Comprehensive Pack

E-Commerce

1
•Industry Overview :3
• Consumer Behavior Trends : 10
•E-Retail : 16
•Sourcing and Stocking Model : 27
•Online Grocery : 30
•Online Furniture and Handicrafts : 55
•Online Jewellery : 64
•Online Ticketing : 73
•Online Deals : 83
•Online Portals : 92
•Snapdeal : 97
•Flipkart Vs Amazon India : 109
•Udaan : 129
•Paytm Mall : 133
• Infi-beam : 135
• Amazon vs Walmart : 148
•Key Policies and their impact : 154
•Profitability
2 : 156
 Industry Overview

3
 E-commerce industry is expected to reach Rs. 5800 bn by 2021-
22.

OVERALL INDUSTRY SIZE

Source: Crisil Research

4
 Online ticketing and E-Retail constitutes 99% of the industry
by value.

E-COMMERCE SEGMENTS

5
Source: Industry, Company sources
 Share of online ticketing has come down while that of online
Retail / Marketplace has gone up.

SEGMENTAL CHANGE

6
Source: Industry, Company sources
E-COMMERCE : GROWTH DRIVERS

•Increase in internet and smart phone penetration

• Better entrepreneurial ecosystem over the last decade.

•Easy funding to e-commerce companies

•Availability of wide variety of products online

•Cash on delivery

• Growth in smaller cities, semi-urban and rural areas

• Growth in the Sale of “Long-Tail” products.

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LONG-TAIL: WHAT IS IT?

•A brick and mortar (store based) book retailer is considering which titles to stock.

There are 100 titles. Each of the top 10 titles sell on an average of 9 units per month

while each of the remaining 90 titles sell only one unit per month.

1. Draw the line graph with the titles as “x” axis and the sales per month as “Y”

axis.

2. What is the share of top 10 titles and the remaining 90 titles in the overall sales?

3. Which of the titles store based retailer can sell and which of the titles online

retailer can sell?

8
9
10

2
4
7
9

0
1
3
Sales per month5
6
8
1
4
7
10
13
16
19
22
25
28
31
34
37

Title
40
43
46
49
52
55
58
61
64
67
70
73
76
79
82
85
88
91
94
97
100
Sales per month
E-Commerce constitute a tiny fraction of overall retail in India

10
 Consumer Behavior Trends

11
 Overview 12

India: retail e-commerce ARPU 2016-2022

Average retail e-commerce revenue per user in India from 2016 to 2022
(in U.S. dollars)

Source: Statista
 Digital buyers 17

India: number of digital buyers 2014-2020

Number of digital buyers in India from 2014 to 2020 (in millions)

Source: statista
 Shopping behavior 22

India e-retail spending share 2015-2020, by gender

Distribution of e-retail spending in India in 2015 and 2020, by gender

Source: Statista, A.T. Kearney; Google;

 Shopping behavior 23

Online shopping frequency among digital buyers in India

2015 2016 2017

Source: Statista, PwC

 25

For each of the following product categories, how many of your

purchases have you made online over the last 12 months?

Source: statista, PwC

 Segmental Analysis : E- Retail

17
 E-retail segment is expected to grew at CAGR of 28-33%
between 2018-19 and 2021-22.

ONLINE RETAIL: SIZE AND GROWTH

18
Source: Crisil Research
 E-retail constitute only 2% of the overall retail in India.

SHARE OF E-RETAIL IN OVERALL RETAIL

2018-19

19
 Even in 2021-22, e-retail penetration will be low across several
categories.

E-RETAIL PENETRATION

20
 Share of categories sold online has significantly changed in the last
few years

SHARE OF CATEGORIES IN E-RETAILING

Product Categories Share in Revenues

2010-11 2019-20 2022-23

Electronics 70% 50-52 % 40-45%

Fashion (Apparels, 15% 30-35% 32 to 37%

Accessories, Shoes etc)

Books 10% 2-3 % 1-2%

Groceries Negligible 5 to7% 10 to 15%

Others (Jewellery, Furniture, 5% 10-15% 10 to 12%

Pharmacy etc)

Source: Industry, Company sources

21
 Profitability highest in lifestyle products; greater scale results
in better margins

ONLINE SEGMENT WISE GROSS MARGINS

Product Gross Margins

Categories (Percent)
Clothing, Shoes, 35 – 40%
Accessories,
Watches
Electronics 12-14%
Grocery 18 to 20%
General 20 to 22%
Merchandise
Books 10 to 15%

22
CONSUMER ELECTRONICS

• The segment forms 40-45% of e-retail pie. Of the overall consumer

electronics e-retail sales, over 2/3rd is accounted by mobile phones.

• Even in the online mobile market, the share of relatively low value

products is significantly higher.

• E-retailers have found it difficult to penetrate PCs, and other consumer

durable, especially bulky appliances such as refrigerators and washing

machines, due to the logistical challenges and associated costs.

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APPARELS

• One of the fastest growing categories.

• Low ticket size, deep discounts on apparel by e-retailers, availability of a
wider product range, and shopping festivals have led to significant online
sales.
• Initial reluctance to buy online without touch and feel has been overcome
with the help of advertising and technology.
• Women’s wear and accessories segment is fastest growing in apparels.
• Going forward, variety, fit and convenience will drive the market rather
than only discounts.

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NEWER SEGMENTS

• The online pharmacy segment is gaining popularity in tier-I cities.

Netmeds, Pharmeasy, 1mg.com, Medlife, Medstar, Bookmeds, mChemist
and Medidart are some of the major players in this segment.
• Beauty & personal care are also seeing improved consumer interests.

25
SEGMENT WISE GROWTH EXPECTATIONS

Source: Crisil Research

26
SEGMENT WISE GROWTH EXPECTATIONS

Source: Crisil Research

27
 Online Retail: Sourcing and Stocking
Model

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 There are 3 business models in online retailing : Drop shipping
model, On-demand sourcing model, Stocking model.

Drop Shipping Model

•In this model, the retailer ties up with different manufacturers to display their
products on its website.
•After the customer places an order on the website, the retailer intimates the
•manufacturer/supplier for that product and the products are shipped by the
manufacturer.
•The online retailer does not incur any inventory holding costs.
On-demand Sourcing Model
•In the on-demand sourcing model, the retailer, on receiving an order from the
customer, gets the products from the manufacturer to its packaging center.
•Here, a quality check on the products is done and the products are packaged
uniformly and shipped to the customer.
Stocking Model
•In the stocking model, the retailer maintains warehouses and stocks all the products
displayed on its website.
•On receiving orders, the products are shipped immediately to the customer.

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BUSINESS MODELS IN ONLINE RETAILING

30
 Online Grocery

31
 Online grocery retail is expected to grow at 57-62% between
2018-19 to 2021-22 to reach $375bn.

ONLINE GROCERY : GROWTH TRENDS

Source: Crisil Research

32
 Online grocery players followed either inventory based model
or hyper-local model.

ONLINE GROCERY : BUSINESS MODELS

Business Models

Inventory Based Hyper-Local

Model Model

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 Many players entered the grocery segment between 2012 to 2015
through hyper-local model.

TREND BETWEEN 2012 TO 2015

•Between 2012 to 2015, many players entered through the hyper-local due to:

•lower funding as compared to inventory-based model, as the players did

not own warehouses.

•the execution time is relatively low, as the orders were delivered from a

nearby store by partnering with a local kirana player.

•easy to scale operations geographically

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 MARGIN COMPARISON (ILLUSTRATION) : INVENTORY
MODEL VS HYPERLOCAL MODEL

INVENTORY MODEL HYPERLOCAL MODEL

•Average Customer Order Size: Rs. 500 •Average Customer Order Size: Rs. 250

• Gross Margin (20%): Rs. 100 • Gross Margin (5%): Rs. 12.50

• Inventory costs (5%): Rs. 25 • Inventory and Warehousing costs

• Warehousing and Overheads: (5%): (0%): Rs. 0

Rs. 25 •Overheads: (2%): Rs. 5

• Transportation cost per order: Rs. 20 • Transportation cost per order: Rs. 30

• Average Profit per order: Rs.30 • Average loss per order: Rs. 22.50

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 Apart from lower margins, hyper-local players also face the
problem of inventory tracking and quality.

DISADVANTAGES OF HYPER-LOCAL MODEL

• Lower Margins

• Do not have the ability like inventory based players to offer

attractive discounts.

