Investment Opportunity in Baby Care

e-Commerce

November 17, 2019 By Mr. Vinay Mangire

Table of Content

Executive Summary

Buzz In India

Advantage India

Market Overview

Growth of Ecommerce in India

Rising Internet Penetration in India

Online Retail Market

Key Players

Growth Drivers & Opportunities

SWOT Analysis
 EXECUTIVE SUMMARY

 The Indian e-commerce industry has been on an upward growth

Indian E-Commerce Market (US$ billion)
trajectory and is expected to surpass the US to become the second
largest e-commerce market in the world by 2034.
200
 The e-commerce market is expected to reach US$ 200 billion by 150 200

2026 from US$ 50 billion as of 2018. 100

39
50 72
50 64
0
2017 2018F 2020F 2022F 2026F

 With growing internet penetration, internet users in India are Internet users in India (million)
expected to increase from 493.96 million as of March 2018 to 829
million by 2021. 1,000
 Rising internet penetration is expected to lead to growth in 829
500 700
ecommerce. 494
446
0
2017 Q1 2018 2020 2021

 India’s internet economy is expected to double from US$160 billion India’s internet economy (US$ billion)
as of April 2018 to US$ 250 billion by 2020, majorly backed by
ecommerce. 300

 Digital transactions are expected to reach US$ 100 billion by 2020. 200 250

100
160
0
FY18 2020
Notes: CAGR - Compound Annual Growth Rate,
Source: Media sources, The $250 billion Digital Volcano, BCG – Digital Consumer Spending in India

3
 WHY BABY PRODUCT INDUSTRY IN INDIA A BUZZ

 Around 27 million babies are born every year in India. Considering that even 10% of babies are born to parents who would spend
annually a conservative fig of INR 5000 on baby products (diapers, strollers, toys, gears, lotions etc), the potential is huge.

 Most of the parents look for best in class and trusted brands of baby products which aren’t readily available in physical stores in
India, especially in tier 2 & 3 cities.
 The market size for baby products in India is estimated around INR 15-25 billion.

 Out of this, the estimated online market for baby products hovers around INR 100-120 crore range and it tends to double in every
6 to 8 months.

 The baby product segment was started with the entry of Firstcry & Babyoye in the Indian Etail space and later on, segment
witnessed rollout of Hoopos & Hushbabies including big etailers such as Flipkart, Amazon, Snapdeal & Paytm etc.

Internet penetration - number of internet subscribers per 100 population

Source: Economic Times, Live Mint, Aranca Research, Department of Telecommunications

4
 E-Commerce

ADVANTAGE INDIA
 ADVANTAGE INDIA

 India is the fastest growing market for the ecommerce sector.  The recent rise in digital literacy has led to an
influx of investment in e-commerce firms,
 Being driven by a young demographic profile, increasing
levelling the market for new players to set up
internet penetration and relative better economic
their base, while churn out innovative patterns
performance, India’s E-commerce revenue is
to disrupt old functioning.
expected to jump from US$ 39 billion in 2017 to
 E-commerce industry in India witnessed 21
US$ 120 billion in 2020, growing at an
private equity and venture capital deals worth
annual rate of 51 per cent, the highest
US$ 2.1 billion in 2017 and 40 deals worth US$
in the world.
1,129 million in the first half of 2018.

ADVANTAGE
INDIA
 A lot of India’s blue-chip PE firms had
previously avoided investing in E-commerce
but are now looking for opportunities in the
sector.  In India 100 per cent FDI is permitted in
 India’s start-up ecosystem is growing B2B e-commerce,
supported by favourable FDI policies,  As per new guidelines on FDI in e-
Government initiatives like Start-up India and commerce, 100 per cent FDI under
Digital India, as well as rising internet automatic route is permitted in
penetration driven by market players like marketplace model of e-commerce
Reliance Jio.

Source: Media sources, Aranca Research, Grant Thornton

6
 E-Commerce

MARKET OVERVIEW
 GROWTH OF E-COMMERCE IN INDIA

 Propelled by rising smartphone penetration, the launch of 4G

E-commerce Industry
Visakhapatnam in India
port traffic (US$tonnes)
(million billion)
networks and increasing consumer wealth, the Indian e-commerce
market is expected to grow to US$ 200 billion by 2026 from US$
50 billion in 2017. 250

 E-commerce is increasingly attracting customers from Tier 2 and 3

cities, where people have limited access to brands but have high
aspirations.
200
200
 With the increase in awareness about the benefits of online trading,
188
there has been a significant rise in investment in E-commerce
business. Hand in hand with offline trading, many established
150
businesses, e.g. Shoppers Stop or Lifestyle, have setup online
transaction channels.

 Earlier food and grocery were never thought of as items for online
trading. However, with the change of working habits, and consumers 100
opting for adaptability and convenience, there are now innumerable
small and large E-commerce companies selling provisions and food
items like Grofers, BigBasket, etc. 64
50
50
39

20
14
0
2014 2015 2017 2018 F 2020 F 2025 F 2026 F

Source: Economic Times, PWC, Financial Express

8
 RISING INTERNET PENETRATION IN INDIA

 Internet penetration in India grew from just 4 per cent in 2007 to Internet Penetration
Visakhapatnam port trafficin(million
India (%)
tonnes)
34.42 per cent in 2017, registering a CAGR of 24 per cent between
2007 and 2017. In Q1 2018 overall internet penetration in India was 40.0
38.02 per cent.

