Baby care segment online suyash tripathi

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Analysis on Baby Care Market and Online Retail Segment

Author : Suyash TripathiOctober 2014

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Content

India – Macroeconomic Factors

Indian E-Commerce Sector Overview

Indian Baby Care Products Market and Market Categorization

Overview of Maternity Care and Baby Care Products Market by product type

Indian Online Baby Care Products Market

Sourcing (Online Portals)

Market Analysis

Known Names

The Baby Care online market is growing

But there is a long way to go

Looking forward, while looking around, for all factors

Observations & Suggestions

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• In the near future India will be the largest individual contributor to the global demographic transition

• India’s young and burgeoning working age population is a competitive edge that sets Asia’s third largest economy apart from other

countries across the world

• Its workforce, those between 15 and 64, is expected to rise from almost 64 percent of its population in 2009 to 67 percent in 2020.

Meanwhile, China's is expected to start declining from 2014 resulting in a labor shortfall by 2050

• India’s long term growth relies on two factors: demographics and rising wealth. Its population of 1.2billion will reach 1.7billion in

2050

India’s Demographic Dividend

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• Its population of 1.2billion will reach 1.7billion in 2050India’s per capita income has risen to INR 5,729 per month in FY’2013 from

INR 2,200 per month in FY’2001, recording a CAGR of 8.3% during the period.

• There are 50 Million babies in the age group of 0-2 years and 304.8 Million children are in the age group of 0-12 years

• The spending power of Y generation who spend a considerable proportion of their income on discretionary items, constitute a large

part of maternity and baby care products’ consumer base in the country.

• The western countries are struggling to overcome from the declining birth rates and the baby care industry has reached a saturation

point in these countries.

• India has 25% more baby population when compared to China, thus highlighting the massive growth potential in baby care industry

in India

• Product innovation and development, deeper penetration in urban and rural areas and key focus on individual baby care product

segments shall remain focal point of growth for existing and potential new players in this industry in the coming few years

India’s Demographic Dividend

GDP Growth Rate of India and other major economies

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E-Commerce Industry Segmentation

B2CC2C B2B

• Online Classifieds• Online Retail

• Online Travel• Online retail• Online Classifieds

• Online Classifieds

15 24 3858

91

139

224

334

504

2008 2009 2010 2011 2012 2013 2014 2015 2016

CAGR ~56%

Rs Billions

Online retail market size and growth (INR Billion)

Indian E-Commerce Sector Overview

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Indian Baby Care Products Market

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0

2008

2009

2010

2011

2012

2013P

Thousands

India Baby Care Products Industry Market Size on Basis of revenue in percentage, 2008-2013

Market Overview

The market has grown from INR 34,564.8 Million in 2008 to INR 60,333.9 Million in 2013

Registered a CAGR of 11.8% during 2008-2013

Including apparels, Baby and child-specific products sees value growth of 13% to reach INR

8.8 billion in 2013

Average unit price of baby and child-specific products continues to increase in 2013

Johnson & Johnson (India) Ltd continues to dominate with 73% value share in 2013 among

the CG peers

Baby and child-specific products is expected to grow by a value CAGR of 2% at constant 2013

prices over the forecast period to reach INR9.5 billion by 2018

Highest demand is for baby food & toiletries

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Indian Baby Care Products Market

80.71% 79.90% 79.46% 78.65% 77.62% 76.73%

6.17%6.38% 6.52%

7.03%7.69%

7.92%

6.00% 6.17% 6.43% 6.69% 6.96% 7.33%

4.04% 4.39% 4.32% 4.24% 4.18% 4.24%

2.11% 2.25% 2.43% 2.60% 2.81% 3.06%

0.96% 0.91% 0.84% 0.78% 0.74% 0.72%

75.00%

80.00%

85.00%

90.00%

95.00%

100.00%

2008 2009 2010 2011 2012 2013P

Revenue Story - Indian Baby Care Product Segemention by Product Categories

Hair Care

ConvenienceProducts

Bath Care

Toiletries

Skin Care

Baby Food

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

2008 2009 2010 2011 2012 2013P

Hundreds

India Baby Care Products Industry Market Size Revenue (INR Hundred Millions)

Growth factors:

Changing attitude of working mothers towards baby care drives

growth

Population of 0-4 years is growing, providing tremendous opportunities

Demand driven by working couples , owing to their changing lifestyles

and convenience, and ‘no compromise’ attitude towards

quality

Metropolitan cities see large spending due to dynamic, time

pressured lifestyles and increasing disposable incomes

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Baby Care Products Market Categorization

