories e.g. jewellery, lingerie, motherhood products

Trends

2012 2013 2016P Accel estimates and Industry sources

TRENDS

Executive Summary

7

Trends: Rise of EMIs &Wallets

•  With increasing order values, we are seeing an uptick of EMI payments •  3rd party wallets albeit a new phenomenon, have a strong value proposition and

will be quick to become popular – similar to China

TRENDS

60%

16% 12% 12%

1% 0%

50%

12% 15%

11% 5% 7%

COD Credit Cards Debit Cards Net banking EMI 3rd party wallets

Indian payment landscape - rise of EMIs and Wallets (Total: 100%)

2013 2016P

Accel estimates, Accel portfolio companies and Industry sources: PayU, EMVantage

Executive summary

8 Online Shopping defined in this presentation does not include travel, ticketing and food ordering

More penetration in Tier-II and Tier-III towns

New shoppers will come from the 40M+ Gen-Y FB users

1.  Tier 2 cities growing much faster in eCommerce adoption than Tier 1

2.  Some states completely lagging in ecommerce, waiting for infrastructure to be put in place

1.  Potentially 40M shoppers between ages of 19 – 24 years, will start spending money online

2.  These shoppers also have a propensity to spend more money than Gen-X shoppers

Growth factors

20M Gen-Y

shoppers

20M Gen-X

shoppers

GROWTH FACTORS

Accel estimates, Google, Facebook, NSSO, Accel portfolio companies

Enough headroom for growth Online retail is still a very small portion of retail in India

9

Online sales, 4 Mn, 2%

Offline sales, 243 Mn, 98%

247Mn mobiles shipments in India CY2013

Online sales, 45 Mn, 7%

Offline sales, 555 Mn,

93%

600Mn books sold in India CY 2013

Online sales, $0.08 Bn, 0.2%

Offline sales, $44.92 Bn,

99.8%

USD 45Bn jewellery sales in India CY 2013

Online sales, $0.5 Bn, 1%

Offline sales, $42 Bn, 99%

USD 43Bn fashion + footwear sales in India CY 2013

Accel estimates, Accel portfolio companies and industry sources: CMR, FICCI, Deloitte

GROWTH FACTORS

Contents


1. Summary 3 - 9


3. Trends 19 - 21


5. Payments 26 - 27


10

$816 M

$1,983 M

$8,519 M

CY2012 CY2013 CY2016P

Annualized online shopping GMV

Growth of India online shopping

11

Market Trends Growth Factors Payments BRICS

140 M 213 M

400 M

CY2012 CY2013 CY2016P

Internet users in India

% of internet users who visit e-commerce sites = 60%

4M 5M

12M

CY2012 CY2013 CY2016P

# of orders per month

3.00%

2.70%

2.90%

CY2012 CY2013 CY2016P

Conversion from visitors to buyers

1.50 1.55

1.70

CY2012 CY2013 CY2016P

Orders per buyer per month

$18

$31

$60

CY2012 CY2013 CY2016P

Average order value

Accel estimates, Accel portfolio companies, comScore & IAMAI


12


140 M 213 M

400 M

CY2012 CY2013 CY2016P




13


140 M 213 M

400 M

CY2012 CY2013 CY2016P



3.00%

2.70%

2.90%

CY2012 CY2013 CY2016P

Conversion from visitors to buyers •  India e-commerce market will start maturing

and display characteristics similar to China – which traditionally has higher conversion rates (nearly 3.5%)

•  This is due to e-commerce being only choice for availability of goods in parts of the country and easy payment options like COD – which are not problems in western countries



14


140 M 213 M

400 M

CY2012 CY2013 CY2016P



•  As e-commerce sites gain trust, users are beginning to order more frequently

•  Also, repeat users – acquired more than 1yr old - are more comfortable ordering online and order significantly more than first time buyers

4M 5M

12M

CY2012 CY2013 CY2016P


3.00%

2.70%

2.90%

CY2012 CY2013 CY2016P


1.50 1.55

1.70

CY2012 CY2013 CY2016P


•  India e-commerce market will start maturing and display characteristics similar to China – which traditionally has higher conversion rates (nearly 3.5%)

•  This is due to e-commerce being only choice for availability of goods in parts of the country and easy payment options like COD – which are not problems in western countries