38.0
 As of March 2018, internet penetration in India’s urban areas stood 35.0

34.8

34.4
at 84.74 per cent and 16.41 per cent in the rural areas.
 Urban India with an estimated population of 444 million as per 2011 30.0
census, already had 348.13 million using the internet as of March
2018.

27.0
25.0
 Rural India, with an estimated population of 906 million as per 2011
census, has 145.83 million internet users as of March 2018. There is 20.0
therefore a great opportunity for increasing penetration in the rural

18.0
areas.
15.0

15.1
 Analysis of ‘Daily Users’ reveal that both in Urban and Rural India,

12.6
the younger generations are the most prolific users of internet. Rising
10.0
internet penetration is expected to drive ecommerce growth in India.

10.1
7.5
5.0

5.1
4.4
4.0
0.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1
2018

Internet penetration - number of internet subscribers per 100 population

Source: Economic Times, Live Mint, Aranca Research, Department of Telecommunications

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 ONLINE RETAIL MARKET

 Online retail sales in India had grown by 31 per cent to touch US$ Shares of Various Segments in E-commerce Retail by Value
32.70 billion in 2018, led by Flipkart, Amazon India and Paytm Mall. (2018)

 Electronics is currently the biggest contributor to online retail sales in

India with a share of 48 per cent, followed closely by apparel at 29
per cent.

 Currently, there are 1-1.2 million transactions per day in e-commerce 3% 3%

retailing. 8%

 In total 8% Baby Care segment is contributing 20% rest is contributed

by Beauty & Personal care. 9%

48%

29%

Electronics Apparels

Home and Furnishing Baby, Beauty and Personal Care

Books Others

Source: Report by eMarketer

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 ONLINE RETAIL VS TOTAL RETAIL IN INDIA

Online retail out of total retail in India (2018-19E) Online retail out of total retail in India (2020)

4.2% 5.3%

95.8% 94.7%

Offline Retail Online Retail Offline Retail Online Retail

 There are a lot of opportunities for e-retailers in India to capitalize upon with the gradually growing internet penetration in India.

 As of 2018-19, online retail made up 4.2 per cent of overall retail market in India and expected to contribute 5.3 per cent in 2019-20. 20 per cent of
organized retail market.

Source : Crisil

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 E-COMMERCE RETAIL LOGISTICS MARKET IN INDIA

E-commerce Retail Logistics Landscape in India (2018) E-commerce Retail Logistics: City-Wise Shipments

50% 40%
Captive
Logistics Arms Metros
23%

50%
E-commerce
49% Tier 2 and
retail focused 38%
below cities
LSPs
28%
Traditional Tier 1 cities
LSPs
12% 10%

2018 2022

 The e-commerce retail logistics market in India is estimated at US$ 1.35 billion in 2018 and is expected to grow at a 36 per cent CAGR over the next
five years.

 Around 1.9 million shipments are currently being handled every day with metro cities contributing around 50 per cent of this demand
 Logistics is a major driver of the e-commerce retail industry and is an important point of differentiation between market players aiming at better
customer satisfaction and service.

 Currently in-house (captive) logistics arms of large retailers execute the most shipments, followed by e-commerce focused logistics service provides
(LSPs) and traditional LSPs.

Source: KPMG Report – E-commerce Retail Logistics India

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 KEY PLAYERS

13
 E-Commerce

GROWTH DRIVERS
AND OPPORTUNITIES
 GROWTH DRIVERS FOR E-COMMERCE

 As the awareness of using internet is increasing, more and more

people are being drawn to E-commerce.

 Whether it be sellers, buyers, users or investors, people have

started getting used to online mode or commerce.

Increasing
awareness

Growth
 Government initiatives like
drivers
Digital India are constantly  Increasing FDI inflows,
introducing people to online domestic investment, support
modes of commerce. Government from key industrial players is
Investment
initiatives helping in the growth of e-
 Favourable FDI policy is commerce.
attracting key players.

Source: Aranca Research

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 DEMOGRAPHIC FACTORS

 Over 135 million people are expected to shop online in 2019 and this number is expected to go up to 175
million by 2020.
Online Shoppers  Mobile-savvy shoppers are the backbone of India’s online shopping industry.
 Men in India are more avid shoppers than women in part because of demographic and cultural differences.

Tier II and Tier III cities
provide major sales
 Metro cities like Bengaluru, Mumbai, and Delhi, with population greater than 100,000, accounted for most
online shopping in absolute numbers.
 Less densely populated regions generated a larger proportion of online sales. Nearly 60 per cent of Snapdeal’s
purchases came from cities classified as tier II and III.
 Flipkart also noted that “sales of branded products across categories saw a sharp increase, as more of tier 2
and tier 3 Indian towns took to shopping online.