•Limited product variety

•Lack of real-time inventory as they tied up with Kirana Stores

• Quality issues

36
 Many Online grocers following hyper-local model closed down
in 2015-16.

2015-16 : PERIOD OF SHUTDOWN OF HYPER-LOCAL PLAYERS

Companies which closed down their

online grocery operations in 2016
•After a series of funding rounds
during 2012 to 2015, 2016 saw
many online grocery firms shutting
down their operations due to non
feasibility of the hyperlocal-based
model.

37
 Big Basket and Grofers are the top 3 players in online grocery
segment.

TOP PLAYERS IN ONLINE GROCERY SEGMENT

38
 BIG BASKET : OVERVIEW

• Largest player in the online grocery segment and operates in 26 cities customer base of 12
million.
• Daily Orders increased from 75000 to 80000 orders day in 2018 to 2.5 lacs -1.3 lacs for BB and
1.2 lacs for micro delivery BB Instant and BB Daily (Pre-Covid)
• Increased its revenues in 2 years from Rs. 1197 crores in FY 2017 to Rs. 2380 crores in 2019
• The company managed to control it’s losses very well. Net Losses reduced from Rs. 653
crores in FY17, from Rs 350 crores in FY19 (in terms of percentage of sales , losses came
down from 54.% to 14.7%.
• Valued at $1.2 bn in October 2019 (Alibaba CDC and Mirae Asset are major investors).

Source:
• https://www.business-standard.com/article/pti-stories/bigbasket-fy-19-loss-widens-to-rs-348-cr-
119112901037_1.html
• https://www.techcircle.in/2020/04/06/exclusive-alibaba-backed-online-grocery-platform-
bigbasket-valued-at-1-2-bn
• https://yourstory.com/2019/06/startup-bigbasket-online-grocery-hari-menon-plans-2020
39
 BIG BASKET : ACQUISITIONS AND NEW INITIATIVES

• Big Basket has launched 3 new segments – BB Daily, BB Instant and Beauty Store.
• BigBasket acquired three ventures- RainCan , Morning Cart and Kwik24.
• RainCan and Morning Cart were micro-delivery start-ups while Kwik24 is a smart
vending machine start-up
• Big Basket has branded the micro- delivery service as BB Daily and it’s Vending
machine segment as BB Instant
• Bigbasket’s third new business is the BB Beauty Store.
• BB Daily and BB Instant have two separate apps, while the third is included in Big
Basket’s main app.
• BB Instant and BB Daily to contribute 15-20 percent of the business and BB Beauty Store
to contribute 10% in the near future. .

• Source: https://yourstory.com/2019/06/startup-bigbasket-online-grocery-hari-menon-plans-2020
40
 BB DAILY

• On BB Daily, one can subscribe for milk, fruits and vegetables, bread, dairy, eggs,
breakfast cereals, tender coconut, etc for “every day or alternate days”.
• Orders can be placed till 10 pm, and change that subscription too (increase or
decrease the milk quantity etc).
• Delivery happens between 5 am and 7 am.
• CEO, Hari Menon says that this model is working out well, and tender coconut
has become their single largest sale item. “It succeeded because of the ability we
have - processing plants where we clean, process, and package them. We sell
60,000-70,000 nuts a day.”

Read more at: https://yourstory.com/2019/06/startup-bigbasket-online-grocery-

hari-menon-plans-2020
41
 BB INSTANT

• BB Instant is for Bigbasket’s unmanned

vending machines that target corporate
offices, tech parks, and apartment
buildings in Tier I cities.
• Each machine carries about 600 SKUs.
• Of the 350 machines installed so far, 70
percent are in Bengaluru, and more
than 300 are in apartment buildings.
• It has just launched in NCR and
Hyderabad, and plans to expand to
3,000 machines this year.
Source: https://yourstory.com/2019/0
6/startup-bigbasket-online-grocery-
hari-menon-plans-2020
42
 BB BEAUTY STORE

• Bigbasket’s third new business is the Beauty Store, which was launched in
March 2019.
• Competing with online beauty products retailer Nykaa, this category goes
beyond the usual personal care products that you will find in supermarkets.
• At present, the contribution to overall sales from this category is six-seven
percent; the company aims to grow it to 10 percent this year.

Source: https://yourstory.com/2019/06/startup-bigbasket-online-grocery-hari-menon-

plans-2020

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 PRIVATE LABELS

• Bigbasket’s private label business is also growing driven by lower prices and
higher margins.
• About 35 percent of their revenue is from private labels, which aim to fill the
gap in categories like organic food, high-end consumer products, etc.
• On the B2B side, the company serves its private label to more than a thousand
kiranas, corporates, and HoReCa (hotels, restaurants, cafes).

Read more at: https://yourstory.com/2019/06/startup-bigbasket-online-

grocery-hari-menon-plans-2020

44
 LOYALTY PROGRAMS

• Bigbasket’s loyalty programme, BB Star, launched at a price of Rs 299 for a

year and gives free delivery for orders above Rs 600 (not Rs 1,000 as in normal
Bigbasket delivery).
• Members also get special offers, and priority on delivery slots. On busy days,
slots are reserved for these members.
• Around 30-40 percent of the total consumer base hassubscribed to the loyalty
program.

Source: https://yourstory.com/2019/06/startup-bigbasket-online-grocery-hari-
menon-plans-2020

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 QUICKER DELIVERY THROUGH DARK STORES

• Big Basket operate with inventory turns of 36 times (as per Marketing Head,
Meera Iyer). This is very good.
• To shorten the delivery time, Big Basket is established multiple small
warehouses in the city (Dark Stores) which are fed by the city’s Central
Warehouse.
• Dark Stores have reduced the distance travelled to the customers’ location.
• Bigbasket now delivers in two hours of customers placing an order in all Tier I
cities

Source: https://yourstory.com/2019/06/startup-bigbasket-online-grocery-hari-menon-
plans-2020
https://www.exchange4media.com/marketing-news/the-biggest-challenge-is-to-get-the-
supply-chain-rightmarketing-headbigbasket-89507.html
46
 FASTER SCALING UP IN NEWER CITIES

• Kolkata was the last Tier I city Bigbasket entered and fastest to reach 2000
orders per day.
• In 2019, Bigbasket also entered Kochi, its 26th city.
• According to CEO, Hari Menon, “During pilot, we got 25-30 orders per day in
Kochi. At launch, it jumped to 150 orders per day. Soon we hit 300-400 per day.
In the last Tier II city we launched, it had taken about eight months to reach
these numbers.”

Source: https://yourstory.com/2019/06/startup-bigbasket-online-grocery-hari-
menon-plans-2020
47
 GROFERS

BAD SHAPE IN 2016

•Grofer’s started with Hyper-Local model

•In 2016, the company was in bad shape – making a loss of Rs. 7.2 crores

every month on a sale of Rs. 4.2 crores.

• It’s delivery costs was high , order size was low and the viability of the

business model was challenged.

Source:
• https://www.financialexpress.com/industry/after-rough-ride-grofers-takes-a-turn-for-
better-as-revenues-touch-rs-11-7-cr/738672/
• https://yourstory.com/2018/04/grofers-got-online-grocery-game-right-won-rs-400-
crore-softbank/
48
 GROFERS TURNAROUND STORY

•In the second half of 2016, the company made the following changes in the business
model:
• Moved from Hyper-Local to Inventory based model.
• Replaced same-day delivery with next delivery
• Over-hauled its delivery mechanism by replacing two-wheelers with mini-trucks
• Increased the assortment of goods (like General Merchandise)
• Introduced Private Labels
• Launched Grofers’ membership/subscription-based service Smart Bachat Club. It
achieved subscription of 1,50,000 in 90 days of its launch.
• Closed Operations in many cities and focused primarily in NCR, Mumbai, Pune
and Bangalore.

