Essay: A Report on E-Commerce Industry

A Study on Indian E-Commerce Industry
Executive Summary
Following report has been made on the ‘Indian E-commerce Industry’. All the data has been collected from the internet, research papers and surveys. The e-commerce is one of the biggest things that have taken the Indian business by storm. It is creating an entire new economy, which has a huge potential and is fundamentally changing the way businesses are done. It has advantages for both buyers as well as sellers and this win-win situation is at the core of its phenomenal rise. Rising incomes and a greater variety of goods and services that can be bought over the internet is making buying online more attractive and convenient for consumers all over the country.
The report gives information on different aspects of the Indian E-commerce industry. For simplicity it is divided into various chapters.
Chapter 1 ‘ Introduces to the Indian E-commerce industry and defines its importance to the economy. The objective of the study is set in this chapter.
Chapter 2 – Briefs about the Global and Indian scenario. Comparison of U.S and Indian E-commerce
Chapter 3 ‘ Provides a brief insight into the Structure of the industry with the HHI index the Chapter 4 ‘ Has the macro environmental analysis of E-Commerce industry which includes the PESTEL analysis.
Chapter 5 – Briefs the Competitive analysis using Porters 5 Forces.
Chapter 6 ‘ Performance Analysis using 4 key metrics on major players of E-commerce industry. Also included the Internet users traffic comparison on top 10 e-commerce sites in India.
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CHAPTER 1
INTRODUCTION
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1.1 Introduction
Since from few years, Growth of internet has changed the world in terms of expectations of
the consumer and consumer behaviour. Online websites for product purchasing concentrate
on consumer behaviour pattern and shopping patter with drastic change. Company are now a
days willing to change their marketing strategies as they have understood traditional selling
practices won’t work with changing technology world.
‘Buying and selling products online’ was a new chapter introduced in the internet world in
year 1991. Ebay.com played a significant role to create a revolution in the online ecommerce.
Till that time nobody thought that purchasing all kind of products online will become a trend
in world and India will share a good part of success. In the late 1990’s, ReddifShopping.com
and Ebay.com gave a first-hand experience for Indians towards E-retail.
Initially when it use to come for weekly shopping of groceries, clothes, shoes and cosmetics,
majority of the people preferred to get into their cars and drive to the supermarket to get the
groceries, shops or malls for other basic products. Now it is becoming common news that
people even buy their groceries online in India.
1.2 Business Model of E-commerce Industry
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Deals Websites
1) Flash Sales Sites: A Flash Sales e-Commerce Website is a B2C type business model
where the website sells the products directly to the end customers. They normally
manage the entire process of the e-Commerce lifecycle on their own or through their
partners and the consumer make the payment directly to the business owning and
managing the website. The consumers take the benefit of huge discounts, which at
times ranges from 50% to 90%, and prefer to buy the products they always aspired to
own. They are normally unaware or do not really care even if the product they are
buying from such websites are obsolete or no longer in fashion.
2) Daily Deals Sites: A Daily Deals Website also operates as a B2C website and
typically showcases a very lucrative sale on a single or a set of products for the
customers. Unlike the Flash Sales website, such a deal is time bound (usually for a
day) which compels the user to make immediate decisions for that product purchase.
3) Group Buying Sites: A group buying website is quite a unique B2C business model
where the website invites the buyers to buy the products / services at a discounted or
at a wholesale price. Like the Daily Deals site, the products advertised on the group
buying sites are also time bound, but usually not limited to a day.
Online Subscriptions
An online subscription website works in a similar manner like an offline subscription
for any kind of service. Such websites showcase the entire catalogue of subscription
options for the users to choose from and subscribe online.
E-Retailing
There are a number of B2C e-Commerce websites offering a range of products and
services to customers across different brands and categories. Such websites buy the
products from the brands or their distributors and sell to the end customer on market
competitive prices. Though their modus operandi is same like a flash sales website,
but their business objective is to offer the latest products to the end customers online
at the best possible prices.
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Marketplace
Another business model gaining attracting in India recently is the online marketplace
model which enables the buyers get in touch with the sellers and makes a transaction.
In this business model, the website owners do not buy the product from the sellers but
act as mediators to facilitate the entire e-commerce transaction. They do assist the
sellers in various services like payment collection, logistics, etc. but do not prefer to
hold inventory in their own warehouse.
1) C2C Marketplace
A C2C Marketplace or a Consumer to Consumer marketplace means an online
marketplace where individual consumers can sell products to individual buyers.
As a seller, even if you do not run a business, you are free to sell your product
through such marketplace to the end customers.
2) B2C Marketplace
A B2C Marketplace or a Business to Consumer marketplace means an online
marketplace where only business owners can sell their products to the end
customer. The process is more or less the same like that of a C2C Marketplace
with the exception that it does not allow individual users to sell their products
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online. Best example of this kind of a website would be SnapDeal.com which has
now become a B2C Marketplace.
3) B2B Marketplace
In a Business-to-Business E-commerce environment, companies sell their online
goods to other companies without being engaged in sales to consumers. B2B web
shop usually contains customer-specific pricing, customer-specific assortments and
customer-specific discounts. Indiamart.com and TATA groups tatab2b.com are few
popular sites in India.
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Exclusive Brand Stores
This is the latest business model of its kind recently started in India. In this business
model, the various brands setup their own exclusive brand stores online to enable
consumers buy directly from the brand. A few examples of brands operating through
an Exclusive Online Brand Store are Lenovo, Canon, Timex, Sennheiser, HP,
Samsung, Mobilestore.com etc.