15


140 M 213 M

400 M

CY2012 CY2013 CY2016P



•  Last year there was a significant jump in average order value as there was a penetration of new categories like jewellery, home décor etc

•  Also, users are becoming more comfortable buying higher priced items online

4M 5M

12M

CY2012 CY2013 CY2016P


3.00%

2.70%

2.90%

CY2012 CY2013 CY2016P


1.50 1.55

1.70

CY2012 CY2013 CY2016P


$18

$31

$60

CY2012 CY2013 CY2016P

Average order value



16


140 M 213 M

400 M

CY2012 CY2013 CY2016P



•  Last year there was a significant jump in average order value as there was a penetration of new categories like jewellery, home décor etc

•  Also, users are becoming more comfortable buying higher priced items online

4M 5M

12M

CY2012 CY2013 CY2016P


3.00%

2.70%

2.90%

CY2012 CY2013 CY2016P


1.50 1.55

1.70

CY2012 CY2013 CY2016P


$18

$31

$60

CY2012 CY2013 CY2016P

Average order value $816 M

$1,983 M

$8,519 M

CY2012 CY2013 CY2016P

Annualized online shopping GMV


Other observations

17


1.  ~200M of Indians will come online in next 3 years 2.  Majority of these will come online on

smartphones 3.  E-Commerce companies are building their

brands, thus gaining trust of users

1.  Existing shoppers shop more number of times than new shoppers (in that year)

2.  As India’s e-commerce market grows the proportion of existing shoppers will increase from 30% (in 2013) to 50% (in 2016)

13M

20M

40M

CY2012 CY2013 CY2016P

# of online shoppers in India

3.4

3.2

3.55

CY2012 CY2013 CY2016P

# of orders per customer / year

Accel estimates & Accel portfolio companies

E-commerce is a small sliver of Indian retail

18

91.0%

8.7%

0.3%

Unorganized retail Organized retail - offline Organized retail - online

92.0%

7.8%

0.2%

2012 2013


Accel estimates & Deloitte

Contents


1. Summary 3 - 9


3. Trends 19 - 21


5. Payments 26 - 27


19

Mobile There is a traffic to revenue gap on mobile e-commerce in India

20

Factors leading to major adoption of mobile as a channel: •  70% of the growth in Indian internet users was mobile only •  Showrooming – a growing habit

Reasons why there is not a 1:1 conversion of traffic to mobile: •  Most e-retailers do not have mobile optimized sites •  Most transactions are for low ticket items •  Mobile marketing budgets are < 10% of overall digital marketing

budgets, even though they have increased 100% Y-o-Y, even though overall ad spends have increased 20% Y-o-Y

23% 27%

33%

9% 10%

33%

India China Japan

Mobile revenue share is lagging mobile traffic share in India and China

Mobile Traffic % 9%

4%

N/A

9.8%

India Brazil Russia China

India vs rest of BRICS - mobile shopping GMV as % of overall GMV

1x 8x 27x

2012 2013 2016

Mobile shopping grew 800% in 2013, we expect it to grow at a 150% CAGR till 2016


Accel estimates, Accel portfolio companies, CNNIC and other industry sources

$122 M / 1x

$511 M / 4x

$3Bn / 24x

2012 2013 2016P

Women influenced GMV

Women shoppers – a growing force

21

Male Female

Women spend 60% more time on jewellery sites than men

Male Female

Women spend 40% more time on fashion sites

1.3x 1.1x

1.0x

Luxury/Jewellery Apparel Home furnishings

Women spend upto 30% more time on luxury sites than on home furnishing


15% of market

26% of market

35% of market

1.  Working women segment grew 43% in 2013 and constitutes nearly 10% of Active internet users in India according to i-Cube & IAMAI

2.  Categories like baby care, home décor, jewellery etc have traditionally been influenced by women decision makers. As more choice become available more women are shopping online.

