industry monitor indian e-commerce sector october 2014

nomictime

Disclaimer: All information contained in this report has been obtained from sources believed to be accurate by Gyan Research and Analytics (Gyan). While

reasonable care has been taken in its preparation, Gyan makes no representation or warranty, express or implied, as to the accuracy, timeliness or

completeness of any such information. The information contained herein may be changed without notice. All information should be considered solely as

statements of opinion and Gyan will not be liable for any loss incurred by users from any use of the publication or contents.

Industry Monitor

Indian e-Commerce

October 2014

Industry Monitor - Indian e-Commerce, October 2014

2 | P a g e © Gyan Research and Analytics Pvt. Ltd., 2014

Table of Contents

1. In Focus – e-Commerce ................................................................................................................. 3

1.1 Market Segmentation .............................................................................................................. 4

2. Industry Statistics .......................................................................................................................... 5

3. Investment in e-Commerce ............................................................... Error! Bookmark not defined.

4. Industry News Brief – e-Commerce ................................................................................................ 6

5. Company News Brief – e-Commerce .............................................................................................. 9

6. Mergers & Acquisitions ................................................................................................................ 10

7. Company Scan: Flipkart Online Services Private Limited .............................................................. 11

8. Upcoming Events ......................................................................................................................... 12



1. In Focus – e-Commerce

The e-commerce market in India registered a growth rate of approximately 45 percent in 2012.

Although the concept of internet-based business has been around for more than a decade,

consumers are waking up to it only now. Growing internet penetration, increasing popularity of

online transactions and favourable demographics are some of the key growth drivers of this sector.

The e-commerce market was estimated at USD 10.34 million in 2013. With a CAGR of 34.49 percent

through 2014-2018, the market is forecast to clock revenues worth USD 46.19 million in 2018.

India is on the cusp of a digital revolution. Considerably low broadband subscription prices, coupled

with the introduction of 3G and 4G services, have led to the growth of netizens in the country.

However, though the e-commerce sector is growing rapidly in India, most of its segments registered

average penetration rate compared to global usage patterns. According to the Telecom Regulatory

Authority of India (TRAI), total internet users in India stood at 164.81 million as of March 2013,

(including shared devices and mobiles), with an estimated internet penetration of 20 percent.

The number of internet users making online transactions is steadily on the rise; it is anticipated to

reach 38 million by 2015 compared to 11 million users in 2011. The online market in India offers

various services such as travel-related transactions, movies, matrimonial services, electronic

gadgets, fashion accessories and even groceries. The growth of the country’s e-commerce industry

has attracted a host of investors, including equity firms and venture capitalists. Venture capital

investment in e-commerce stood at USD 540 million in 2012, up from USD 462 million in 2011.



1.1 Market Segmentation

Transactions in e-commerce in India can

be classified into four segments -

business-to-business (B2B), business-to-

customer (B2C), customer-to-business

(C2B) and customer-to-customer (C2C).

According to the Internet and Mobile

Association of India (IAMAI), the B2C

segment dominates the sector with a

share of 56 percent. Among various

sub-segments, online travel enjoys the

majority market share with 71 percent

and was valued at USD 5.67 billion in

2012.

e-Tailing accounted for 16 percent of

the overall market, at USD 1.06 billion

in 2012. e-Tailing is set to grow in the coming years, not just due to greater internet penetration but

also because of the development of supporting infrastructure, such as logistics.

Online financial transactions, such as payment of insurance premiums, utility and mobile bills and

share trading, accounts for a market share of 6 percent. B2B and B2C classifieds (jobs, matrimony,

real estate, car hire) contribute 5 percent, while other online services such as online entertainment

ticketing, food delivery and transactions of gift vouchers account for 2 percent of the overall market.

71%

16%

6%5%

2%

Segments of e-Commerce Market in India

Online Travel e-Tailing

Financial Services Classifieds

Other Online Services

Source: IAMAI, IMARB



2. Industry Statistics

Total Internet Subscribers in India – in million

Jan - March 2013 Apr - June 2013 July - Sep 2013 Oct - Dec 2013 Jan - March 2014

164.81 198.39 210.38 238.71 251.59

Mobile Internet Users in India – in million

Jan-March 2013 Apr - June 2013 July - Sep 2013 Oct - Dec 2013 Jan - March 2014

143.20 176.50 188.20 220.38 233.09

Smart Phone Users in India – in million

2009 2010 2011 2012 2013

4.5 10 18 44 67

Internet Capable Mobile Devices in India – in million

2009 2010 2011 2012 2013

149 332 431 432 613

3G Subscribers in India – in million

2009 2010 2011 2012 2013

NA 5 11 23 56

Source: TRAI quarterly performance indicator reports, Nielsen, IDC, NTT Docomo, Avendus estimates



3. Product Scan - Online Travel

The online travel segment accounts for the lion’s share of India’s e-commerce industry. The

country’s travel-and-tourism sector, which has the second highest growth rate in the world, has

contributed significantly to the rise of this online segment. With an average year-on-year growth of

32 percent, the segment was valued at USD 5.67 billion in 2012. It is expected to clock a turnover of

USD 30 billion in 2018, with a CAGR of 32 percent through 2013-2018.