Source:
• https://www.financialexpress.com/industry/after-rough-ride-grofers-takes-a-turn-for-
better-as-revenues-touch-rs-11-7-cr/738672/
• https://yourstory.com/2018/04/grofers-got-online-grocery-game-right-won-rs-400-
crore-softbank/
49
 GROFERS TURNAROUND STORY: IMPACT OF THE INITIATIVES

• Order size increased from Rs. 750 in July 2016 to Rs. 1000 in December in
2016 and to Rs. 1750 in March 2019
• Daily orders increased from 13000 to 14000 in 2016 to 35000 to 40000 in
2018 and 80,000 to 90,000 orders(pre COVID)
• 40% of sales in 2017 came from private label brands
• 30% reduction in the delivery costs.
• After stabilizing it’s operations, it has expanded to 27 cities

Source:
• https://www.financialexpress.com/industry/after-rough-ride-grofers-takes-a-turn-for-
better-as-revenues-touch-rs-11-7-cr/738672/
• https://yourstory.com/2018/04/grofers-got-online-grocery-game-right-won-rs-400-
crore-softbank/
50
 FINANCIAL PERFORMANCE

• The company’s GMV in FY19 was Rs. 2500 crores, in FY 18 was Rs1200 crore,
up from Rs250 crore in 2016.
• Losses in terms of percentage of sales have come down ( Rs. Rs. 448 crores in
2019 vs Rs200 crore for both financial years 2018 and 2017)
• Major investors – Softbank, Tiger Global, Sequia.
• SoftBank Vision Fund (SVF) Growth has valued Grofers International at
around $643.52 million in Series F round (December 2019)
Source:
• https://www.financialexpress.com/industry/after-rough-ride-grofers-takes-a-turn-for-
better-as-revenues-touch-rs-11-7-cr/738672/
• https://yourstory.com/2018/04/grofers-got-online-grocery-game-right-won-rs-400-
crore-softbank/
• https://entrackr.com/2019/12/exclusive-softbank-valued-grofers-644-mn/

51
 NEW ENTRANTS

Jio Mart–”Desh Ki Nayi Dukaan “

“In the very near future, JioMart and WhatsApp will empower nearly three crore

small Indian kirana shops to digitally transact with every customer in their

neighbourhood. This means all of you can order and get faster delivery of day-to-day

items from nearby local shops. At the same time, small kiranas can grow their

businesses and create new employment opportunities,” Mukesh Ambani, CMD,

Reliance Industries said in a video on April 22, 2020

52
 NEW ENTRANTS

Jio Mart–”Desh Ki Nayi Dukaan “

• One of few businesses launched during lock-down.

• JioMart, which went live with its pilot project in Kalyan, Thane and Navi
Mumbai for grocery shopping on WhatsApp has witnessed around
6,000 kirana stores onboarding for the services.
• Jio provided POS machines to the kirana stores.
• Customers can place an order on JioMart’s WhatsApp number 8850008000 using
their phones.
• In the future will allow consumers to purchase from among 50,000 products
including groceries and other essential items along with private labels owned by
Reliance Retail.
• Aims to connect 20 crore customers to three crore offline stores throughout the
country.
• In the initial phase, customer will have to pick up the order from the nearby
kirana store.
• Reliance plans to integrate its supply chain, sell it’s private labels, fruits and
vegetables in the future.
53
 NEW ENTRANTS

AMAZON FRESH STORE – “ 2hour delivery”

• In August 2019, Amazon India has launched Amazon Fresh store, a 2-hour
grocery delivery of daily essentials on Amazon.in for select pin-codes in
Bengaluru and later expanded to 3 other cities – Hyderabad, Delhi-NCR and
Mumbai.
• Through Amazon Fresh store customers can pick a 2-hour delivery slot that is
convenient to them.
• Amazon Fresh lets customers place orders across a selection of over 5000 fruits &
vegetables, dairy, meat, ice-creams, and dry grocery like staples, packaged food,
personal care and home care.
• All customers get convenient 2-hour delivery slots from 6 AM to midnight with
free delivery for orders above Rs. 600. Orders below Rs. 600 will be charged a
delivery fee of ₹29.
• The inventory sold through Fresh is also largely controlled by the ecommerce
company.
54
 NEW ENTRANTS

FLIPKART “SUPERMART”
• In February 2019, Flipkart s launched its online grocery store
Flipkart Supermart in the city.
• As part of the launch, Flipkart Supermart promises free delivery on orders above
Rs. 600, the best prices on top brands, and Re. 1 deals.
• Flipkart has set up a separate supply chain for groceries in the city that includes
fulfillment centers and a last-mile delivery network.
• By September 2019 had on-boarded nearly 27,000 kirana shops across 700 cities
to strengthen its pan-India supply chain and expand its reach in the tier 2 and
tier 3 cities.
• Flipkart is contemplating to go for partnership with local stores offering its
customers a "touch and feel" experience, at least for some products.
• Flipkart proposes to have authorised "buy zones" where a customer can walk in
and check a product but he or she has to order it online.

55
 Online Furniture and Handicrafts

56
 Online Furniture and Handicrafts is expected to increase 1.7 times
between 2018-19 and 2021-22.

ONLINE FURNITURE AND HANDICRAFTS : SIZE AND GROWTH

Source: Crisil Research

57
 Urban Ladder reported profits in FY 19.

URBAN LADDER
FY 2019 FY 2018

Revenues Rs. 433.97crs Rs. 204.73 crs

Profit/Loss Rs. 50 crs -Rs. 117 crores

PEPPERFRY
FY 2019 FY 2018
Revenues Rs. 206.8 crs Rs. 140.6 crores
Profit/Loss Rs. 183 crs Rs. 106.7 crs

Source:
https://yourstory.com/2019/11/urban-ladder-doubles-revenues-profitable-
narrows-losses-fy19
https://www.business-standard.com/article/companies/pepperfry-loss-widens-
to-rs-183-crore-now-trails-urban-ladder-119113000989_1.html
58
 Urban Ladder achieved profitability due to increased volumes and
change in the business model.

How Urban Ladder turned profitable?

• Increased volumes (Operating Revenues doubled from Rs. 15crs to Rs. 298
crores).
• Change in its business model from being an online marketplace service
provider and to commence operating as a retail seller of its own brand of
furniture both online and offline.
• A hybrid sales model helped the company to cater to a larger audience and
processed more sales orders in 2018-19.

Source: https://entrackr.com/2019/11/urban-ladder-posts-a-rs-50-crore-profit-in-
fy19-but-has-a-long-way-to-go/
59
 Competition from Brick and Mortar Players

• Several players such as Ikea and US furniture major Ashley have entered the
Indian furniture market.

• Ikea has plans to invest Rs 7 billion to set up 25 stores across the country.
Ashley also recently set up a store in India, with an aim to increase the count
to 100 stores.

• The brick-and-mortar category also comprises domestic players such as

HomeTown and Godrej Interio.

• This has increased competition for players in the online segment, as

customers prefer the touch and feel aspect before purchasing a furniture.

60
Tier I demand forms backbone of online furniture industry
• More than 80% of the online furniture demand is from Tier I cities, as top
industry players have a presence in over 20 of them.
• Limited space along with the need to accommodate household essentials has
made online furnishing websites popular in cities.
• Players such as Urban Ladder and Pepperfry have tie-ups with several
suppliers, and display over 0.1 million products on their websites.
• They offer a wide variety of designs and colours, which are generally not
available in the brick-and-mortar setup owing to limitations of physical
display.
• Mushrooming of e-retail players in the furniture and handicrafts space has
changed the styling pattern of interiors.
• The festive season and wedding season typically see high demand for
furniture and handicrafts.
• From wall paintings to clocks, coffee tables, sofas and beds, consumers are
ordering a wide range of products online.
61
OMNI-CHANNEL ROUTE TO DRIVE GROWTH

• Although the biggest edge for the online furniture industry is no requirement
of physical space for display, players like Pepperfry have taken the offline route
to connect more strongly with customers.
• With its 42 studios, the company offers live experience to customers by
showcasing a few products and helping customers better visualise designs.
•In fact, over 25% of the Pepperfry’s sales is estimated to come from these
studios.
•On similar lines, Urban Ladder has opened 8 brick and mortar stores.

62
 LOGISTICS AND RETURNS ARE A MAJOR CHALLENGE

• Logistics, especially return logistics is a major challenge in this segment.

• Most online furniture companies offer easy return policies within 7-15 days.
• Since furniture are bulky, a dedicated logistics team is required to ensure
dismantling and return transportation of the items once delivered.
• Disconnect with the colour or quality perceived by the buyer on the website
is one of the primary reasons for returning furniture items.
• Hence, companies are using 3D technology and putting up high quality
images to ensure minimal colour and quality disconnect.
• Pepperfry has built its largest warehouse in Mumbai and follows a hub-and-
spoke model in order to cut down on logistics costs.
• The company has its own logistics network of ~400 trucks.
• It has now lowered its logistics cost to 8-10% of the cost of goods sold from
20-25% initially.
63
 INVESTORS INTEREST IN FURNITURE RENTAL BUSINESS

 Furniture rentals, a newer business model, is making inroads into the sector.