• Indian Maternity & Baby Care Market ~INR 710 Million (USD 11.12 Bn)

• India Toy Industry is estimated to be growing at a CAGR of ~20%, catering to about 40 million kids across the country

• 50 Million babies in the age group of 0-2 years

• 304.8 Million children are in the age group of 0-12 years

• Change in spending pattern of the parents due to high disposable income and change in lifestyle

• Increase in proportion of working women

• The major product categories include:

• Baby Food

• Skin Care

• Toiletries

• Bath Care

• Convenience Products

• Hair Care

• Maternity Products are overlaps with the Baby Care as well as Mother Care category.

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Maternity Care Category

Maternity Apparels

91%

Pillows & Cushions

5%

Books & CDs3%Others

1%

Segmentation by Product Category

5323.65943.5

7070.38451.9

989711,184.40

0.00

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

2008 2009 2010 2011 2012 2013

Matrnity Care Products Market Size on Basis of Revenue in INR Million, 2008-2013Key Points

• Alongwith quality of life for the baby, the new generation is also beginning to understand and spend on quality life for expecting mother

• Preference of Indian consumers is from low quality–low price to ‘value for money’ and superior quality goods in the domestic market

• New age maternity benefits from employers

• Grew from INR 5,328.6 million in 2008 to INR 11,184.4 million in 2013

• Recorded a CAGR of 16.0% from 2008-2013

• A tremendous growth of nearly 19.0% from 2009-2010

• Few prominent BM retailers are enjoying a major share -Mothercare, Mom & Me, Nine etc

• Majorly divided into Maternity Apparels, Pillows and Cushions, Books and CD’s, Creams &Lotions, Maternity Belts etc

Growth obstacles

• Unorganised sector working population has no access to maternity benefits

• Concentrated in Tier-I Cities

• Low penetration in Tier – II Cities

Growth Drivers

• Expected to remain niche segment, but huge growth potential

• Market majorly driven by mothers/women between 24-49 years

• Women are becoming more fashion and quality conscious

• The products are now spreading through all channels – special retail stores, MBOs, E-Commerce

12.970814.9493

17.49820.759

24.7863

0

5

10

15

20

25

30

2014 2015 2016 2017 2018

Tho

usa

nd

s

Indian Maternity Products Market Future Projections (INR Millions)

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Baby Food Category

27

89

8.4

30

69

9.4

33

96

5.9

37

75

9.8

42

06

8.2

46

29

1.9

25000

30000

35000

40000

45000

50000

2008 2009 2010 2011 2012 2013P

Indian Baby Food Market Size on Basis of Revenue in INR Million

Dried baby Food61%Infant Milk

Formula37%

Speciality Food2%

Percentage contribution of different segments to the Baby Food Category

Key Points

• Market size reached INR 46,291.9 Million in

2013, compared to 27, 898.4 Million in 2008

• Baby food industry saw a CAGR of 10.7% from

2008 - 2013

• Slow growth rate in 2009 and 2010

• Parents do not compromise on the spending on

babies’ nutrition diet

• Sale of high-end baby food products continued

to appreciate during recessionary periods also

Segments

• Dried baby food segment contributes to 61.3% of

total baby food market,

• Infant milk formula contributes 36.8%

• Prepared baby food - slowly establishing. Eg

Puree and Snacks.

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Baby Food Category

13

,89

0.5

0

16

,26

7.2

0

18

,93

6.6

0

21

,81

5.0

0

25

,00

0.0

0

28

,37

5.0

0

10,000.00

15,000.00

20,000.00

25,000.00

30,000.00

2008 2009 2010 2011 2012 2013P

Indian Dried Baby Food Market Size on Basis of Revenue in INR Million, 2008-2013

9,3

75

.00

10

,47

5.6

0

11

,74

7.3

0

13

,22

7.5

0

15

,00

0.0

0

17

,05

5.0

0

5,000

10,000

15,000

20,000

2008 2009 2010 2011 2012 2013P

Indian Infant Milk Formula Market Size on Basis of Revenue in INR Million, 2008-2013