Currently, of the total online travel market, the domestic air ticket segment contributed 50 percent

and had an annual turnover of USD 2.48 billion in 2012. Online transactions relating to railway

tickets contributed 39 percent of the overall market and was valued at USD 2.24 billion.

The civil aviation sector registered favourable growth in the last decade, and India is poised to be

one of the leading civil aviation markets in the world in the next decade. The website of India

Railways is the most visited travel site in India with more than 12 million visitors every month.

According to a study by ASSOCHAM, 1 out of 5 online users in India visit the Indian Railways site.

Global distribution systems (GDS), online

travel agencies (OTA) and meta search

engine websites are the major service

providers of various ticketing (airline, train

and bus) and booking of hotel-and-tour

packages. The operational model of the

segment is dependent on the revenue-

sharing agreement among different

stakeholders. Airline companies offer

directly on their websites or through GDS

and OTAs. GDS sells products ranging from

air and rail tickets to providing tour

packages. Meta search engines collaborate

with airline companies and hotels to offer customers a common portal with all the information from

various OTAs. Hence, customers receive information on the best prices available on a single website.

Table 1

Sources of Revenues for GDS, OTAs and Meta search Engine Websites

GDS OTA Meta Search

Engine Website

Charge a

commission fee

when their

database is

used

Charge a

service fee on

transactions

Advertising

fees

Generate

revenues through

tie-ups with

airlines and

hotels

Advertising

fees



OTAs derive the greatest share of their revenues from the airline sector. Low-entry barriers in the e-

commerce sector have largely contributed to the increase in the number of small players looking to

capture the existing market space, which is marked by the presence of a large number of Indian

OTAs and several international players.

The rise in the number of OTAs has put pressure on the profit margins of existing players and has

also shrunk the market space. Low profit margins and declining airline commissions have opened up

opportunities for OTAs to diversify into online hotel reservations and tour packages. Further, higher

profit margins and better commissions have lured OTAs to move beyond air ticketing and specialise

in tour packages.

Increase in the numbers of airline passengers has also contributed to the growth of the online travel

segment. Air passenger traffic increased considerably, to reach 162.30 million in FY2012 from 59.30

million in FY2005. Spending on international and domestic flights by Indian travelers is estimated to

reach USD 426 million and USD 1.4 billion, respectively, by the end of 2013.

Inter-city flight travel in India is on an uptrend. This has contributed to the growth of the online

travel segment. Interestingly, the top 10 sites in this category offer both travel options as well as

information about the location.



4. Industry News Brief – e-Commerce

1. India’s e-commerce sector venture capital investment above USD 1 billion – India’s e-commerce

venture capital investment is expected to rise above USD 1 billion in 2014. Venture capitalists in the

US and India predict robust growth of the sector, similar to what was experienced by the Chinese e-

commerce sector five years ago. Investors are focusing on the growing competition between

Amazon, Flipkart and Snapdeal. Rapid e-commerce boom is responsible for the rise in venture

capital investment.

2. Logistics companies attract investment in e-commerce – Investors are betting on the logistics

sector, which is expected to be a key beneficiary of the e-commerce surge. Widely followed

investors like Radhakrishnan, R. Damani are active buyers in shares of logistics companies such as

Gati, Blue Dart and Transport Corporation. Brightstars Investments and Derive Investments bought

5.77 percent in Gati, 4.88 percent in Transport Corporation and 5.35 percent in Blue Star. The

primary reason for investors’ rising interest in logistics is the huge opportunity arising out of e-

commerce in the country.

3. Indian e-commerce companies to step up investment in infrastructure - The growing popularity

of online shopping in India is projected to attract investment worth USD 2 billion in logistics,

infrastructure and ware-housing by 2020. The total spending on warehousing and sortation centers

will be over USD 450 – 900 million, by 2017-2020. PriceWater House Coopers (PWC) estimates that

7.5 to 15 million square feet of space would be added in the form of fulfillment centers.



5. Company News Brief – e-Commerce

1. Ratan Tata invests in Snapdeal – Ratan Tata has reportedly made a personal investment in Delhi-

based online retailer Snapdeal.com. The value of the investment has not been disclosed. Further,

Snapdeal and Tata Value Homes has entered into a strategic alliance. Snapdeal’s existing investors

include BlackRock, Temasek Holdings and eBay, yet the investment by Tata adds great significance to

the company.