 Recent years saw a majority of funding interest for players involved in

furniture rentals business.

 Pepperfry also launched furniture rental service in select cities in India.

64
 Online- Jewellery

65
 Online jewellery expected to grow at a CAGR of 35 to 40% between
2018-19 to 2021-22..

ONLINE JEWELLERY : SIZE AND GROWTH

Source: crisil research

66
 Bluestone and Caratlane are the two oldest players in the Online
Jewellery Segment.

BLUESTONE VS CARATLANE

67
 ONLINE JEWELLERY : GROWTH DRIVERS

 Variety and price point

Access tolarge variety of designs for different occasions and of different ethnicity,
coupled with easy comparability between prices across websites has increased
customer confidence and led to preference for online jewellery purchases.
Small ticket-size items

Players mostly see demand for smaller ticket-size ornaments like rings. They are
coming up with new, modern and light-weight designs to attract customers.
•Pre-Sales Assistance/Consultancy Services: Companies have started providing pre-
sales assistance and consultancy services aggressively. For example, if a customer is
not sure of whether how the design look like on reality or if there are sizing issues,
the company can arrange free trial with dummy of the product at a door step of the
customers. Through this, the customer gets to look and feel the jewellery and its
design.

68
 ONLINE JEWELLERY : GROWTH DRIVERS

Quality Assurance through Third Party Certification: Moreover, in order to gain

trust of the customers, these players are getting their products certified by third
party
Tier 2 and Tier 3 cities: Rising penetration of online jewellery in Tier-2 and Tier-3
markets has resulted in significant growth in the industry. Around 45-50% of the
volumes came from Tier-2 and Tier-3 cities, where options to purchase jewellery with
latest designs are limited.
 Convenience
 Improved product and service offerings from players with easy return policies,
home-try options and provision for customisation make it lucrative for customers to
try online option.
 Small ticket-size items
Players mostly see demand for smaller ticket-size ornaments like rings. They are
coming up with new, modern and light-weight designs to attract customers.

69
 Different models are followed in the online jewellery segment.

OPERATING MODELS

70
 ONLINE JEWELLERY MARGINS

• Online jewellery retailers enjoy better profitability than players running

physical format stores, who have to pay high rental costs.
• Moreover, online retailers can afford to maintain limited inventory because of
'just-in-time' delivery practices followed by them.
• Hence, their need for working capital is lower than that for traditional retailers
and is estimated to be 30-60 days.
• Online retailers, upon receiving an order, source jewellery from vendors or
manufacture them in-house. This allows them to exclude middlemen in the
delivery chain.
• As a result, these players can offer lower prices, while earning higher margins
than the regular physical-format jewellery retailers.

71
 ONLINE JEWELLERY MARGINS

• Online jewellery retailers typically earn 12-17% operating margins compared

with 8-10% earned by physical format jewellery retailers.
• While margins are lower at 12-14% in case of real jewellery due to high service
costs, margins in imitations are higher at 15-20% due to design-based cost and
lower service cost (players do not have to provide try-at-home and
customization options for low-value imitations).

72
 OMNI CHANNEL STRATEGY

 Considering the high value of jewellery, the customers' need to touch and feel
it cannot be completely replaced by multiple trial and return options.

 Additionally, physical presence also aids in building customer trust.

 Considering benefits of both online and offline presence for growth, players
are adopting omni-presence strategy for growth.

 While CaratLane has over 50 operating retail

 stores across the country, several established jewellers like Tanishq, TBZ and
Kalyan have tie-ups with Flipkart and Amazon to sell their products online.

 Recently, Kalyan Jewellers acquired online jewellery firm Candere.com to

augment its presence in the online jewellery segment.

73
 Segmental Analysis: Online Ticketing

74
 Online ticketing growth is expected to double between
2018-19 and 2021-22.

ONLINE TICKETING: SIZE AND GROWTH

Source: Crisil Research

75
 Share of airline ticketing is expected to come down while that
of Travel packages and Hotel bookings are expected to
increase.

ONLINE TICKETING: SEGMENTAL ANALYSIS

For example, MakeMyTrip, which

currently has 54% of business

coming from the hotel and travel

packages segment, plans to

increase the segment's contribution

to 70-75% in next 3-4 years.

Source: Industry, Company sources

76
 Profitability highest in events ticketing, hotels and packages
sub-segments but airline ticketing is still the crowd puller.

PROFITABILITY OF ONLINE TICKETING SEGMENTS

Importance of Airline Ticketing
•Airline ticketing acts as the crowd
puller.
• It helps attract a large number of
visitors to their website.
•It helps them position themselves as an
end-to-end travel solutions provider.
•Therefore, airline ticketing will remain a
significant portion of their revenues

Source: Industry, Company sources

77
 Industry consolidation will help in reducing the price wars and
improving the margins.

CONSOLIDATION
• Two major players in the travel industry, MakeMyTrip and Ibibo Group, have
merged and MakeMyTrip owns 100% of Ibibo Group.
• The combined entity holds a substantial market share (60% of the travel
industry)
• The industry now comprises three major players: MakeMyTrip, Cleartrip and
Yatra.
• All three players have strong promoters backing them and will be able to fend
off any pricing pressure from peers.
• Other recent acquisitions include – Yatra acquiring ATB (Corporate travel
service provider), Paytm acquiring Insider.in (event ticketing platform).
Yatra.com has partnered with OYO to increase its inventory of hotels, especially
in the budget hotels category.
• Consolidation in the industry is expected to ease pricing pressure and improve
profitability in the long-term.
78
RECENT M&As

Source: Industry
79
OTHER EMERGING TRENDS:
Micro-event ticketing
• Large online ticketing players like Kyazoonga and Bookmyshow.com are
getting into 'micro event' ticketing. Kyazoonga has come up with 'iTicket' that
allows users to create events, price tickets and sell them using the platforms.
• Micro events can be anything - startup meets, training events, employee get-
togethers, alumni get together, niche music events, kitty parties and even
cocktail parties.
Selling Merchandise
• Movie/ event-based online ticketing websites have started to diversify into
online retail.
• For example, a website selling event-based tickets for, say, a concert of
Metallica also retails related merchandise such as t-shirts, caps and other
related products.
• Such companies are already witnessing frenetic growth in online retail sales.

80
OTHER EMERGING TRENDS:

Package Deal

• Some websites are offering a package deal: for events of any scale, they

arrange everything: logistics, ground level organisation and other

arrangements.

81
 Competition from OYO and increasing marketing expenses will be a
challenge for the players despite consolidation.

PROFITABILITY
• Going forward, margins to slightly improve on account of consolidation in the
industry.
• As operational costs do not rise drastically for the players with increase in
revenue, a rise in sales volume will aid operational profitability.
• However, marketing expense in the hotel and travel packages segment will
increase as the companies look to increase their market penetration and
competition grow.
• Further, the increase in the margins will be partially offset by pricing pressure in
the hotels segment, due to competition from OYO Rooms.
• But the extent of competition will be limited as all existing players have strong
promoter backing, making it difficult for any company to topple the rivals
82
 MakeMyTrip, reported loss at the operating level for fiscal 2018 as it
doubled its marketing costs compared with previous year.

MAKE MY TRIP: REVENUES AND PROFITS

Source: Company Reports, Crisil Research

83
 Online Deal Sites: Size and
Growth

84
 OVERVIEW

•The market for online deals in India began with non-travel services such as

restaurants, spas, tattoos, etc but now has expanded to products also.

•Through this segment, the service providers can off-load excess inventory at

discounted prices and improve the demand during the lean period.

•Deal companies/ websites usually earn through:

•Commissions on the deals bought on the website and

•Placement/ prominence of the vendor's deal on the deal website.

85
MAJOR PLAYERS IN THE SEGMENT

86
 Online deals companies follow full payment or token payment or
no payment model.

COMPARISON OF BUSINESS MODELS

87
 Online Deals segment has been growing at a CAGR of close to
35% in the last 3 years.

ONLINE DEAL SITES: SIZE AND GROWTH

Source: Industry, Company sources

88
 Food and beverages, Spa and Wellness account for 50% to 60% of
Online Deals segment.

ONLINE DEAL SEGMENT: SHARE OF VARIOUS CATEGORIES

• The share of travel services is

steadily rising, and
is expected to increase further.
• Companies like Groupon are
increasingly focusing on
diversifying their deals
portfolio and have started
offering more of travel services
and products.