1.3 Role of Internet in E-Commerce
Large and small business companies both use internets for promotional activities. Some of
the advantages of E-Commerce are:-
1. Availability- The availability of internet is widespread these days and hence is easily
accessible to people which has increased the online purchases of goods and
commodities.
2. Open to All- Internet open page allows everyone to access and transact from any
global location. Moreover it provides an extension of product choice to the customers
which in turn is not possible at local retail stores, etc .
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3. Global Presence- Having a global presence it is very easy to access from any world
location just by having a laptop and an internet connection. All such happenings have
encouraged E-Commerce as any commodity is just a step away from oneself.
4. Professional Transaction- Internet allows professional transaction with just one click a
professionalism that consists of decision making.
5. Low Cost, More Earn- E-commerce can be easily done with more earnings and less
expenses. The easiest approach is to replace sales person with a well informative and
designed web page that could easily help the customers to have their like items at
their doorsteps with a click of a mouse.
1.4 Changes due to online shopping in India
According to report BCG (Boston consultancy Group), by 2016, Indian economy will reach
$10.8 trillion. In global chart India’s rank is 8th. India ranks top in services and china occupies
top position in goods in terms of export through internet. As of now, June 2014, India has
user base of about 250.2 million. It is estimated that by 2024-26, e-commerce market in India
will be $260 billion.
At an Exponential rate, E-commerce is growing in India. According to recent online retailing
report by Forrester, twenty eight percentage of growth is experienced by every retailer year
after year in 2012. As per the study digital consumers spend alomostaround$1.46 billion on
cyber cafes. This indicated that year after year there will be increasing number of online
users. Consumer behaviour is one of the biggest reasons of e-commerce boom in India.
Major reasons for online shopping growth in India
‘ There is increase in broadband connection and 3G penetration in India.
‘ Much wider range of products are available then what is available in brick and mortar
retailers.
‘ Living standard is rising for middle class people and disposal income is also getting
high.
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‘ Online products are usually available at discount which is less than the products
available in normal shops.
‘ Lack of time and busy lifestyle for offline shopping.
‘ Evolution of the online marketplace model with websites like ebay, flipkart, snapdeal
etc.
‘ Takes less time for purchasing as there is no need to stand in the queues which usually
done in offline shopping.
1.5 Advantages of E-Commerce
‘ With E-Commerce as an alternative shopping is no longer a barrier for the customers
in terms of time, distance and place as customers can shop at any time and from
anywhere they prefer to.
‘ E-Commerce has satisfied and provides certified branded products to the customers
that even typical Indian customers are ready to buy products such as clothes, shoes,
etc. without even touching or trying them for fitness.
‘ All extra expenditures that were initially done on labour, etc are avoided and a lot of
funds get saved.
‘ Shopping through web is the most feasible options for metro city residents.
‘ Transaction time has reduced.
‘ Alternative products offered by different brands are also availed to the customers if by
chance the current product in a particular brand is unavailable.
‘ 1-Day delivery along with door-door delivery has caught a boom in the market with
the evolution of E-Commerce.
1.6 Disadvantages of E-Commerce
‘ Unprofessionalism has increased as any company gets a chance to make their business
portal out of trust or belief.
‘ Customer interaction is very less so the product quality and satisfaction to the
customer remains a matter for concern.
‘ Hackers and crackers are day in and day out searching for a chance to hack into
customer personal details that they share at the time of online payments.
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‘ E-commerce go discouraging for the purchasing of precious items just by having a
glance of them rather than getting a chance to wear them or check product quality
such as jewellery etc.
‘ E-commerce concept is under a mess as many online sites do not deliver services as
promised at the time of placing the order.
‘ Authenticity for the product is untrustworthy.
1.7 OBJECTIVES OF THE STUDY
‘ To study the global and Indian scenario with respect to the E-commerce Industry
‘ To study the structure of the Indian E-commerce industry
‘ To study the macro environmental factors affecting the Indian E-commerce industry
‘ To analyze the industry using Porters 5 Forces
‘ To study the performance of major players in the industry
‘ To compare the U.S and Indian E-commerce industry
‘ To study the future opportunities and prospective growth in the industry
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CHAPTER 2
GLOBAL AND INDIAN
SCENARIO
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2.1 Status of the global e-commerce industry
Middle class in many of the developing countries, including India, is rapidly embracing
online shopping. However, India falls behind not only US, China and Australia in terms of
Internet density, but also countries like Sri Lanka and Pakistan. Sri Lanka has an internet
penetration of 15 percent. Better internet connectivity and the presence of an internet-savvy
customer segment have led to growth of e-commerce in Sri Lanka with an existing market
size of USD 2 billion. Pakistan, with an internet penetration of 15 percent has an existing
market size of consumer e-commerce of USD 4 billion. Incidentally FDI in inventory-based
consumer ecommerce is allowed in both these countries. (IAMAI-KPMG report, September
2013).
A.T. Kearney’s 2012 E-Commerce Index examined the top 30 countries in the 2012 Global
Retail Development Index’ (GRDI). Using 18 infrastructure, regulatory, and retail-specific
variables, the Index ranks the top 10 countries by their e-commerce potential.
Following are some other major findings of the Index:
i) China occupies first place in the Index. The G8 countries (Japan, United States, United
Kingdom, Germany, France, Canada, Russia, and Italy) all fall within the Top 15.
