E-commerce industry in India

Market Structure of E-Commerce in IndiaMade ByAkshit Arora(15P126)Kanwar Preet Singh(15P146)Nitish Gupta(15P156)Sanhita Baruah(15P166)Sambhav Jain(15P167)Vatsal Shah(15P176)Electronic commerce is the process of buying, selling, or exchange of products, service, and information by various agents via computer networks and other electronic mediums INTRODUCTIONE-commerce business modelsInventory driven model

E-commerce websites primarily source the inventory sold through their websiteLots of cash burned by the players to hold inventoryIn India, only a company incorporated in India can operate through this modelGuaranteeE-commerce business modelsMarketplace driven model

E-commerce websites bring buyer and seller in direct contactDoes away with warehousing as well as inventory holdingAs per FDI rules, e-retailers have to follow this approach to sellNo GuaranteeE-commerce business modelsHybrid model

In this, the retailer holds his own inventory as well as enables the sale of third-party productsActing as a mediator, the website takes a part of the transaction as feeConflict of interest exists while pushing products to consumersGuaranteeNo GuaranteeExternalitiesPositive ExternalitiesBetter rate and variety for the customersMore footfall for the advertisersCan help achieve economies of scale

Negative ExternalitiesConstant Tracking of customersExcessive advertisements for the customers

Economies of Scale

Targets:Reduced long run average costSourcing and selling adequate quantityAvoiding diseconomies of scale due to overestimated demandAdvantages:Cost savings for the customerUndercutting competitors without damaging profit marginsHeightened barriers to market entryWaterbed effectIn two sided market, when prices of only one side of the market is pushed down it results in a re-balancing of prices on the other-side.Illustration: Google charges high prices to advertisers and does not charge cost to customers. If Google starts charging advertisers the actual costs incurred it would inevitably force customers to pay for the search, and possibly reduce the cost for the advertisers.

E-commerce: The New Realities of Dynamic PricingIt is apricing strategyin which businesses set highly flexible prices for products or services based on current market demands.Time Based Pricing

Exploits the different prices customers are willing to pay at different times

Peak Load PricingWhen supply is inflexible, which allows suppliers to systematically increase prices with predictable increases in demand.Eg- Airlines

Clearance Pricing When Demand is uncertain and products lose value in the eyes of the customer with timethey simply go out of fashion.Eg- Apparel Retailer

Dynamic Merchandising

Exploits the Internet-enabled capacity to change prices rapidly and frequently to offer customers different products, promotions, delivery options and pricing as supply and inventory change.Eg- Amazon.com

Segmentation and Rationing

Exploit the difference in the willingness of customers to pay through different channels, at different times and with different levels of effort.

E-commerce players in India: Comparative AnalysisBusiness ModelFrom Regular Inventory Model to Marketplace ModelMarketplace ModelSearch and Transaction Modelbeing local, thinking global specific market segmentsOnline Travel and HospitalityProduct Categories712N/A77Market Valuation$ 15 billion$ 5 billion$0.876 billion$1.38 billion$0.55 billionRevenue$ 4.5 billion$ 3.5 billion$ 94.31 million$ 108.81 million$ 290.37 million Orders through Mobile75%75%50%61%35%Employee Strength330009000900040491712

Impact of E-Commerce IndustryBrick and Mortar RetailersFootfalls at retail stores have been impactedHeavy discounts have left vendors uncompetitiveHit on the reputation of offline retailersCanon has stopped selling its products on some websites

On the brighter sideLocal sellers have increased their customer base by associating with e-commerceHyperlocal startups have increased the salesAlso mention about launch of new phns on websitesFlipkart alone had a GMV (Gross Merchandise Volume) of $1billion

15Social ImpactEverything at the doorstep E-commerce has generated employmentMore transparency for consumersCompetitive pricesLarge no. of brands under one umbrella

Marketing IndustryNeed to grab users eyeballs as marketing is not optional it is a need Rise of digital marketingEcommerce spend on ads in 2015: Rs 3,430 crore ($553 million)Digital Advertising will account for 10% of the ad-spendsAd spend by e-commerce has grown 50% yoy

Logistics IndustryLogistics is the backbone of e-retailMany logistic companies have started their dedicated e-commerce logistic armsWith the rapid growth of ecommerce it is estimated that e-tailing would grow at 50% CAGR

E.G. Patel Logistics have started patel retail for amazon18Credit Card IndustryE-com companies have gained customers trust over the period of time. This has led to a shift from COD to pre-payment using cardsAlso, save card details option has led to easy card paymentCredit card industry saw an increase of 22.59% in the outstanding amount

Key Growth DriversWeb content search in Hindi has grown a whopping 155% in the past yearNon-metro cities offer a huge growth potential. This large group of city dwellers have significant purchasing powerMobile penetration is set to reach 50% by 2020. Given the increased mobile penetration and Smartphone adoption, mobile is certainly one of the major factors drivingGrowth in infra sector and logistics industry has helped ecommerce prosper to a great extent. Online retailers say they have extended their reach to 12,500-15,000 pin codesThe usage of debit cards at point of sale terminals has seen a growth of 86 per cent from 2013 to 2015. Snapdeal launched its interfaces in local languagesMakeMyTrip launched its Hindi app in November 2014 and plans to add four more languages Gujarati, Tamil, Telugu and MalayalamIf use of debit card increasesthen delivery to new places can be done without making arrangements for COD20Challenges Low Internet PenetrationIndia has a very low internet penetration of just 19.2%. Rural India is still catching up with 2GTelecom operators are finding themselves cash-strapped in making heavy investment for network infrastructureUncertainties around regulation and policy is adding to the telecos woesEven the best content and app may not appeal to a user if the network backbone does not support the intended user experience

Inefficient payment modesCash on delivery is the most preferred mode of payment. Manual cash collection is laborious, risky, and expensive

Payment gateway error rates are high (>25% of transactions fail at the gateway). They also charge way too much commission on each transaction

Low credit card and debit card penetration

No Profits in SightToo many competitorsImmense cash burn for customer acquisitionHuge marketing expendituresCustomer retention cost is too highHigh percent of return of orders

Even after customer acquisition there is very less customer loyalty. Thus to retain the customer persistent discounts need to be givenOla burns 125crore every month24Lack of InfrastructureLack of proper roads adds to logistics costPostal addresses are not standardized

Absence of cyber lawsIn India, there are no cyber laws to monitor and regulate transactions on netPrivacy and security concerns of consumersComputer virus is also a formidable problem in the execution of e-transactions. Transactions are confirmed by the computer virus I love you