Growth Drivers

• Increasing Baby Nutrition awareness combined with

rising personal disposable income

• Rising of Working Women population - from 9% in

2011 to 14% in 2012. Inadequate time to breastfeed

babies, hence substitutes are welcomed

• Aggressive baby food awareness campaigns in rural

areas by companies

Key Points

• Tier I and Tier II cities are preferred locations for

product launches

• Baby Food products are affordable by only 1/4th of

population, hence pricing is a growth deterrent

• Dried Baby Food CAGR – 15.4% (2008-2013)

• Infant Milk Formula CAGR – 12.7% (2008-2013)

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Baby Skin Care Market

21342450

27893376

4167.94777.7

0

1000

2000

3000

4000

5000

6000

2008 2009 2010 2011 2012 2013P

Baby skin care market size on the basis of revenue in INR million 2008-13

1,1

51

.70

1,2

81

.40

1,4

47

.50

1,7

28

.50

2,0

83

.90

2,3

50

.60

50

0.0

0

58

3.3

0

68

8.9

0

85

0.8

0

1,0

75

.30

1,2

61

.30

48

2.3

0

58

5.3

0

65

2.6

0

79

6.7

0

1,0

08

.60

1,1

65

.70

2008 2009 2010 2011 2012 2013P

India Baby Skin Care Market Segementation - Revenue in INR million 2008-13

Massage Oil Cream and Moisturizer Baby Powder

Key Points

• Baby Skin is extremely delicate and fragile,

hence a big issue of concern among parents

and caretakers

• Parents’ product buying decisions depend on

peers, family members, marketing initiatives

by product makers

• One of the fastest growing segment in baby

care products

• Market valued at INR 4,777.7 million in 2013,

in contrast to INR 2,134 million in 2008

• Massage oils – approx 50%, creams and

moisturizers – 25%

• CG players with largest share – J&J, Dabur,

Emami, Wipro, Himalaya, Doux

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Baby Diaper Market

2072.8

2371.9

2749.3

3210.1

3772.2

4425.2

0 1000 2000 3000 4000 5000

2008

2009

2010

2011

2012

2013P

India Baby Diaper Market Size on the Basis of Revenue in INR million 2008-13

Key Points

• Largest contributory segment after Baby Food

• Low penetration rate ~ 3%, due to low consumption

• Growth potential of ~99.5 Billion Units/year, among highest in the world

Growth Obstacles

• Current purchasing power prohibits a large consumer base

• Cultural resistance to accept disposable diapers

• Consumers have a harder time in getting rid of things and putting them in waste

Growth Drivers

• Rising disposable incomes of the households

• Increasing attention to baby’s health

• Surging population of babies in India.

• Increase in median age of expecting women ,as higher aged parents are viewed as financially more stable and can afford premium baby utility brands

• Changing lifestyle brands

• Mother’s going back early to work after delivery

Therefore…

• The segment demands more marketing efforts by diaper companies than other regions

• Lower diaper prices can act as a major driver, and market acquirer in this segment

• Online retailers like babyoye and firstcry buy in bulk, and pass on the margins to the end consumers (Mothers), keeping the prices lower and thereby drawing traffic and sales

99.575.7

22.4

2.512.1

22.3

0

20

40

60

80

100

120

India China US

India Baby Diaper Market Size Potential

Billion units/year Present Market potential

Billion Units/year Maximum market potential

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Baby Bath Care Market

1396.3

16861847.2

2034.52263.1

2556.4

0

500

1000

1500

2000

2500

3000

2008 2009 2010 2011 2012 2013P

Baby Bath Care Market Size on the Basis of Revenue in INR million 2008-13

2008 2009 2010 2011 2012 2013P

1354.40 1625.30 1777.00 1953.10 2152.20 2408.20

41.90 60.70 70.20 81.40 110.90 148.30

India Baby Bath Care Products Segmentation by Soaps and Other on Basis of their Revenue in INR Million, 2008-13

Soaps Others

Key Points

•Category includes soaps, shower gels,

body wash, bubble bath foams and other

bathing additives such as bath oil

•Baby bath products except soap is

relatively low in India

•Valued at INR 2,556.4 million in 2013

•Segment has witnessed CAGR of 12.9%

over the period 2008-2013

•Growth Obstacles and Drivers are akin to

other categories

•This segment is witnessing a good growth

rate, but due to lower starting figures,

the penetration in market will take time

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Baby Convenience Products Market

73

0.8

86

5.4

10

36

.6

12

50

.3

15

23

.2

18

46

.7

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2008 2009 2010 2011 2012 2013P

India Baby Convenience Product Market Size on the Basis of Revenue in INR million 2008-13 SizeKey Points