89
Source: Crisil Research
 SEGMENT OVERVIEW

 The number of players in the online deals segment is relatively large at over
100, with Nearbuy, Coupondunia and CashKaro being the major players.
 While the segment comprises over 100 players, not all are doing well.
 This can be attributed to low differentiation among players as a majority of
them provide only deals.
 The industry is expected to consolidate, as in the case of the acquisition of
Nearbuy and Little, which provide online deals on services, by Paytm.
 Paytm is expected to benefit from the large pool of merchant partners of the
two as well as the customer base with the acquisitions, thereby boosting its
online-to-offline model.

90
 SEGMENT OVERVIEW

 The business model of online deal players is undergoing a shift as the

quantum of discounts provided by online players decline
 Also, online players have their own offers. Thus, the pure-play business of
providing only deals will not sustain, and players will need to provide
differentiated products to be successful.
 For e.g., CashKaro provides price comparison, product search and
cashback, in addition to regular coupons and offers.
 In fact, companies are increasingly focusing on diversifying their deals
portfolio as well, and have started offering more travel services such as air
ticketing, weekend getaways, and travel packages, and products such as
apparel, electronics, food and grocery (including vegetables and staples), etc.
 As the average ticket price for these new segments is higher, we expect the
average ticket size for the segment to grow at a healthy pace over the next few
years.

91
KEY CHALLENGES

•Gross margins hover around 20% in India for players providing deals on
services.
•Globally, companies make 50-60% as they have higher bargaining power with
the vendor due to high volumes provided by online deal players.
• The companies are making net losses as spending on marketing to generate sales
and build a brand.
• Consumer stickiness is very low, as users look for the player providing highest
discount, irrespective of the brand and credibility.
• Building exclusive relationships with strong brands is the only route to retain
customers and move closer to profitability.

92
 Online Portals

93
TYPE OF PORTALS AND PLAYERS

•Car portals: Carwale.com, Gaadi.com and Zigwheels.com

•Job portals: Naukri.com, Monsterindia.com and iimjobs.com

•Property portals: Magicbricks.com, Makaan.com and 99acres.com

•Matrimonial portals: Shaadi.com, Jyotimatrimony.com and

Simplymarry.com

•Other portals: Zomato, moneycontrol.com, etc

94
 Revenue mix differ significantly between Car/Property portals Vs
Job /Matrimonial portals.

REVENUE MIX OF ONLINE PORTALS

CAR AND PROPERTY Job and Matrimonial Portals

PORTALS

1. Others include Commissions

and Access to User Database
95
EMERGING TRENDS IN CAR AND PROPERTY PORTALS
•Online car and property portals' revenue to grow robustly over the next three
years.
• People across the country are increasingly using the internet to research before
purchasing a new car or new house.
•Car portals are increasingly moving towards including online retail as part of their
overall strategy.
• These companies are using portals to sell car accessories such as audio systems
and tyres to customers, while showcasing the list of cars available for sale.
•Similarly, certain property portals plan to opt for a commissions-based model,
wherein they earn a certain pre-fixed percentage of the value of the property being
sold.
• However,
96 the viability of such a model remains to be seen.
EMERGING TRENDS IN JOB PORTALS

•Job portals have increasingly begun to focus on job seekers.

•Companies have recognised that job seekers would need assistance in

preparing resumes to highlight their achievements and position themselves

more favourably to recruiters.

•Further, job seekers are ready to pay to promote their resume to a prospective

company, as against letting the company scan for suitability.

97
 Snapdeal

98
 SNAPDEAL’S FALL

“The one thing I am very, very clear about right now is that I think we’re going to be No.
1 (in terms of sales) by March 2016. I think we’re going to beat Flipkart by then,” Bahl
said in an interview with The Economic Times. “I’m very confident that whatever their
(Flipkart’s) numbers are, we will be ahead of them by March (2016).”
- Kunal Bansal , CEO Snapdeal in August 2015
• Snapdeal had a peak valuation of $ 6.5 bn in 2015.

•In April 2017, Softbank which was the largest investor in Snapdeal was trying to

sell the company at a Valuation of $1bn.

• Freecharge was acquired by Snapdeal in 2015 for $450 mn. In July 2017, Axis Bank

bought Freecharge for Rs. 385 crores (almost 90% lower than what Snapdeal had

paid
99
to acquire Freecharge).
 What led to Snapdeal’s downfall?

SLUSHED WITH CASH TILL MID- 2016

•Major investors in Snapdeal:

•Softbank– 33%, Nexus -10% Kalaari -8%, Snapdeal founders Bahl and Rohit
Bansal together own less than 6.5%
•Snapdeal raised $1.4 bn between October 2014 and early 2016.
• Even in July 2016, the company still had about $ 500 mn left.
• Those cash reserves were wiped out by discounts and marketing, along with its
daily expenses and those at its payments unit Freecharge.
• The company also had run a heavily funded re-branded campaign in an attempt
to reverse market share losses to Amazon and Flipkart.

100
 What led to Snapdeal’s downfall?

UNCONTROLLED SPENDING WITHOUT NEW INVESTMENT

•From the time it pumped $627 million into Snapdeal in October 2014, SoftBank
encouraged the online marketplace to go all out and spend heavily on marketing,
discounts, logistics and warehouses, without caring about cash burn rates.
•Though spending heavily, the company rejected at least two funding offers
because of differences at the board between SoftBank on one hand, and Kalaari
and Nexus on the other.
• Even as late as January 2017, Snapdeal was spending heavily, expecting funds
from new investors or SoftBank.
• But no such deal materialized. Sales crashed in February and March 2017 as it
cut spending.
•It cut hundreds of jobs and shut Shopo, a consumer-to-consumer marketplace.
101
INVESTORY DIFFERENCES

•From November 2015 to April 2016, Snapdeal in fact witnessed a decline in

monthly revenue.
•Existing and new investors promptly refused to pour fresh funds into an e-
commerce firm that was already starting to be seen as an also-ran against Flipkart
and Amazon.
•SoftBank is now keen to sell Snapdeal at a cut-price value but that deal is being
opposed by Kalaari and Nexus
• Since such a deal would value Snapdeal at a fraction of its peak valuation of $6.5
billion and severely reduce the value of the holdings of Kalaari and Nexus, which
count Snapdeal as their largest investment.

102
SOFTBANK’S STRATEGY

•Softbank is a major investor in Snapdeal, Paytm and Grofers among other small
e-commerce companies. (prior to investing in Flipkart)
• In May 2017, it invested $1.4 bn in Paytm.
• The company felt that they Paytm was a winner, and they could give more time
to Grofers, but Snapdeal have lost out on the race.
• Hence the company wanted to Sell Snapdeal to Flipkart and get a stake in
Flipkart
•Since they could not sell Snapdeal to Flipkart due to differences with other
investors, in August 2017 the company invested $2.6bn in Flipkart which they
later sold to Walmart.

103
 After FY 2017, Snapdeal managed a mini-turnaround when
nobody thought it will survive.

SNAP DEAL : MINI-TURNAROUND

FY 2017 FY 2018 FY 2019

Revenue Rs. 1180 crs Rs. 535.9 crs Rs. 925.3 crs
Profit/Loss -Rs. 5143 crs -Rs. 611 crs -Rs. 186 crs

• It’s very rare that a start-up turnaround after failure and that too when it is
starved of cash.
• Between FY 2017 and FY 2019, Snapdeal’s losses dropped by 96% while the
revenue dropped by 22%
• Between FY 2018 and FY 2019, Snapdeal’s revenue jumped 73%
• The company got a new investor Mr. Anand Piramal in July 2019.
Source:
• https://economictimes.indiatimes.com/small-
biz/startups/newsbuzz/snapdeals-revenue-soars-73-losses-drop-by-71-in-
fy19/articleshow/70243470.cms?from=mdr
• https://entrackr.com/2018/11/snapdeal-2-0-revenue-loss-fy18/
104
SNAP DEAL : INVESTORS WROTE OFF THEIR INVESTMENTS

• In May 2017, Japanese investor Softbank had written off its investments in
Snapdeal.
• Since then, others have followed suit.
• Early in 2018, FIH Mobile, a subsidiary of Taipei-headquartered Foxconn
Technology Group, had written down the remaining $40 million of its $200
million investment in Jasper Infotech, the parent company of Snapdeal. The
contract electronics manufacturer has effectively declared its entire investment
irrecoverable as it had already written down $160 million of its stake in the e-
tailer last year.
• In February 2018, eBay reportedly wrote off close to $61 million on its
investment in Snapdeal.
105
TURNAROUND STRATEGY

Sold off most of it’s non-core assets

• It sold FreeCharge in July 2017 to Axis Bank, Vulcan Express to Future Group in
January 2018.
•The US-based subsidiary Snapdeal Inc was liquidated in February 2018.
•E-Agility Solution is also under the process of liquidation.
•Unicommerce e-solutions arm was also sold to Infibeam in May 2018.