 Although shoppers between 25 and 34 years of age were most active on e-commerce portals, a surprising
number of older people also shopped online in 2018.
Millennials are the most
active  However, the age group of 15-34 years are the major consumers of E-commerce.
 The popularity of web series among millenials is growing immensely.

 Discounts, added with a comfort of sitting at home and purchasing, is an effective driving factor of E-
commerce. Availability of various websites gives customers a lot of options to choose from.
Convenience of E-  Chatbots and personal assistance apps have made transactions seamless.
commerce  One can get several brands and products from different sellers at one place. Also, one can get in on the latest
international trends without spending money on travel; you can shop from retailers in other parts of the country
or even the world without being limited by geographic area.

Source: Economic Times, Media sources, Aranca Research

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 FACTORS DRIVING E-COMMERCE GROWTH… (1/2)

 Online retailers see this emergent segment as a new growth driver as the incremental growth in mobile
Internet content in local subscribers can be credited mainly to people who are comfortable with languages other than English.
languages  E-tailing customers using Indian languages in place of English are expected to reach 165 million by 2021 from
63 million in 2018.

 Online retailers’ growing reach in town and cities beyond metros is driven by an increasing in usage of mobile
internet in the country. Increased ownership of smartphones is helping more Indians access shopping websites
easily.
Mobile Commerce  Rise in smartphone usage is expected to reach 50 per cent penetration by 2020.
 The number of mobile internet users is expected to reach 478 million by June 2018 which will further boost the
mobile commerce sector in India.

 Online retailers now deliver to “12,500-15,000 pin codes” out of nearly 100,000 pin codes in the country.
 With logistics and warehouses attracting an estimated investment of nearly US$2 billion by 2020, the reach of
online retailers to remote locations is set to increase.
Growth of logistics and
warehouses  Indian warehousing sector is expected to grow by at least 100 per cent by 2021.
 In April 2018, Amazon announced its plans to add five new fulfilment centres in India and retain its position as
the largest warehousing space provider in the country.

Source: Media sources, Kalaari capital – India Trends 2018

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 FACTORS DRIVING E-COMMERCE GROWTH… (2/2)

 A net addition of nearly 140 million debit cards has been recorded in the country in the past few years. Usage
of debit cards at points of sale terminal has increased by 86 per cent during the same period. This clearly
reflects that people are getting comfortable with using debit cards for activities other than withdrawals at ATM.
 Digital payments will act as a game changer for the domestic e-commerce business and the current trend of
dominance of Cash-on-delivery would be reversed in the next five years, as per Mr Sachin Bansal, Executive
Cashless Transactions Chairman, Flipkart.
 Monthly transactions through the unified payments interface (UPI) surpassed the 200 million mark in June
2018.
 Digital consumer spending in India is expected to increase by more than two times to cross US$ 100 billion by
2020, driven by women and new internet users from smaller cities, according to a report by Google India and
BCG.

 Amazon has launched an online Business-to-Business (B2B) market place in India where small and medium
enterprises (SMEs) can buy products.
 Power2SME, one of the largest B2B online marketplaces in India that provides raw materials to small and
B2B ecommerce medium enterprises (SMEs), has raised US$ 36 million from Inventus Capital, Accel Partners and others in
September 2017, which will be used towards technology, sales, marketing and geographic expansion.
 DesiClik a US based company has entered into strategic partnership with Indian Gifts Portal (IGP) which will
offer range of B2B solutions.

 Chinese phone manufacturer, Xiaomi Corporation, is planning to invest about US$ 1 billion in 100 Indian start-
ups over the coming five years, with an aim to make an ecosystem of apps surrounding its smartphone brand.
 US-based ecommerce giant, Amazon, has invested about US$ 1 billion in its Indian arm so far in 2017, taking
Increasing Investments its total investment in its business in India to US$ 2.7 billion.
 Fynd a fashion e-commerce company closed its series of C round of funding at US$ 3.4 million with
participation from IIFL Seed Ventures, Venture Catalyst and Google.

Source: Media sources, Aranca Research

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 SWOT ANALYSIS
Strength
1. Highest profit margin
2. Clear & oriented target market
3. Higher average ticket size
4. Higher category margins
5. Impulsive Purchasing
6. Shopping convenience
SWOT
Opportunity
1. Increase in online orders YOY
2. 60% orders originating from metro 1 & tier 1
cities rest 40% from tier2 & 3 cities, huge
opportunity to tap untapped tier 2 & 3 city market.
3. Baby care market is mostly offline & rest is online.
4. Easy to enter global market.
5. Shipping fees can be wavered above a certain limit.
Weakness
1. Last mile Logistics
2. 95% products are imported. Other than a few
like J&J and some local players, no one else is
manufacturing in India. So bringing efficiency in
SCM is going to be a big focus area.
3. Look & Feel of the product is missing.
4. Need to keep price updating due to competitive
online market.
Threat
1. Competition
2. Cluttered market with ecommerce companies
selling same chinese products at lower price.
3. Higher attrition rate.
4. Risk associated with the confidentiality during
Trcxn.
5. Some products will face backlog problem because
incorrect marketing plan or incorrect sales method.
THANK YOU 