• Another one of the fastest growing segments

• Grew in size from INR 730.8 million in 2008 to INR 1,846.7 million in 2013

• Witnessed a CAGR of 20.4% from 2008-2013

• Categories -

•Toys

•Baby Strollers

•Baby Cots

•Baby Furniture

•Car Seats

•Others (Baby Wipes, Feeding Bottles, Devices, Health etc)

Growth Drivers

• Increasing population and consumerism

• Increasing count of dual income parents

• Increased spending on safe and branded convenience products

• Easy accessibility to imported convenience products

• Entry of international convenience product manufacturers in the Indian market

• Increasing marketing spend of toy companies

Toys43%

Baby Strollers27%

Baby Cot14%

Bay Furniture

11%

Car Seat3%

Others2%

Percentage Contribution of Convenience category subsegments

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Plush Toys49%

Plastic Toys39%

Electronic Toys12%

India Toys Market Segmentation by Plush Toys, Plastic Toys and Electronic Toys on Basis of their revenue Contribution %, 2012

Toys’ Sub-segment

• Convenience products is upheld by the baby toys segment - toys’ contribution has increased from 25.7% in 2008 to 45.9% in 2013

• Toys’ market is pegged at INR 847.6 million in 2013, recording a CAGR of approximately 24.9% during the period, 2008-2013

• Caters to approximately 80 million babies in the age group of 0-3

• 15% toys are made in India, rest imported

• Mostly unorganised and with no government support or assistance

Hard Goods sub-segment

• Includes

• Baby stroller

• Baby cot

• Baby furniture

• Baby harness

• Baby car seats

• Baby stroller and baby cots - largest contributors with market share of 26.4% and 13.8% respectively.

• Baby car seat and baby furniture are minuscule contributors to this segment with a market share of 3.3% and 11.1% respectively.

• Car seats are popular in Bangalore, as the IT crowd has had exposure to the west

Toys43%

Baby Strollers27%

Baby Cot14%

Bay Furniture

11%

Car Seat3%

Others2%

Percentage Contribution of Convenience category subsegments

Baby Convenience Products Market

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Baby Haircare Market

33

2.4 34

9

35

7

37

6.3

40

1.5 4

36

0

50

100

150

200

250

300

350

400

450

500

2008 2009 2010 2011 2012 2013P

India Baby Hair Care Market Size on the Basis of Revenue in INR million 2008-13

Baby Shampoo83%

Baby Hair Oil12%

Baby Conditioners

5%

India Baby Hair Care Products Sub-segmentation by Revenue in INR Million,

2013

Key Points

•Smaller segment

•Low penetration in Rural and Urban areas

•Expected to grow at a CAGR of 11.8% from 2013-2018 as compared to moderate growth of 5.6% during 2008-2013

Growth Drivers

•Marketing and advertising getting aggressive

•Educated and vigilant parents

•Advent of shopping mall culture

• Increasing penetration of CG companies in rural areas

Growth Obstacles

•Orthodox beliefs in traditional, homemade oils

•Use of massage oil as hair oil

•Low sales of shampoo leads to lower sales of other haircare products

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73

0.8

86

5.4

10

36

.6

12

50

.3

15

23

.2

18

46

.7

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2008 2009 2010 2011 2012 2013

India Online Baby Care Market Size, INR Million 2008-13Excitement Ahead!

• Internet Penetration is rising

•Population growth is huge

•Ease of transactions is growing

•Last mile delivery methods are evolving are improving

•Household incomes are rising

•Consumer attitude are changing

•The E-retail of baby Care in India is expected to transpire as one of the world’s fastest growing baby care markets

•Strategic product innovation and development shall remain key focus areas

•Penetrating deep into urban areas, especially rural areas shall remain the focal growth point of these companies

•The online baby care products market was valued at INR 605 million in 2008, growing to INR 1,879.0 million in 2013

•CAGR of 25.4% for the review period, 2008-2013!