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ii) Developing countries feature prominently in the Index. Developing countries hold 10 of
the 30 spots, including first-placed China. These markets have been able to shortcut the
traditional online retail maturity curve as online retail grows at the same time that physical
retail becomes more organized. Consumers in these markets are fast adopting behaviors
similar to those in more developed countries.
iii) Several “small gems” are making an impact. The rankings include 10 countries with
populations of less than 10 million, including Singapore, Hong Kong, Slovakia, New
Zealand, Finland, United Arab Emirates, Norway, Ireland, Denmark, and Switzerland. These
countries have active online consumers and sufficient infrastructure to support online retail.
iv) India is not ranked. India, the world’s second most populous country at 1.2 billion, does
not make the Top 30, because of low internet penetration (11 percent) and poor financial and
logistical infrastructure compared to other countries.
It is seen that countries making in the top list of the table of e-commerce have required
technologies coupled with higher internet density, high class infrastructure and suitable
regulatory framework. India needs to work on these areas to realize true potential of ecommerce
business in the country.
2.2 Comparison of E-Commerce in US and India
The Indian e-commerce market will reach as high as USD 6 Billion by the year 2015. This
implies that if we compare the e-commerce market with the statistics from the year 2014,
there is a substantial growth of 70%. It is evident that India is slowly becoming like the US in
the area of e-commerce.
It is stated that India has started doing well in the market of e-commerce because of the
growing number of people who have access to mobile Internet. Broadband usage has
increased by about three times in the last two years (2013 & 2014).
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2.2.1 Cash on Delivery (COD) system in India
Cash on Delivery is an Indian thing. US consumers mainly transact online using Credit Cards
or through PayPal. Indians are known to be price sensitive. Even though with heavy
discounting e-retailers are trying to lure them to buy online, consumers are still wary of
making prepaid orders.
The situation is different in US. Even though the discounting games continue, users generally
go with prepayment. This is also because the penetration of credit cards and electronic
payments is highly evolved in that market, while in India, despite the estimated 1.252 billion
strong population of India, only 18.8 million credit cards existed in the country, with
approximately 331 million debit cards till last year. The popularity of CoD is directly
dependent on the trust issues consumers have on the online retailers.
2.2.2 Offers and excitement created among customers
The trend of mega online shopping festivals started in the West. From offline trends of
Macy’s Day parade and Black Friday to taking these festivals online, and creating further
new trends like Cyber Monday.
India is still naive, even the three editions of the Great Online Shopping Festival have not
been able to make the impact they were expected to. The festive season of Diwali is a time
when Indians indulge in spending, and while the Indian retailers were busy creating their
respective versions of ‘mega sales’, US based Amazon was the first to step on this
opportunity with ‘Diwali Dhamaka Sale’. Also, the consumer shopping behaviour is different
in the two countries.
The Indian online retails brings up offers and excitement into the consumers, but it is not big
like how it is in US.
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2.2.3 Type of Product that People Buy Online.
Nowadays people buying real estate and even automobiles online even in India is becoming
common. But in general, Apparel and electronics remain the most popular categories people
buy online, and the same is seen in the US as well. These two categories dominate both the
markets.
An area where India is lacking is online grocery retail. Grocery retail and logistics is highly
evolved in US. In India, it was a taboo, and wasn’t touched for a long time even though the
sentiment was strong. Players are emerging now in this segment, with start-up’s like
BigBasket, LocalBanya etc. and mature players like Reliance Fresh taking the lead.
The local Indian ‘banya’ is still stronger than online stores. The unorganised retail in India is
an area where the e-commerce would be able make a difference and eventually take over.
2.2.4 Logistics and Regulations
The logistics infrastructure is still not up to the mark in India. While India Post is doing a
great job in helping the e-commerce players, no dedicated e-commerce company has been
able to scale up its operations to reach all the postal codes. The penetration of internet in
India is 18% as against 87% in US, is a big hindrance.
When it comes to technology, site crashes, issues in ERP systems etc. are commonly heard
things in India. Whereas in US, the technology is very strong.
The Government bodies in India haven’t yet matured to the online businesses that are
operational. There hasn’t been any clear guidelines for FDI until recently, even there the
Government has decided to treat both online and offline retail alike. Some of the other online
marketplace keeps running into warehousing policy issues. The heavy discounting is another
questionable area, since the Government has clear guidelines for Maximum Retail Price,
there is no lower bar set.
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CHAPTER 3
STRUCTURE OF THE
INDUSRTY
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3.1 HERFINDAHL – HIRSCHMAN INDEX
A commonly accepted measure of market concentration. It is calculated by squaring the
market share of each firm competing in a market, and then summing the resulting numbers.
The HHI number can range from close to zero to 10,000.
The HHI is expressed as: HHI = S1^2 + S2^2 + S3^2 + … + Sn^2 (where Sn is the market
share of the Ith firm) the closer a market is to being a monopoly, the higher the market’s
concentration (and the lower its competition).