Source:
https://entrackr.com/2018/11/snapdeal-2-0-revenue-loss-fy18/
 TURNAROUND STRATEGY

Reduced the manpower, office space and other overhead expenses:

• The company had only 750 employees in October 2019
• Operate from one and a half floor office space
• As far as expenses were concerned, the company recorded a 77.05 per cent
contraction from Rs 3146.4 crore to Rs 784.1 crore in a span of one fiscal
ending March 2018.
• Fulfillment expense accounting for the largest share in expenses (43 per
cent) decreased 67.22 per cent from Rs 1028.2 crore to Rs 337 crore.
• Promotion and Advertisement expense also narrowed down by 81.65 per
cent to Rs 118.3 crore.

Source:
https://entrackr.com/2018/11/snapdeal-2-0-revenue-loss-fy18/
 TURNAROUND STRATEGY

BUILDING AN EFFICIENT VALUE CONSCIOUS MARKET PLACE:

• Millions of new buyers from Tier 2&3 cities are starting their e-commerce
journeys every month.
• Similarly, lakhs of small and medium sellers from all parts of the country are
looking to establish and grow online businesses to tap this opportunity.
• Snapdeal is in the process of building an efficient market place for them.
The company reduced their exposure to high priced but loss-making electronics
and mobile phones category.
• Snapdeal has sharpened its focus on the needs of the value-conscious buyers in
India.
• Source: https://economictimes.indiatimes.com/small-
biz/startups/newsbuzz/anand-piramal-invests-in-
snapdeal/articleshow/70346421.cms?utm_source=contentofinterest&utm_
 TURNAROUND STRATEGY

BUILDING AN EFFICIENT VALUE CONSCIOUS MARKET PLACE:

• The company reduced their exposure to high priced but loss-making electronics
and mobile phones category.
• Snapdeal has sharpened its focus on the needs of the value-conscious buyers in
Tier 2 and other smaller towns
• Most of the products the company sells have a ticket size of less than Rs. 500
and from lesser known or local brands.
• More than 80% of its 70 million active users come from the small towns and
cities of India.
• During the FY 19, the portal attracted 90% of the orders received came from
non-metro towns.
Source: https://economictimes.indiatimes.com/small-
biz/startups/newsbuzz/anand-piramal-invests-in-
 Flipkart Vs Amazon

110
 Amazon has better engagement compared to Flipkart. It gets more
customer visits per month than Flipkart , Myntra and Jabong put
together.

ENGAGEMENT : FLIPKART VS AMAZON

Flipkart Amazon Myntra Jabong
Average 230 mn 310 mn 40 mn 0.8 mn
Visits per
month
(November
2019 to Jan
2020)
Average 00.04.02 00.03.58 00.05.15 00.04.62
Visit
Duration
Pages per 4.43 4.81 5.54 5.2
visit
Bounce 49.67% 48.52% 50.22% 54.22%
Rate

Source:https://www.similarweb.com/website/flipkart.com?competitors=a
111 mazon.in
112
Source: Redseer Analysis
 Flipkart has got huge lead in Fashion due to it’s acquisition of
Myntra and Jabong.

MARKET SHARE: FASHION AND SMART PHONE

Source:
https://www.bloomb
ergquint.com/busines
s/2018/03/23/this-is-
why-amazon-hasnt-
beaten-flipkart-in-
india-yet#gs.X_Le_mc

113
MARKET SHARE: CONCENTRATION AND RANGE

• Flipkart is highly concentrated in it’s portfolio taking a clear lead in fashion

and smart phones categories.

• Amazon’s sales is more widespread across different categories

 Flipkart has been consistently outperforming Amazon in Festive
Season Sale.

FESTIVE SALE

Source: https://economictimes.indiatimes.com/small-
biz/startups/newsbuzz/amazon-flipkart-sales-generate-rs-19000-crore-in-6 -
days/articleshow/71491146.cms?from=mdr
115
 While Amazon had higher GMV, Flipkart had higher revenues in
2018.

OVERALL REVENUE AND GMV

116
 Amazon scores better in terms of Customer Service and Seller
Service.

CUSTOMER SERVICE

• Amazon has an edge here.

•Its customer service is celebrated and people are more certain of replacements
and after sales services when they buy from Amazon.
•Amazon operates guided by its well-known vision of being earth’s most
customer centric company.
SELLER SERVICE
•Sellers prefer Amazon over Flipkart for it’s responsiveness and better processes.
•Though many sellers are common, Amazon focus more on small sellers of the
local market.
•The company also launched many seller friendly platforms like “Easy Ship” and
“Seller Fix.”
117
 Flipkart have utilized its acquisitions well leading to improved digital
payments, logistics, and tech.

M&As: FLIPKART’S KEY ACQUISITIONS

Myntra Ecommerce
Jeeves Consumer Technology
NgPay Fintech
AdiQuity Mobile Tech
NestAway Real Estate
Zinka Logistics Logistics

Cube26 Machine Learning, Enterprise Software

Qikpod Logistics
Mechmocha Mobile Gaming
Appiterate Mobile Tech
FX Mart Fintech

MapMyIndia (Minority Stake) Digital Map Platform

ZAPR Big Data, Digital Media

Tinystep Child Care
Jabong E-Commerce
PhonePe Fintech
eBay India Ecommerce
F1 Info Solutions IT And Mobile Repair
118
LOYALTY PROGRAMS
Loyalty Price Benefits
Program

Amazon Prime Rs. 999/year • Unlimited free One-Day and Two-Day Delivery on
or Rs. eligible items
129/month • Unlimited video streaming on PrimeVideo.com
• Unlimited, Ad-free music streaming with Amazon
Prime.
• Read as much as you want on Kindle apps.
• 30-minute early access to Lightning Deals.

Flipkart Plus 300 super • Free and Faster delivery

coins • Early exclusive access to sales
• Priority customer support

119
FLIPKART PLUS :
What are the benefits of Super Coins?
• For every Rs.100 you spend, you

get 2 super coins. ( for non-plus

members) and 4 super coins (for

plus members)

• One has to earn 300 super coins in

12months to avail annual plus

membership. (Purchase Rs.12000

worth of items to collect 300 coins)

120
 ILLUSTRATIVE: EXCLUSIVE DEALS FOR PLUS MEMBERS

Offers Super Coins

MOJO Pizza Rs.200 off 100
Flipkart Flight, Rs.500 off 100
Hungama Music (1 year) 100
Hungama Play ( 1 year) 100
YouTube Premium ( 6 months) 150
OYO Wizard Gold Membership 200
BookMyShow Rs.300 off 250
Pizza Hut, Rs.300 off 300
Ola Outstation 50% off, up to Rs.500 350
Zee5 subscription (1 year) 350
BookMyShow Rs.500 off 500
Ola Outstation 50% off, up to Rs.1000 600
Hot Star Premium (1 year) 750
Tinder Plus (6 months) 750
Zomato Gold (1 year) 750
BookMyShow Rs.1000 off 750
Ola Drive Rs.1000 off on self drive cars 750
Myntra Voucher worth Rs.1500 1000
Flipkart
121 Gift Card worth Rs.5000 250
 Amazon prime has been a run away success compared to
Flipkart Assured or Snapdeal Gold.

AMAZON PRIME:

• Amazon Prime was launched in July 2016 while the Video content was launched 5

months later in December 2016.

• Currently 30% of Amazon’s orders are from Prime Subscribers.

•Amazon's Prime subscribers had crossed 10 mn in April 2018.

• Number of products under Prime has increased 40 million since the launch.

•Amazon prime subscribers ordered more frequently than non-prime subscribers

indicating higher purchase value

•Flipkart Plus so far have not made as much an impact like Amazon Prime

122
 Amazon prime has a huge upside potential.

AMAZON PRIME: FUTURE POTENTIAL

•In US, Amazon Prime subscription provides 20 benefits – including Music,
deliveries from preferred restaurants, membership sharing between family
members and a 5% Cash back on the use of Prime credit cards.
• In US, Prime members spend $2000 a year compared to $900 by non-prime
members.
• There is a huge upside potential in India as Amazon will gradually increase the
benefits associated with Prime.