2. SoftBank Corp to invest in Snapdeal – Japan’s SoftBank Corp is slated to invest USD 600 million to

USD 650 million in Snapdeal. The deal will make SoftBank the largest shareholder, with a 35 percent

share of the company and will surge Snapdeal’s valuation to USD 2 billion. With this investment,

SoftBank will become a serious player in India’s online retail sector; it will also help Snapdeal to

diversify into payments and logistics platforms and add to smaller towns to its seller base.

3. Amazon to invest in India – Amazon announced plans to invest USD 2 billion in the Indian e-

commerce market. This is estimated to be the largest investment in the country’s e-commerce

space. The investment would allow the company to compete strongly in the market and enhance

customer and seller experience.

4. DHL to invest USD 130.20 million – DHL, the leading global logistic group, is set to invest USD

130.20 million over the next two years in services related to the e-commerce sector. The company’s

subsidiary, Blue Dart, is expected to play a decisive role in creating the e-commerce wave. According

to company sources, India is projected to be the biggest online market in years to come.

5. Snapdeal to partner with India Post – Snapdeal has signed a memorandum of understanding

(MoU) with India Post for faster delivery service. India Post is the world’s largest postal service

network and is known for its wide reach in every part of the country, including the rural areas.

Private courier services, on the other hand, have limited reach and are restricted only to certain

pockets.



6. Mergers & Acquisitions

Company Investment

Flipkart buys out Myntra USD 300 million

Amazon to acquire Jabong* USD 550 million

Source: Business Standard, Economic Times

* Preliminary Talks



7. Company Scan: Flipkart Online Services Private Limited

Snapshot

Legal Status: Private Limited Company

Year of Incorporation: 2007

Industry/Sector: e-commerce

Founder and CEO: Mr. Sachin Bansal

Address: Flipkart Internet Private Limited,

Ozone Manay Tech Park,

#56/18 & 55/09, 7th Floor,

Garvebhavipalya, Hosur Road,

Bangalore - 560068,

Karnataka, India.

Employees: Approximately 4,800

Background

Flipkart was established in 2007 with the objective

of making books easily available on internet

The company was founded by Sachin Bansal and

Binny Bansal, both alumni of the Indian Institute of

Technology, Delhi

According to Alexa Traffic Rankings, Flipkart is

among the top-30 Indian web sites and has been

credited with being India's largest online bookseller

with over 11 million titles on offer

Initially funded by the Bansals themselves with INR

400,000

Products/Services

The company caters to several categories:

Clothing

Footwear

Watches

Sunglasses

Jewellery

Wellness and Beauty Products

Electronics

Home & Kitchen

Books & Media

Baby & Kids



8. Upcoming Events

Event Organiser Date Venue Highlights Contact Details

eTAILING India Conclave

Etailing

India

November

27, 2014

Fortune Landmark, Ashram Rd, Usman Pura, Ahmedabad, Gujarat 380013

eTailing India's vision of spreading knowledge and awareness about e-commerce and its components in India and abroad. The conclave at Ahmedabad looks at three key industry segments - Jewellery, Handicrafts and Furniture & Home Furnishings. It will help key retailers and players to extend their reach through online channels.

Grishma

grishma@etailingIndia.

com

Telephone: +91 81085-60123

4th Asia e-Commerce Conference 2014

Jointly organized by MDEC, SME Corp (Malaysia), MITI Malaysia and Rebles Group.

October 28, 2014

The Royale Chulan, 5 Jalan Conlay, 50450 Kuala Lumpur, Wilayah Persekutuan, Malaysia.

To share and exchange new ideas and findings about e-commerce, thus providing a higher degree of exposure for participants. It is especially designed for Internet CEOs, executives and investors to gain deep insights into the latest proven concepts, to network with senior executives and to establish new business relationships.

RebleX Business Group Sdn. Bhd (947250M) Unit 7-1,Wisma Genting (New Wing), No 28, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia. Tel: +603-27247006 Fax: +603-27247007

mailto:[email protected]

mailto:[email protected]



GYAN RESEARCH AND ANALYTICS PVT. LTD.

Corporate Office:

LG 37-38, Ansal Fortune Arcade, Sector-18,

Noida - 201 301

Delhi NCR, INDIA

Phone: +91-120-4235181

Regd. Office:

298-A, Pocket 2

Mayur Vihar Phase -1

Delhi 110 091, INDIA

Central Delivery Centre:

BD-9, Sector-1,

Salt Lake City

Kolkata- 700 064, INDIA

Phone: +91-33-40060084

E-mail: [email protected]

Website: www.gyananlytics.com