For the e-commerce industry, the HHI, based on the market share is calculated as follows
Company Sales(in cr) market
share
HHI index
Flipkart 2846.13 53.89683186 2904.868484
Jabong 202 3.82525044 14.63254093
Myntra 441.58 8.362148958 69.92553519
Snapdeal 830 15.7176132 247.0433646
Amazon 168.99 3.20014392 10.24092111
Ebay 107 2.02624652 4.105674961
naptol 460 8.710966349 75.88093474
Yebhi 120 2.272426004 5.163919944
Yepme 80 1.514950669 2.295075531
bewakoof 25 0.473422084 0.22412847
total sales 5280.7 100 3334.38058
>1800
Highly
concentrated
Source: capitaline.com
The HHI can have a theoretical value ranging from close to zero to 10,000. If there exists
only a single market participant which has 100% of the market share the HHI would be
10,000. If there were a great number of market participants with each company having a
market share of almost 0% then the HHI could be close to zero.
‘ When the HHI value is less than 100, the market is highly competitive.
‘ When the HHI value is between 100 and 1000, the market is said to be not concentrated.
‘ When the HHI value is between 1000 and 1800, the market is said to be moderately
concentrated.
‘ When the HHI value is above 1800, the market is said to be highly concentrated.
So the HERFINDAHL – HIRSCHMAN INDEX of the E-commerce industry is greater than
1800. Hence it is highly concentrated.
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CHAPTER 4
COMPITITIVE ANALYSIS
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4.1 PORTER’S FIVE FORCE ANALYSIS
The huge competition in the e commerce market allows to win as companies have to
keep their prices in check to attract buyers.
Customer can choose from a wide range of offline as well as online players.
Customers can always buy from some other website or some other store in case they
are not satisfied with any one player
Buyers in this industry are customers who purchase products online. Since this
industry is flooded with so many players, buyers are having lot of options to choose.
Switching costs are also less for customers since they can easily switch a service
from one online retail company to other one. Same products will be displayed in
several online retail websites. So, product differentiation is almost low. So, all these
factors make customers to possess more power when compared to online retail
companies.
Also the E-commerce aggregators sites makes it transparent to the consumer to see which
site offers the product in the least price
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4.1.1 Bargaining Power of Buyers
The huge competition in the e commerce market allows to win as companies have to
keep their prices in check to attract buyers.
Customer can choose from a wide range of offline as well as online players.
Customers can always buy from some other website or some other store in case they
are not satisfied with any one player
Buyers in this industry are customers who purchase products online. Since this
industry is flooded with so many players, buyers are having lot of options to choose.
Switching costs are also less for customers since they can easily switch a service
from one online retail company to other one. Same products will be displayed in
several online retail websites. So, product differentiation is almost low. So, all these
factors make customers to possess more power when compared to online retail
companies.
Also the E-commerce aggregators sites makes it transparent to the consumer to see which
site offers the product in the least price
4.1.2 Bargaining Power of suppliers
Tens of millions of sellers list their products on ecommerce marketplaces; hence
their individual bargaining power is limited.
However, sellers can also list their products on multiple platforms and sites,
including Amazon, Etsy.com and various international e-commerce sites. Hence, if
eBay introduces policy and pricing changes that are unsatisfactory to sellers, then it
could result in lower number of product listings on its marketplace.
There are relatively fewer number of postal and delivery services as well as
shipping carriers; hence any pricing change or disruption in their services could
hamper eBay’s ability to deliver products on time. Hence, these carriers hold some
bargaining power.
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The sources that generate traffic on ecommerce site can also be classified as
suppliers. Search engines hold significant leverage as they account for over 20% of
traffic on eBay if we account for both organic and paid search (according to Similar
Web estimates). Changes in Google SEO (search engine algorithm) have a negative
impact on traffic. eBay’ seller marketplace model leads to large amounts of
unstructured data on the site, which is detrimental to its SEO efforts.
Additionally, several referring sites such as slickdeals.net, dealnews.com and social
networks also bring considerable traffic to ecommerce and any changes in their
policies could adversely affect the company’s top-line and profitability.
In this industry, suppliers are the manufacturers of finished products like Nike, Dell,
Apple etc. Online retail companies sell various products ranging from books to
computer accessories to apparels to footwear. Since there are many suppliers for any
particular category, they can’t show power on online retail companies. For example,
if you take computers category, there are many suppliers like Dell, Apple, Lenovo,
and Toshiba who wants to sell their products through these online retail companies.
So, they won’t be having power to control the online retail companies. Online
customers can select the products on their own and the switching costs in this case is
zero. It is very difficult for manufacturers of finished products to come into this
industry because of challenges in Logistics. Online retail industry is important to
suppliers because it acts as one of the channel to sell the products. Now, with most
of the customers in India purchasing online through online retail companies, they
can’t afford to lose this channel. So, they can’t dictate terms with online retail
companies. So, in this industry the supplier power is low.
4.1.3 Competitive Rivalry within the Industry
E-commerce faces competition in its marketplaces segment from both offline and online
players. Customers can buy products from a wide range of retailers, distributors,
auctioneers, directories, search engines, etc and hence the competition is intense.
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Various factors such as price, product selection and services influence the purchasing
decision of customers. E-commerce companies frequently engage in price-based
competition to woo buyers, which limits their ability to raise prices.
In the payments business, there is competition from sources such as credit and
debit cards, bank wires, other online payment services as well as offline payment
mechanisms including cash, check, money order or mobile phones.
Considering the entry of newer players such as Apple Pay and Alibaba, the
competition is expected to heighten in the online payments space.
Competition is very high in this industry with so many players like Flip kart,
Myntra, Jabong, Snap deal, Amazon, India plaza, Homeshop18 etc.