•Toiletries – highest contribution (33.5%)

•Baby Apparels – second largest (32.3%)

Toiletries33%

Baby Apparels32%

Convenience Products

21%Baby Food4%

Skin Care4%

Bath Care2%

Hair Care2%

Other2%

Product Categories - Contribution Percentage to Online Retail of Baby Care Products

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Prominent League

•Firstcry.com

•Babyoye.com

•Hopscotch.com

•Redlily.com

•Flipkart.com

•Snapdeal.com

•Amazon.com

•Momandmeshop.in

•Healthkart.com

•Ebay.in

•Shopclues.com

•Sunbabyindia.com

•Kidloo.com

•Myntra.com (apparels)

•Littlesindia.com (Only listing)

• In.pamper.com (Only listing)

•Huggies.co.in (Only listing)

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Popular Brands in India

New Entrants in India

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Sourcing (Online Portals)

Players Best Sellers Average Order Size/day# of

Orders/daySourcing Methods

Babyoye.com Diapers, Clothes, Toys INR 2000-3000 500-5220Sourcing from vendor

contracts and own warehouse

Firstcry.comDiapers - Huggies, Pampers,

Mamy Poko PantsINR 500-1000 120-150

Sourcing from vendor contracts and own

warehouse

Jabong.com Baby Apparels INR 1500-3000 50-100Sourcing from vendor contracts and jabong

partners

Momandmeshop.comBaby rockers, Car Seats, Baby Cots, Baby Swings

INR 3000 - 5000 100-110Sourcing from vendor

contracts and Mom&Me warehouse

LittlePipalBaby Bed Sheets, Diaper Bags, baby Bath Towels

INR 2000-300030-40 bulk

orders

Sourcing from vendor contracts and own

warehouse

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Market Analysis

What's Good

• Large scale of operations

• Product Innovations

• High standard quality products at competitive prices

• Increase in personal disposable income

• Increase in dual income parents

• 3

• Increased expenditure on baby care products

• Expansive portfolio of products

• Growing market

• Increasing awareness towards baby care and maternity products quality

• Few online retailers in this space

What’s Bad

• Low customer concentration especially in Tier III cities such as Trichyand rural areas.

• Low Research and Development investment

• Local manufactures produce low quality duplicate products

• Low awareness about baby care products

• Short shelf life of baby care products

• Low government regulations on safety and security regulations on products

• Low trust of consumers in online space

Optimistic view

• Preference of branded baby care products over local products

• Lack of domestic players in the Indian baby care industry

• Low competition from cheaper substitutes

• Having strong brand image and customer loyalty helps

• Increasing internet and ecommerce penetration

• Population, internet penetration and conversion rates of online purchase are steadily increasing

• Working women have less time, more concern about their babies and access to technology - all factors together

Deterrents

• Monopoly of CG players such as J&J, P&G

• Highly unorganized market with local players

• Strategic joint ventures between big players such as the partnership deal between Kimberly Clark and HUL

• Regulations by Govt IMS Act 1992, prohibiting the advertisement of baby food products

• Rigid Societal norms which is acting as a deterrent to changing consumer behavior

• s

• Customers in online Baby Care are not loyal, and repeat purchases are seen in few consumer goods only eg Diapers, Shampoos etc

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Known Names

• Founded in 2010, part of Pune based BrainBees Solution Pvt. Ltd.

• Round A+B funding of $18 Million;

• Round C of $15 Million by Vertex Venture Holdings and existing investors SAIF Partners and IDG Ventures

• 70000+ Items, 400+ Brands, 150+ Vendors

• Hybrid Model – Online+Offline presence : 70 stores in 21 States from 26 stores in 11 states in Aug 2013.

• Plan to reach 100 stores by end of 2014, 400 stores by end of 2017

• Ships 6000-10000 orders per day, Avg Ticket Size of Rs 1000.

• 30% viewers from Mobile, 25% Sales from Mobile

• Free of Cost ‘Next Day Delivery’ in 10-12 cities

• ‘Subscribe and Save’ – an unconventional Subscription model added in Aug 2013

• Target $250 Mn in 2015

• Positives -

o Early mover

o Big assortment range

o Hybrid model – scope for efficient operations

o The offline stores give way for easier omnichannel access , the current buzz in retail

o Healthy order size and ticket size

o Operations and Subscription model

o Innovative marketing ideas like ‘First Cry Boxes’ for the ‘Happiest Cry Ever’

• Negatives –

o Lack of marketing and sales initiatives

o The company seems to be in slow growth mode in online space

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Known Names

• Founded in 2012, brainchild of ex Diaper.com executives Rahul Anand and Lisa Kennedy

• Model – Flash Boutique Sales, International Brands, Pre-booking on flash sales

• Raised seed investment from unknown investors; received $2Million in Feb 2014 from Lionrock, Nisa Godrej, Skype co-founder Toivo Annus and

Diapers CTO Wei Yan

• 400 odd niche brands – domestic and international

• Premise – Access to modern Indian mom to international brands and products

• Store everything in Mumbai warehouse, ship and deliver within 2-5 business days

• Acquired school supplies e-tailer SkoolShop, in a stock and cash deal in May 2014

• Target revenue goal for 2014 is $3.5-4 million (Rs 25 crore)

• Price range – Rs 79 to Rs 15000.