123
 Last mile delivery pose a big challenge for e-tailers in India.

LAST MILE DELIVERY CHALLENGES

• In India, last mile delivery is a big challenge:

• First attempt delivery strike rate is 75% (which is considered to be dismal)

• 10-12% of all shipped items fail to reach the end customer

• Last mile delivery costs is about 45-50% of the overall logistics costs

(compared to 25 to 30% in developed economies)

Source: https://redseer.com/articles/amazon-ihs-program-disrupting-the-last-mile-of-e-commerce-
logistics-in-india/

124
 Amazon has roped in local retailers to improve last mile
delivery.

AMAZON LAST MILE DELIVERY: IHS

•Amazon’s IHS (I Have
Space) focus on last mile
delivery by involving
Kirana stores
•Packages are delivered by
Amazon to the kirana
stores, post which the
kirana stores take care of
the item sorting,
delivery/pick-up and order
reconciliation. (paid Rs. 17
Source: https://redseer.com/articles/amazon-
to Rs. 20 per delivery).
ihs-program-disrupting-the-last-mile-of-e-
commerce-logistics-in-india/
125
 Almost 35-40% of Amazon’s last mile delivery are delivered by
Kirana stores through IHS.

AMAZON LAST MILE DELIVERY: IHS

• No.of Kirana Stores

enrolled in IHS have

crossed 20,000 in 350

cities by September 2019

Source: https://redseer.com/articles/amazon-ihs-program-disrupting-the-last-mile-of-e-commerce-
logistics-in-india/
https://yourstory.com/2019/09/amazon-india-space-initiative-kiranas-delivery-partners
126
 IHS has improved the delivery rate, reduced costs and more
importantly help in managing volume spikes.

IHS:IMPACT

Kirana stores earning potential has gone up with negligible

costs. (Rs. 5000 to Rs. 25000 per month depending on the
number of deliveries)
127
 Amazon through their Amflex program has roped students and
housewives to improve last mile delivery.

AMFLEX

• Amazon also tapped students and housewives to become delivery partners.

• An Amazon flex delivery partner can earn Rs. 500 per day (Rs. 120 – Rs.

140 an hour delivering packages), working four hours a day.

• Each Amflex partner makes around 40 deliveries a day.

• More than 30,000 delivery partners have been enrolled through Amflex

program.

128
 MENSA network of Myntra involve kirana store in last mile
delivery.

MENSA NETWORK: MYNTRA

• Along the lines of Amazon’s IHS, Myntra launched MENSA network

(Myntra Extended Network Through Store Activation)

• Myntra has increased the number of its Mensa Network to 6,200 across 50

cities in the country.

129
 Udaan

130
UDAAN VALUATION

• As per this number, in Feb-20, Udaan

was the fourth-highest valued startup

right after Paytm ($16 billion), OYO

($10 billion) and Byju’s ($8 billion).

Source: https://entrackr.com/2020/02/udaan-valued-at-7-5-bn/
131
 OVERVIEW

• Udaan is a B2B e-commerce portal bringing together all participants onto a single
platform - be it the wholesaler, distributor, producer, and the small retail shop
owner. While other major e-commerce companies focus on B2C.
• Poor Distribution efficiency has been one of India’s perennial problems. Udaan’s
value proposition is to solve core trade problems for small, medium and large
businesses across India.
• Its categories include variety of categories - foodgrains, fruits and vegetables,
electronics, apparel, footwear etc.
• It’s website claims to have 20,000 sellers and 10 lakh retailers from 900 cities and
towns in India, selling 15 lakh products.

Source: https://yourstory.com/2019/09/startup-b2b-ecommerce-retail-udaan
132
 OVERVIEW

• Implementation of GST, agricultural reforms, greater acceptance of digital

payments etc have been great enablers.

• According to the founders of Udaan, the startup’s average daily overall

transaction is more than 6,000 tonnes including 500 tonnes of Fruits and

Vegetables in September 2019.

• The company received NBFC licence through which it provides loans and credit

of 7 to 15 days which is very critical for small retailers/wholesalers.

Source: https://yourstory.com/2019/09/startup-b2b-ecommerce-retail-udaan

133
 Paytm Mall

134
 Though there was lot of expectations, Paytm mall is yet to live upto
its promise.

PAYTM MALL: BUSINESS MODEL AND FINANCIAL PERFORMANCE

• Adopted o2o model which brings physical stores into E-commerce space
• The business strategy involves finding consumers online and brings them
into the realworld to make purchases in physical stores.
• Many global and Indian players incorporate o2o model as a part of their
strategy (Alibaba, Amazon, Flipkart etc)
• Paytm Mall saw revenue jump 25% to Rs 968 crore in FY19 and reduce it’s
losses by 35% to Rs. 1171 crs
• The company still lost more money than it’s— Rs 1.21 for every rupee in
revenue it made in FY19.
• Its loss percentage is much higher than that of Amazon and Flipkart.

Source: https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/paytm-e-
commerce-narrows-losses-to-rs-1171-crore-in-fy19/articleshow/71843176.cms?from=mdr

135
 Infi-beam

136
 FINANCIAL PERFORMANCE

Source: Company’s Annual Report for FY 2019

137
 OFFERINGS BRANDS

138
 MAJOR BUSINESS SEGMENTS

Payment Gateway Platform Infrastructure and

- CCAvenue Infibeam Web Data Management
services (IWS)

139
 More than 800,000 merchants use Infibeam‘s e-commerce and
payment solutions.

CC AVENUE

Source: Company’s Annual Report for FY 2019

140
 More than 800,000 merchants use Infibeam‘s e-commerce and
payment solutions.

CC AVENUE : KEY CLIENTS

Source: Company’s Annual Report for FY 2019

141
 The company has recently forayed into bill payments where it had
a negligible presence earlier.

BILL AVENUE
• BillAvenue is a paymen
platform built on the Bharat
BillPay System (BBPS) Key Billers onboarded
infrastructure, which is
developed by the National
Payments Corporation of India
(NPCI).
• The company has been
building a series of strategic
partnerships with billers, to
fetch bills and digitise them for
electronic presentment to
customers.
Source: Company’s Annual Report for FY 2019
142
 The company has recently forayed into bill payments where it had
a negligible presence earlier.

BILL AVENUE

Source: Company’s Annual Report for FY 2019

143
 More than 500,000 merchants use Infibeam‘s e-commerce and
payment solutions.

INFIBEAM WEB SERVICES (IWS)

• The company provides web services primarily through “Build a Bazaar”
(https://www.buildabazaar.ooo/)
• Buildabazaar is a cloud-based ecommerce platform, which allows users to
create an online retail store. [5]
• The platform provides tools to customize the appearance of the
store, managing inventory, order management, SEO, connect via social
network, integrated payment gateway, tie up with logistics providers. [9]
• The Company has over 100,000 merchants across its web services (e-
commerce solutions and payment solutions) offerings
• Examples: Hidesign, Amul, Britannica, Esselworld, Idea are some of
the brands using “Build a Bazaar” platform.
• They also have international clients like Sears (USA), Saudi Telecom

144
CHANGE IN THE REVENUE MODEL OF IWS
• Infibeam used to follow the subscription model for it’s IWS where they
charged a fixed amount from each online store.
• Disadvantages of subscription model
• No upside potential for the company from the merchant’s revenue growth.
• Only avenue for growth was through increasing the number of merchants
enrolled in the platform
• In early 2018, the company moved from “Subscription” based to
“Subscription + transaction “ model in which apart from monthly
subscription, they charge 1 to 2% of the transaction values.
• In Q3, 2018-19, Volume of transactions processed was 30 mn (up 28% YOY)
and the value of transactions processed was Rs. 114.70 bn (up 112% YOY)
145
 Government e-Marketplace (GeM)

 Infibeam and its

consortium partners won
contract by the
Government of India for
Design, Development,
Implementation, and
Operation & Maintenance
of Government e-
Marketplace’ (“GeM”).
 Government purchases
lakhs of crores of products
and services. Bringing
them online could make
Infibeam a very big
marketplace. Source: Company’s Annual Report for FY 2019
146
 GIFT CITY GANDHINAGAR

• Infi-beam built a data centre at GIFT City, Gandhinagar in collaboration with

Schneider and IBM.