4.1.4 Threat of New Entrants
Given the nature of the business, there is always a threat of new entrants as it is
relatively less costly to enter the market and setup operations. There is no additional
cost incurred to set up any physical stores and locations. In addition, traditional
established physical stores can easily move into online retailing and bring with them
their substantial consumer base. These stores such as Target or Wal-Mart, already enjoy
economies of scale, have recognizable brands and a strong supply chain. So they do
pose strong competition to Amazon.
That said, the threat from brand new entrants remains low as it would be nearly
impossible for a new company to match the cost advantages, economies of scale and
variety of offering as Amazon.com. These advantages will deter most brand new
entrants to the market.
Substantial Economies of Scale
Ecommerce like Amazon works with over 10,000 vendors and boasts an impressive 75
percent repeat purchasers. Its market capitalization is substantially ahead of its nearest
competitors.
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First Mover Advantage
As the pioneer online retailer, Amazon , flip kart has the necessary brand awareness and
credibility as a strong reliable presence in the market.
Massive product Variety
Way beyond a bookstore now, Amazon.com , Flipkart provides any type of product
there is in its online stores. This means that there is a strong supplier base relationship
that cannot be replicated. In addition, as a bookseller and a provider of other
entertainment channels such as movies, videos and music, ecommerce has established
relationships with publishers, producers, movie studies and music producers which are
not easy to form and replicate.
The e-commerce market is characterized by low barriers to entry. It is relatively easy
for newer players to enter the market and start selling products. Having said that, it’s
difficult for newer players to gain brand recognition and attain high ranking on search
engines.
Newer players require significant marketing budgets to compete on a large scale and
this restricts entry of newer players to an extent.
The online payments market has relatively higher barriers to entry as there is intense
competition between established players; additionally, security is a paramount during
online payments and hence newer players which do not have the necessary brand
recognition will find it difficult to attract new customers.
However, established players such as Apple, Amazon and Alibaba have the potential
to make a dent in PayPal’s strong market position.
‘ Indian government is going to allow 51% FDI in multi-brand online retail and
100% FDI in single brand online retail sooner or later. So, this means foreign
companies can come and start their own online retail companies.
‘ There are very less barriers to entry like less amount of money required to start a
business, less amount of infrastructure required to start business. All you need is
to tie up with suppliers of products and you need to develop a website to display
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products so that customers can order products, and a tie up with online payment
gateway provider like bill desk.
‘ Industry is also going to grow at a rapid rate. It is going to touch 76 billion $ by
2021. Industry is going to experience an exponential growth rate. So, obviously no
one wants to miss this big opportunity.
4.1.5 Threat of substitute products
The threat of substitutes for ecommerce is high. The unique characteristic Amazon has is
the patented technology (such as 1-Click Ordering), which differentiates them from other
possible substitutes. However, there are many alternatives providing the same products
and services, which could reduce Amazon’s competitive advantage. Therefore, Amazon
does not have absolute competitive advantage on their product offerings, but they
definitely have the advantage when it comes to the quality of customer service and
convenience provided.
There is no technology that can substitute the Internet so far in the market. Even, analog
signal that use to send the television signal or radio signal are not the main threat.
The main substitute that exists is the brick and motor store, which they change or move
their place to be on the Internet. Therefore, the e-commerce industry has low threat of
substitutions. When we compare relative quality, relative price of product that he/she
buys online with physical store, both are almost same and in some cases, online discounts
will be available which makes customers to buy products online.
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Porters 5 Force Model of E-Commerce Industry
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CHAPTER 5
MACRO ENVIORNMENTAL
ANALYSIS
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PESTLE ANALYSIS
This industry analysis, also known as the macro environmental analysis is basically done to
determine the conditions in which the industry is operating in. The analysis of these factors
becomes very important for a company operating in that particular industry for the growth
and sustenance.
5.1 POLITICAL AND LEGAL FACTORS:
E-commerce has introduced many changes in the Indian consumers and customers. However,
e-commerce in India has also given rise to many disputes by the consumers purchasing the
products from e-commerce websites. In fact, many e-commerce websites are not following
Indian laws at all and they are also not very fair while dealing with their consumers.
Allegations of predatory pricing, tax avoidance, anti competitive practices, etc have been
levelled against big e-commerce players of India. As a result, disputes are common in India
that is not satisfactorily redressed. This reduces the confidence in the e-commerce segment
and the unsatisfied consumers have little choice against the big e-commerce players. At a
time when we are moving towards global norms for e-commerce business activities, the
present e-commerce environment of India needs fine tuning and regulatory scrutiny. In fact,
India is exploring the possibility of regulation of e-commerce through either Telecom
Regulatory Authority of India (TRAI) or through different Ministries/Departments of Central
Government in a collective manner.
It is obvious that e-commerce related issues are not easy to manage. E-commerce disputes
resolution is even more difficult and challenging especially when Indian Courts are already
overburdened with court cases. Of course, establishment of e-courts in India and use of online
dispute resolution (ODR) in India are very viable and convincing options before the Indian
Government.
Many Indian stakeholders have raised objections about the way e-commerce websites are
operating in India. These websites are providing deep discounts that have been labeled as
predatory by offline traders and businesses. Further, Myntra, Flipkart, Amazon, Uber, etc
have already been questioned by the regulatory authorities of India for violating Indian laws.