• Average Ticket Size – Rs 1500 – Rs 2000.

• Positives –

o Flash Sales model – attractive for high ticket value customers

o Flash Sales models help in keeping inventory low, hence low carrying cost

o Chirpy UI on the website

o Pre-order – plus point in inventory and order management

o Big names associated with the venture

o Imported brands attract high value customers

• Negatives –

o Flash Sales – Missing a sale may spoil customer experience

o Category and product assortment is not streamlined

o Low marketing and sales initiatives

o Low funding

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Known Names

• Founded in 2010, by husband-wife duo of Sanjay Nadkarni and Arunima Singhdeo under Nest Childcare Services Pvt Ltd.

• Range of 4,000 products including Pampers diapers, Chicco food, Johnson’s skin care range and cycle-maker BSA’s prams and walkers. Babyoye.com

delivers to 20,000 cities and towns in India.

• Targeting about Rs 250 crore in revenue in two years – CY 2013 and 2014

• Undisclosed funding by actress Karishma Kapoor in Dec 2011; $2.5 Million from Accel Partners and Tiger Global in April 2011;

• Acquired hoopos in an all stock deal in Apr 2013,; merged entity has raised $12 Million from Helion , Accel and Tiger Global.

• Has joined hands with Umang Foundation who will help them to donate clothes to needy babies and children

• TVC Campaign - http://www.adforum.com/creative-work/ad/player/34481051

• Positives –

o Huge product assortment

o Easy and simple to use category assortment on website

o Lesser clicks to reach the product page

• Negatives -

o Reportedly running low on funding

o Poor customer reviews on products, delivery as well as returns

o Zero marketing after initial TVC

Firstcry.com Momandmeshop.in Hopscotch.in Babyoye.com Amazon.in Flipkart.com Snapdeal.com

Brands 550+ 70+ 400+ 400+ 500+ 400+ ~400

Shops/ Stores Yes No No Yes No Yes Yes

USP•OfflineStores

•Offline Stores•Established Name•Online Chat for help

•Flash Sales•ImportedProducts

•Large Assortment

•Global Brandname

•Indian E-RetailGiant

•Indian E-RetailGiant

Categories* 10 8 10 12 8 14 12

*Categories taken by the count of categories on the website serving babycare/babywear produts, subject to individual opinion

Feature Comparison

http://www.adforum.com/creative-work/ad/player/34481051

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The Baby Care online market is growing

11.80%

15.30% 16.40%

12.90%

20.40%

11.80%

16%

25.40% 24.90%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

Baby Food Skin Care Toiletries/Diaper Bath Care ConvenienceProducts

Hair Care Maternity Care Online Baby CareMarket

Toys

CAGR

• The online baby care products market was grew to INR 1,879.0 million in 2013 with a CAGR of 25.4% from 2008-2013.

• Accel estimates predict that the Annualized GMV of online shopping in India (including all categories) will reach $8.52 Bn in 2016!

816

1983

8519

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

CY 2012 CY 2013 CY 2016P

Annualised Online Shopping GMV (USD Mn)

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… but there is a long way to go

Fashion, Footwear & Accessories

28%

Books7%

Home Décor3%

BabyCare3%

Computers, Cameras,

Electronics & Appliances

18%

Health & Personal Care2%

Mobile, Tablets & Accessories

35%Jewellery

2% Others2%Fashion,

Footwear & Accessories

35%Books21%

Home Décor8%BabyCare

8%

Computers, Cameras,

Electronics & Appliances

10%

Health & Personal

Care4%

Mobile, Tablets & Accessories

9%

Jewellery1%

Others4%

Current estimates suggest that

although Baby Care contributes to 8%

online retail transactions

But the category accounts to only 3%

of the GMV

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Looking Forward – Take 1

The online baby care products market grew to INR 1,879.0 million in 2013 with a CAGR of 25.4% from 2008-2013

Considering 2 growth rates – 10% (conservative) and 20% (aggressive), within which Snapdeal’s share to be assumed 5% (conservative), 25%