• The Company will run the captive workload through this data centre and will

also open additional capacity as public cloud with the following services:

Infrastructure as a Service (IaaS), Platform as a Service (PaaS) (blockchain

platform, e-commerce platform), Database as a Service (DBaaS).

• The data centre business will offer storage as well as compute services.

147
 Despite it’s stated growth and profitability, Infibeam’s market
capitalization has been stagnant.

MARKET CAPITALIZATION
1600 $1406
1400 mn
1200

1000

800

600

400
$424 $467
200 $363 mn mn
0 mn
April 5, May 14, May 18, May 18,
2016 2018 2019 2020
Source:
https://www.moneycontrol.com/india/stockpricequote/miscellaneous/infibeamavenue
s/IIL03
148
 Amazon Vs Walmart

149
 In 2019, Walmart’s revenue was 80% more than that of Amazon.

REVENUES : AMAZON VS WALMART

600
510.34 Annual revenue for
500 2019 in $bn

400

300 280.5

200

100

0
Walmart Amazon

Source: https://www.macrotrends.net/stocks/charts/
150
 In 2017, Amazon’s profit exceeded Walmart for the first time ever.

NET PROFITS : AMAZON VS WALMART

16 10.07
$14.5bn
14 FY 2019
12
$11.58 bn

10

8 9.68
6

0
Walmart Amazon

Source: https://www.macrotrends.net/stocks/charts/
151
 Amazon’s market capitalization was more than 3 times that of
Walmart in May 2020.

MARKET CAPITALIZATION: AMAZON VS WALMART

1400

1200 1200

1000
920
800 777
Walmart
600
Amazon
400
356
247 289
200 197 236
117
0 29
2008 February
2013 February
2018 May2019 May2020 May

Source: Company Reports

152
 Between 2010-2019 Amazon grew by 820%. Whereas Wal-mart grew
around 25%

10 YEAR GROWTH: AMAZON VS WALMART

• Walmart has not
Walmart’s YOY Amazon’s YOY
Revenues growth Revenues growth made much
in $bn in $bn
2019 $510.2 2% $280.5 21% headway in E-
2018 $500 3% $232 36% Commerce
2017 $486 1% $170 25% • Walmart’s E-
2016 $483 0% $136 27%
commerce
2015 $486 2% $107 20%
2014 $476 2% $89 19% revenues is only
2013 $469 5% $74.5 22% around 8%of it’s
2012 $447 6% $61 27%
total revenues in
2011 $422 3% $48 41%
2010 $408 1% $34 40% 2019
Source: Company Reports,
https://www.forbes.com/sites/greatspeculations/2020/03/02/how-much-in-online-revenue-
can-walmart-generate-in-2020/#6e584fc92e26
 Amazon has multiple very fast growing segments.

AMAZON: REVENUE BY SEGMENT (US $BN)

Online Physical Retail Subscript Amazon Others

Stores Stores third ion Web
party services Services
seller
services
2014 68.51 11.75 2.75 4.64 1.32
2015 76.86 16.09 4.47 7.88 1.71
2016 91.43 22.99 6.39 12.22 2.95
2017 108.35 5.8 31.88 9.72 17.46 4.65
2018 122.99 7.22 42.75 14.17 25.66 10.11
2019 141.25 17.19 53.76 19.21 35.03 14.09

Source: https://www.statista.com/statistics/672747/amazons-consolidated-net-
revenue-by-segment/
 KEY POLICIES AND THEIR
IMPACT

155
 Policy Impact
Maximum limit of 25% of • Discount reduction
revenues from a single seller • Electronics and Apparel to be impacted most
• Growth to be impacted negatively by 10 to
15%
Marketplaces to not mandate • No major impact as there is no restriction of
exclusive tie-ups brands to choose a particular platform (Ex:
oneplus)
Submission of compliance report • No major impact on operations
• Add to compliance costs
Services to all vendors should be • Policy is ambiguous
provided in a non-discriminatory • E-tailer can still incentivize performance
manner

156
 E-COMMERCE : ROUTE
TO PROFITABILITY

157
ROUTE TO PROFITABILITY

• Consolidation

• Omni –Channel Retailing

•Private Labels

•Exclusive Launches

• Distribution Efficiencies

• Reducing the Discounts

•Increase non-COD sales

• Increasing Loyalty
158
 FOCUSSED FUNDING

• The e-commerce space witnessed aggressive funding in the past from

investors.
• However, of late, the number of players being funded has declined after the
failure of majority of startups such as LocalBaniya, PepperTap and Shopo.
• The investors have become cautious and focused their funding, as they eye
profitability.
• Of funding of over Rs 600 billion in the online retail space in past two fiscals,
the top two players have pocketed over 80% share.
• Investors have figured out that the top 2-3 players are going to survive and
garner major market share.
• Over the medium to long term, we expect this trend of focussed funding to
continue.
159
 SOME MAJOR PLAYERS SHUTTING DOWN

Major players who shut down operations in 2017

Major players who shut down operations in 2016

160
 Players focus on weaning customers away from high cost
cash-on-delivery payments

• Cash-on-delivery (COD) payment has the highest share of 60-70% among

payment options for online retail in India.
• Initially, it helped to expand the market and bring in new customers.
• However, the cost of COD orders is 2-2.5% of order value or Rs 30-50,
whichever is higher, which is a major cost.
• E-commerce companies are focusing on reducing the proportion of COD
• Players are encouraging payment through credit cards, net-banking, debit
cards and e-wallets.
• Companies have also tied up with major banks and mobile wallet service
providers to offer additional discounts/ cash backs on online payment.

161
 Discounts are coming down and becoming more focussed

 Lower incremental funding and consolidation in the market has led to an

overall dip in discounts.

 Gone are the days when e-tailers used to give over 50% discount on
majority of the products.

 Players are moving away from across-the-board discounts and towards

differential discounts based on the customer’s purchases and targeting
particular segments in which they want to increase sales

162
 Exclusive launches and offers give competitive edge to several
players

Several players are entering exclusive sale arrangements for electronics,

smartphones, etc.
Amazon
• is the exclusive seller for OnePlus during the contract period from
December 2014 to 2017.
• It also has exclusive selling contracts with ZTE sub-brand Nubia,
Coolpad, BLU, Gionee and LG.
• In 2017, Mondelez India and Amazon partnered to sell chocolates and
sweets through the online platform in the country.
Flipkart
• is the exclusive seller for Xiaomi, Lenovo, Alcatel, Panasonic, Honor,
LeEco, Huawei and Motorola's latest range of smartphones,
Snapdeal
• has tied up with real estate players such as Tata Value Homes for
booking of flats.

163
 GST – A MIXED BAG

Benefit
• With the Goods and Services Tax (GST) being implemented, inter-state taxes
has been abolished.
• Online players can consolidate the warehouse and look for the cost-effective
source from anywhere in the country.
Disadvantages
• Under GST regime, the online players have to deduct 2% of the amount as the
GST liability of the seller and deposit it with the government.
• The seller will then have to claim credit of TDS at a later stage.
• The working capital requirement of the seller will also increase
• The online players will have to register in each state and file the reports
separately on a monthly basis.
• This will increase hassles for compliance and hike the cost of running the
business for e-commerce players.

164
UPSCALING AND SEGMENT DIVERSIFICATION

 Profitability at the gross level is highest in the lifestyle segment, while it

is the lowest in sub-segments like electronics.

 However, better volumes are generated from products like mobile

phones and mobile accessories in the electronics sub-segment.

 Thus, a player needs to have the right mix of both high-volume, low-
margin products and low-volume high-margin products.

 Players want to increase the scale:

 High Scale – More than 30,000 transactions per day

 Low scale – Less than 2,000 transactions per day
165
 Private Labels

• Players are seeing private labels an important tool to improve profitability.

• Flipkart launched “Flipkart Smartbuy”, an umbrella brand offering more
than 50 categories.
• Flipkart acquired Myntra, that has significant presence of private labels that
account for a significant proportion of its revenue.
• Shopclues introduced its private labels Home Berry (Home & Décor), MEIA
(Workwear fashion for women), Baton (Footwear fashion for men) and
Digimate (electronics) this year.
• Amazon has private labels known as AmazonBasics (electronics, home utility
products etc.), Symbol (clothing), Myx (women’s ethnic wear) and Solimo
(home and kitchen products, utensils etc).
• But, with technology, and not retailing being the core competency for e-
tailers, these players may find challenges ahead.
• Penetrating high-value categories will be difficult as customers show
brand loyalty in these categories.

166