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5.1.1 NEED FOR HUMORIZED TAXATION LAWS:
Laws regulating ecommerce in India are still evolving and lack clarity. Favorable regulatory
environment would be key towards unleashing the potential of ecommerce and help in
efficiency in operations, creation of jobs, growth of the industry, and investments in back-end
infrastructure. Furthermore, the interpretation of intricate tax norms and complex inter-state
taxation rules make ecommerce operations difficult to manage and to stay compliant to the
laws. With the wide variety of audience the ecommerce companies cater to, compliance
becomes a serious concern. Companies will need to have strong anti-corruption programs for
sourcing and vendor management, as well as robust compliance frameworks. It is important
for the E-Commerce companies to keep a check at every stage and adhere to the relevant
laws, so as to avoid fines.Myntra, Flipkart and many more e-commerce websites are under
regulatory scanner of Enforcement Directorate (ED) of India for violating Indian laws and
policies. There are no taxation laws for these websites so the products are being sold at huge
discounts in these sites. Some of the major causes not keeping taxation laws over ecommerce
are that the government is not having proper knowledge about the structure of
industry and the limitations that has to be given to the e commerce industry and what are the
rights that should be given to them for selling the product Security of the information
provided during the online transaction is a major concern. Under section 43A of the I T Act
the ‘Reasonable practices and procedures and sensitive personal data or information Rules,
2011’ have been proposed, which provide a framework for the protection of data in India
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5.2 ECONOMIC FACTORS:
Mass usage of internet:
The usage of internet is increasing rapidly in INDIA, it is said that India is said to be the 3rd
largest internet population country after USA and CHINA. Current India internet users are
205 millions .The total no of users are expected to be 330-370 millions in just 3 years. The
internet usage in cities has been increased rapidly.
Increased aspiration levels and availability
The aspiration of the Indian youth and middle class while the coming year will be even more
promising both for the consumer as also the entrepreneurs, with average annual spending on
online purchases projected to increase by 67 per cent to Rs 10,000 from Rs 6,000 per person.
In 2014, about 40 million consumers purchased something online and number is expected to
grow to 65 million by 2015 with better infrastructure in terms of logistics, broadband and
Internet ready devices will be fuelling the demand in ecommerce. The smart phones and
tablet shoppers will be strong growth divers, mobile already accounts for 11% of e commerce
sales, and its share will jump to 25% by 2017. Computer and consumer’s electronics as well
as app
eral and accessories account for the bulk of India retail ecommerce sales will contribute 42%
of its sales.
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Liberal policies (FDI in Retail and Insurance)
The E-commerce Association of India (ECAI) is looking for a positive response from the
government on critical reforms like permitting FDI for the B2C inventory led model. This has
been industry’s demand for a long-time, especially as many small and medium sized
ecommerce players face obstacles on easy access to capital and technology. The industry has
been hoping that the government would at least review a partial opening of the sector to FDI.
In 2015 budget the FDI has been increased to 51 %. So there is a positive response from the
international e commerce industry that is trying to enter into India. Even allibaba.com is also
trying to enter into India with the help of snapdeal.com. But on the other side the small e
commerce companies are finding it difficult because may face difficulty in the future when
the MNC e commerce companies enter India.
Supply chain and the productivity growth
The most important impact of ecommerce is maintained supply chain and the productivity of
the products. The buying and selling of goods’continues to undergo changes that will have a
profound impact on the way companies manage their supply chains. Simply put, e-commerce
has altered the practice, timing, and technology of business-to-business and business-toconsumer
commerce. It has affected pricing, product availability, transportation patterns, and
consumer behavior in developed economy in India. Business-to-business electronic
commerce accounts for the vast majority of total e-commerce sales and plays a leading role in
supply chain network. In 2014, approximately 21 percent of manufacturing sales and 14.6
percent of wholesales are done in India.
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From the moment the online order is placed to when it is picked, packed, and shipped, every
step in the process must be handled efficiently, consistently, and cost-effectively. In ecommerce,
the distribution center provides much of the customer experience. Simply
delivering the goods is no longer an adequate mission for the fulfillment center’customer
satisfaction has to be a critical priority. The typical e-commerce consumer expects a wide
selection of SKU offerings, mobile-site ordering capability, order accuracy, fast and free
delivery, and free returns. Understanding how online consumers shop and purchase across
channels is critical to the success of online fulfillment. More consumers are browsing the
Internet for features and selection, testing products at brick-and-mortar stores, acquiring
discounts through social media, and then purchasing the product online through the
convenience of their mobile device. Some retailers,’including those that also sell through
catalogs’have been in the direct-to-consumer marketplace for some time. These companies
have fulfillment facilities established and information technologies in place to manage orders
with speed and efficiency, doing it well and profitably. But to many distribution executives,
online fulfillment poses a significant challenge to their existing knowledge, experience, and
resources.
5.3 SOCIAL FACTORS:
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Better comfort level and trust in online shopping:
‘ Consumers feel easy to access the ecommerce sites 24×7 support. Customer can do
transactions for the product or enquiry about any product/services provided by a company
anytime, anywhere from any location. Here 24×7 refers to 24 hours of each seven days of a
week.
‘ E-Commerce application provides user more options and quicker delivery of products.
‘ E-Commerce application provides user more options to compare and select the cheaper and
better option.
‘ A customer can put review comments about a product and can see what others are buying or
see the review comments of other customers before making a final buy.
‘ E-Commerce provides option of virtual auctions.
‘ Readily available information. A customer can see the relevant detailed information within
seconds rather than waiting for days or weeks.