(aggressive) to 40% (overpowering)

Conservative Growth Aggressive Growth

Baby Care in 2013 Baby Care in 2014 @ 10% Growth Baby Care in 2014 @ 20% Growth

E-tail Category Size – INR Bn. 1.89 2.08 2.08 2.08 2.27 2.27 2.27

E-tail Category share in Market

5% 5% 25% 40% 5% 25% 40%

Market Share – INR Bn 94,500,000 103,950,000 520,000,000 832,000,000 113,400,000 567,000,000 907,200,000

USD Mn (@60 INR /USD) 1.89 2.079 10.4 16.640 2,268 11,340 18,144

• Under the assumption of Conservative or Aggressive growth of the market, Snapdeal can look towards its future steps and determine

the extent of involvement in this category using promotions, sales, category and product catalogue expansion , strategic tie-ups and

new avenues to target a Conservative, Aggressive or Overpowering share in the online baby care industry market

• Revenue targets can be anywhere between INR 100 Million to INR 500 Million, with superpowered growth coming from Aggressive

estimates pointing to INR 900 Million

• This converts to ~$2 million to $10 Million in moderate estimates and 2.25 to 18.14 Mn in superpowered growth

Opportunity for Snapdeal

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Looking Forward – Take 2

Taking the market estimates from Accel reports, the current E-Retail industry revenues were estimated to be $1.983 Bn in 2013

The predicted E-Retail revenue in 2014 is ~$2.5 Bn, and for 2016 the revenues are predicted to be $8.519 Bn, owing to growing internet

penetration, increasing adoption of technology by Generation Y , higher conversion rates for online shoppers and increase in the organised

retail sector in India

• Under the assumptions of this alternate methodology, the market to target in 2014 is approx 75 Million, and at 5% to 40% share of

market in 2014, the revenues can touch the tune of ~$3.8 Mn to ~$30 Mn.

• For a future outlook, the same methodology gives an estimated revenue of ~$12 Mn to ~ $102 Mn , for 5% to 40% market share

when the predicted Market Size is $8.5 Billion

• If we consider the category to grow at 5%, there is a potential of growing the revenues from this category to the tune of 3-10 times

the current revenues (taking estimation of 5% Market Share currently).

All Figures in USD Mn

E Retail - 2013 Predicted E Retail - 2014 Predicted E Retail - 2016

E-Retail Industry Size 1,983 2,500 8,519

Baby care category size (@3%) 59.490 75.000 255.570

Snapdeal’s share @5% of Category Size 2.975 3.750 12.779



Baby care category size (@5%) 75 425.95

Snapdeal’s share @5% of Category Size 3.8 21.30



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Attractiveness for Entrants and Existing Players

.... while looking around

• With the modern day access to corporate funding, the entry barriers (in financial context) are low

• Capital requirements are moderate

• However, more than the expertise in website, technology, and financial management, the online baby care segment needs expertise

in product knowledge and strategic sourcing

• Government policies prohibit foreign retailers to start e-shops, however this rule is easily circumvented by using a marketplace model

• Cost disadvantages are independent of size, and in the long run only the horse with large feed can keep on running

• A new competitor might not achieve the economies of scale and scope, both of which are important to have in this segment

• Product, delivery and service levels differentiation matters a lot, and its difficult to achieve all these at the entry level

• A sensitive category, hence the brand equity matters. A new mother will trust a known brand over a new one, and same goes for the

online seller.

• The category has lesser players, and hence there is usually no threat of retaliation to a new entrant

• Access to distribution and operational efficiency is important, and it grows with experience

• The customers tend to switch between websites for their requirements, hence there is low loyalty and easy switching, making the

category attractive to enter

• Industry profitability is moderate to low, esp. since ticket sizes are smaller, there are more CG products involved (which usually have

lower margins) and fixed delivery costs per product are higher than other bigger products

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.... for all factors

• The Indian Baby care products market is still in nascent stage, with low points of sale of good

quality, reliable products

• The population still considers some primitive products (cloth nappy, home made oils) to be better

for baby care

• The major web players are not big enough. Competing is relatively easier as compared to categories

like Books, Mobiles etc

• It is easy for consumers to switch to another website if they have a bad experience

• There is a high propensity of the customer to substitute and switch, with almost no switching cost