Accel estimates, Accel portfolio companies & comScore

Contents


1. Summary 3 - 9


3. Trends 19 - 21


5. Payments 26 - 27


22

149M

132M 132M

102M

19M

40M

20M 8M

13%

30%

15% 8%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

0M

20M

40M

60M

80M

100M

120M

140M

160M

13 - 18 19 - 24 25 - 30 31 - 36

20M new shoppers could come just from the 19-24 age group

India population FB users (2013) FB users %

Young India will become dominant presence in e-Commerce

23


Young Indians (19-24yrs) are more comfortable with online services e.g. FB and thus could potentially add upto 40M new shoppers in next 3 years – if we just take the Facebook users

Accel estimates, NSSO, Facebook

E-commerce friendly states

24

•  Top 3 e-commerce states •  Delhi-NCR •  Karnataka •  Maharashtra

•  Large states with very little ecommerce presence: •  Bihar •  Uttrakhand •  Chhatisgarh

•  Top 10 cities: 1.  Delhi 2.  Bangalore 3.  Mumbai 4.  Pune 5.  Hyderabad 6.  Chennai 7.  Kolkata 8.  Ahmedabad 9.  Jaipur 10.  Panaji

Central & North-Eastern India appears to have low adoption of e-commerce


Accel estimates, Accel portfolio companies, Google

Categories

Books 7%

Mobile, Tablets & Accessories

35%

Computers, Cameras,

Electronics & Appliances

18% Health & Personal care

2%

Babycare 3%

Fashion, Footwear & Accessories

28%

Jewellery 2%

Home décor 3%

Others 2%

Categories by GMV (%)

Books 21%

Mobile, Tablets &

Accessories 9%

Computers, Cameras,

Electronics & Appliances

10% Health & Personal care

4%

Babycare 8%

Fashion, Footwear & Accessories

35%

Jewellery 1% Home

décor 8%

Others 4%

Categories by # of trxns. (%)

Books category contributed to 21% of the transactions … … but only 7% of the GMV



Contents


1. Summary 3 - 9


3. Trends 19 - 21


5. Payments 26 - 27


26

Payments

27

COD 60%

Credit Cards 16%

Debit Cards 11%

Net banking

12% EMI 1%

2013


With most e-commerce players launching their wallets, we believe that 3rd party wallets will become a significant alternative to COD in coming years.

COD 50%

Credit Cards 12%

Debit Cards 15%

Net banking 11%

EMI 5%

3rd party wallets

7%

2016P


Contents


1. Summary 3 - 9


3. Trends 19 - 21


5. Payments 26 - 27


28

Indian online shopping has tremendous growth potential Significant headroom for growth

29

1,249

200 144

1,358

213 99 66

591 17%

50% 46% 44%

0%

10%

20%

30%

40%

50%

60%

-

500

1,000

1,500


In M

illio

ns

Only 17% of Indians are online, compared to >40% for other countries …

Population Online population Internet penetration %

213

99 66

591

19 31 30

280

9%

31%

45% 47%

0%

20%

40%

60%

80%

100%

-

100

200

300

400

500

600

700


in M

illio

ns

… only 9% of online Indians shop, compared to >30% in other countries

Online population Online shoppers Online shopper penetration %

Market Trends Growth Factors Payments BRICs

Accel estimates & Industry sources

BRICs B2C online shopping market India is quite small compared to rest of BRIC countries…

30

$ 1.8 Bn / 1x $ 13 Bn / 7x $ 16 Bn / 9x

$ 106 Bn / 60x


Indian e-Commerce market is $1.8Bn, 60x smaller than the Chinese market …

$ 93

$ 421

$ 533

$ 380


… annual spend by an Indian online shopper is $93 - 4x smaller than Chinese one



0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Onl

ine

shop

per p

enet

ratio

n

Internet Penetration

(size of bubble indicates market size)

Indian e-commerce needs better infrastructure to grow 88% of the growth in India online shopping will come from more Indians online

Infrastructure issues Shopping issues

Happy shoppers Willing shoppers but infrastructure problems

31

India

China

Brazil

Russia



CONTACT

Prashanth Prakash Partner, Accel Partners

32

Subrata Mitra Partner, Accel Partners

Prayank Swaroop Senior Associate, Accel Partners [email protected]

Disclaimer

The information and opinions in this Report have been prepared or complied by ACCEL PARTNERS and are subject to change/modification without any notice. The information contained in this Report is believed to be accurate at the time of date of issue of this Report, but no representation or warranty is given (express or implied) as to its accuracy, completeness or correctness. ACCEL PARTNERS accepts no liability whatsoever for any direct, indirect or consequential loss or damage arising in any way from any use of or reliance placed on this material for any purpose. The contents of this Report are the copyright of ACCEL PARTNERS. Nothing on this Report constitutes advice, nor creates any contractual relationship.

33