Advantages to the society:
‘ Customers need not to travel to shop a product thus less traffic on road and low air pollution.
‘ E-Commerce helps reducing cost of products so less affluent people can also afford the
products.
‘ E-Commerce has enabled access to services and products to rural areas as well which are
otherwise not available to them.
‘ E-Commerce helps government to deliver public services like health care, education, social
services at reduced cost and in improved way.
‘ E-Commerce increases competition among the organizations and as result organizations
provides substantial discounts to customers.
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5.4 Technological factors:
Cloud computing in e commerce:
According to analysts, within 10 years’ time 80% of all computer usage worldwide, data
storage and e-commerce will be in the cloud. It is called the third phase of the internet.
During the first phase software and operating systems were combined to create a simple flow
of communication through ‘ for instance ‘ email. The second phase brought the user to the
World Wide Web, where he had access to millions of websites. This increased internet usage
by a factor of one hundred in only 2 years’ time. In the third phase everything is in the cloud,
both data and software.
There are several types of cloud computing, of which Software-as-a-Service is probably the
best-known. The others are Platform-as-a-Service (PaaS) and Infrastructure-as-a-Service
(IaaS).
The ability to lower costs, accelerate deployments and respond quickly
to market opportunities and challenges are just a few reasons why so many IT leaders are
leveraging cloud based e commerce applications. Given the variety of solutions, IT leaders
must research their options carefully in order to select the one that best meets their needs.
Following are the top four impacts of cloud computing on e-commerce applications and
steps IT leaders should take during their evaluation process.
It’s easy for business leaders to focus on the benefits of cloud computing without considering
the time and effort involved in implementing a viable solution. However, whatever cloud
computing solution they select, the application will need access to customer data, product
data, fulfilment systems and other operational systems in order to support e-commerce. Cue
the IT team.
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Consumerization of the online customer experience requires closer scrutiny
of e commerce:
While many B2C companies use e-commerce platforms for direct sales, B2B organizations
are also leveraging them to add transactional capabilities to their informational sites. In
addition, the online experience is becoming more ‘consumerized,’ meaning that B2B buyers
expect a retail-like customer experience ‘ even when visiting non-retail sites. Cloud solution
providers (CSPs) that focus solely on creating retail models are often not well-versed in B2B
requirements which can be more complex. As a result, their offerings don’t include B2B
functions, such as easy entry of large orders and repeat orders, segmented product catalogues
that are based on a client hierarchy and buying privileges, configure price quote capabilities
and extended payment terms. IT leaders have an unprecedented number of CSPs from which
to choose. However, they need to carefully evaluate ones that have experience meeting their
industry-specific needs, whether it’s B2B, B2C, or a combination of both.
Usage of bandwidth for E-commerce:
Transmission capacity of a communication channel is a major barrier for products that
require more graphical and video data. For this e commerce companies need higher
bandwidth than usual. These all depend on the no of the customers visiting websites, the
type of the products the e commerce industry is selling and the location at which the online
users are mostly visiting the website. These all are some of the factors that affect the usage
of bandwidth. Web processing is also some of the key factors that make e commerce
industry to run. Another key factor is: High cost of developing, purchasing new software,
licensing of software, integration into existing systems, costly e business solutions for
optimizations.
Benefits of using cloud computing over E-commerce:
‘ Trust. Cloud computing enables online store owners to use the same platform and use
the same functionality. That means that new features can be made available to
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everyone with a simple modification. Moreover, the maintenance is taken care of
centrally, which means that store owners can rely on a stable platform.
‘ Cost saving. In many cases this is the most important reason for companies to choose
cloud computing. Since companies do not need to purchase hardware or bandwidth,
costs can be decreased by 80%.
‘ Speed. A company can activate an ecommerce application five times faster and sell
directly through a platform that is managed remotely.
‘ Scalability. Cloud computing makes a company more elastic and able to respond to
seasonal changes or sudden increases in demand due to special promotions.
‘ Security. Many cloud computing suppliers have been certified so more security can be
guaranteed to customers.
‘ Data exchange. The explosive growth of cloud ecommerce will lead to more data
exchange between the clouds. Suppliers will offer more and more possibilities to add
features to their clouds for users, partners and others.
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CHAPTER 6
PERFORMANCE ANALYSIS
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6. FIRMS UNDER STUDY
‘ Flipkart
‘ Snapdeal
‘ Amazon
Four key metrics have been used to evaluate the performance of
E-Retailers in India.
1. Gross Margin
2. Subscriber Growth Rate
3. Average Order Size:
4. Percentage of Mobile Visits
6.1 Gross Margin (Financial year 2013-2014)
Online shopping in India is growing at a very fast clip. At the same time, there is an intense
competition in ecommerce space, especially among the top 3 players. There is aggressive
pricing and discounts are being paid by Venture Capitalists’ pockets.
Flipkart, Amazon and Snapdeal, all of them have raised investments or have commitments of
$1 Billion or more. This money is being burned to acquire new customers, offer discounts
and pump up products on offers. At the same time these sites are losing money, the quantum
of loss these ecommerce players have incurred for every Rupee spent is displayed in the
below figure.
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The revenue figures above are not the price of products sold (GMV), as these are all
marketplaces, and their revenues come from commissions they get from sellers or listing fees
that they charge to list the products on their site.
GMV or Gross Merchandize Value represents the price of products sold and net revenues are
just a fraction of that.
Flipkart leads the race with net revenue of 179 crore followed by Amazon at 168.9 crore and
Snapdeal at 154.11 crore.