• Product differentiation matters, since its easy to substitute between lower end, easily available

products

• Long tail of the category can serve as a profitable business, esp. with rare items like bassinets, baby

care devices, training materials for mothers etc

• Customers have more buying power, esp. in the Indian e-retail scenario, where all players are

focused towards improving the service level and outpacing the competition at any cost

Competition and available sources of access to end customers

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Observations/Suggestions

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• Put the marketing spend on TV and Digital, but also reach out to customers through traditional channels

• Employ sales force to set up app and website demo camps in malls, RWA Society campus, Fairs, Events

• Pamphlets/Brochures help retrieve information when needed

• Easier to target tier-II and III cities with traditional methods

• Market Snapdeal to Analysts by more frequent interactions and highlight the baby care category

• Traffic increases with app install count increase, so educate the customers and let the sales force do it for them through

outdoor interactions in malls, fairs etc

• Content marketing will be the new SEO, grab on to it – Snapdeal should work more on Content Marketing.

• More content for the new and expecting mothers

• Make Snapdeal their trusted destination for baby care tips

• Learn from global Retailers like Williams Sonoma, and Woolworths’ websites

• Helps in increasing traffic, conversion of viewers into customers and retention/repeat visit to website

• Contests like ‘Smart SD Kid ‘should have more Social Media buzz and Home page presence on the website

• Personalize the delivery boxes to appeal to the customer

MarketingStrategies

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• Localize the merchandise displayed on the home page and landing page

• Survey the users, reward them for completion, use the data

• Make/Offer weekly/monthly baskets for them to fill in, and send mail/SMS reminders – helps in retention/loyalty

• More emphasis on predictive analysis for to give out tailored deals and alerts to customers

• Pre-order is the buzz word – ask the users to register and then pre-order exclusive merchandise

• Bundle the pre delivery and post delivery products, either as a combo, on in a phased sale/discount (a part of the discount can be

availed on products before child delivery and a part to be availed for post delivery products). This will increase reach, repeated

purchase and retention

• Add a dedicated ‘Services ‘catalogue – Nannies on call, Exercise trainers and Yoga teachers, Caretakers etc

• Make ‘Baby Gifting’ a more prominent category – Gifts for Baby Showers, Post delivery celebrations, 1st birthdays - potentially big market

for online gifting.

• Customers should be able to see on the website how the gift will look in packed condition

• Products missing from the catalog –Devices for Baby lights n music, CDs n Media (mostly longtail products)

• Make the UI more colorful and use rich content – 85% product decisions are made at the visual appearance and colours are the best way

for brand recognition

Category & Website Specific

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• Strategic tie ups lead to increased traffic and increased customer conversion, loyalty transfer and higher market attention

• Tie ups with Yoga practitioners – Yoga and exercises for expecting mothers and new mothers to keep them healthy.

• This can also be sold as content on CDs etc.

• Tie ups with Hospitals, Fertility Clinics –

• To connect straight with the customers

• To be a helping hand and guide when they might be looking for advice

• To market specialty products and give them a bundle of products+services (for pre delivery or post delivery care)

• Tie-ups for exclusive merchandise and pre-ordering them will lead to increased traffic and sales

Strategic Tie-Ups

• Strategic Tie Ups for exclusive offers and products (with emphasis on a long term relationship)

• More imported brands and goods

• Market is expanding and hence its advised to keep a foresight into the consolidation that should happen after a boom

• Improving the catalog seen

• More visibility to sales on the home page

Growth Planning

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• Should pay heed when comparing or mapping the growth of this category to China's Baby Care growth and observations, the stark

difference being 'One Child' policy

• Important to remember that end customer doesn't look at only the product, price or delivery, but also looks at the facts like

product quality, usage and convenience related to it. Hence product landing page should have more informational features

• In strategic partnerships with trainers/maternity and infant care advisors, it is important to have a thorough background and

eligibility check. Same goes for domestic baby care products suppliers, esp. for non-branded items

Pitfalls

• Alt texts important for features like 'Register your baby' - The customer has to know about the feature and what to expect from it

• Use ‘Gamification’ to help attract the customer and keep their interest in the product profile

• Use of mobile technology in portable kiosks, pop-up stores etc should be incorporated

• Use clickable videos on kiosks and pop-up stores

• Adopt SMAC for competitive advantage over peers

• Bring in shopping assistance. For a category like Baby Care, customers welcome suggestions and help

• Look for niche social networks in India

• Overcome SEO difficulties and costs with Content Marketing

Technology

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Thanks