However, when it comes to losses, Flipkart leads by a much bigger margin and their loss for
2013-14 stands at Rs. 400 Crore. Comparatively, Amazon losses are pegged at Rs. 321.3
crore and Snapdeal had least losses of 3 with 264.6 crore.
The figure below shows the loss each player incurs for every rupee in net revenues.
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Flipkart leads the race to losing 2.23 rupees for every 1 rupee of revenue. Amazon loses 1.90
and Snapdeal has least amount of losses at Rs. 1.72.
This cannot be judged as a low performance by the players as after a certain time when they
gain major part of market. Every product they sell would be a profit for them.
6.2 Subscriber Growth Rate
Flipkart was founded in the year 2007. By the end of year 2013 they have acquired 22
million registered users and handles 5 million shipments every month while Snapdeal was
founded in the year 2010 and has 20 million registered users by the end of year 2013.
Snapdeal has acquired customers in a quicker pace when compared to Flipkart, but this
cannot be considered to be low performance shown by Flipkart, because when they founded
e- retail in India, the people were not much familiar to e-commerce and online purchasing at
that period.
6.3 Average ordering size of Flipkart for Financial year 2011-2012
Flipkart, has hit a milestone clocking Rs 100 crore in gross merchandise value shipped in a
month for the first time in June 2012. The jump is from an average of around Rs 42 crore
financial year 2010-2011. Flipkart had clocked Rs 500 crore for the 12 months ended March
31, 2012.
In the year 2012 the number of daily orders has hit 25,000 mark (or seventeen orders per
minute), a five-fold rise after the company clocked 5,000 orders a day for the first time in
May 2011. Flipkart first clocked 1,000 orders a day in March 2010.
Average order size= Total Revenue/Number of Orders
=Rs.5000000000 / 25,000 x 365
=Rs.548
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6.4 Percentage of Mobile Visits
Mobile is now one of our most strategic channels for driving revenue and customer acquisition. The eretailers
are investing to build strong technology and marketing platforms that will allow them to
accelerate their growth on mobile
Shopping online through smartphones is expected to be a game changer shortly. In the year 2014
there were nearly 123 million smartphone users in India. Affordability of smartphones is
leading to the growth in mobile Internet users, hence generating fresh consumer base for the
online players. Mobile Internet users in India are estimated to be 120 million compared to 100 million
users using Internet on their personal computers.
Snapdeals
60 percent of Snapdeals orders are coming over mobile in the end of year 2014. It is growing really fast.
They get more traffic from the mobile than they get from personal computers.
Flipkart
Flipkart a year ago, less than 10 percent of their orders, transactions and visits used to come from mobile
commerce.
Now those numbers are greater than 50 percent for them. It is accelerating at a very rapid pace. Flipkart
is seeing more than 2 times or 3 times growth from the mobile front compared to desktop,
where Flipkart is growing overall but mobile is growing at a much faster pace.
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6.5 Top 10 Indian E-Commerce Sites Traffic Comparison
Stats have been taken for month of April 2014
Flipkart topped the charts with over 62 million visits in the month of April with Myntra
coming shade lower at 59.5 million. Given that both of them have now come together, purely
based on the traffic, they clock more traffic than the rest 8 players combined.
While we expected either Amazon or Snapdeal to grab the 3rd place in terms of traffic,
Jabong took the bronze position with 42.5 million visitors followed by Snapdeal (31.4
million).
Amazon.in clocked a respectable 27.6 million visits in month of April (Remember, they have
not even completed a year since launch as yet). Also, if you combine Junglee, which is
owned by Amazon, their traffic bulges to close to 40 million visits.
Infibeam and Tradus both have not been doing too well in terms of traffic. They clocked 3.4
million & 3 million respectively. Also, according to similar web, their traffic has been
steadily dropping over last 6 months. Both of them had close to 5 million visits at the start of
the year.
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Stats have been taken for month of April 2014
When it came to user engagement, Flipkart again reigned supreme with each visitor spending
an average of 8:35 minutes per visit. Ebay also had very high levels of engagement with 8:15
mins followed by Snapdeal (7:49 mins).
Myntra had surprisingly low (in fact lowest of all) visitor time spent at 3:04 minutes. Junglee
and Jabong were other two sites who had low visitor time spent.
Given that Flipkart had highest time spent by visitors, they also got the maximum pageviews
per visitor (8.53) followed by Ebay (8.04). Surprisingly, Tradus did quite well in terms of
page views with a average of 7.57 views per visit.
6.6 Conclusion
Ecommerce industry in India is in their blooming stage now. E-commerce including online
retail in India constitutes a small fraction of total sales, but is set to grow to a substantial
amount owing to a lot of factors such as rising disposable incomes, rapid urbanization,
increasing adoption and penetration of technology such as the internet and mobiles, rising
youth population as well as increasing cost of running offline stores across the country.
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media-and-ecommerce/
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MACRO ENVIONMENTAL ANALYSIS
‘ https://www.academia.edu/3832983/Cloud_Computing_and_E-commerce
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COMPITITIVE ANALYSIS
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five-forces/
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MARKET SHARE VALUE
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this-year-114052100665_1.html
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oq=naaptol+sales+revenue&aqs=chrome..69i57.8943j0j4
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ebay-india-latif-nathani
PERFORMANCE ANALYSIS
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GLOBAL AND INDIAN SCENARIO
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108066