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 : 47
•Online Jewellery : 55
•Online Ticketing : 63
•Online Deals : 72
•Online Portals : 80
•Snapdeal : 85
•Flipkart Vs Amazon India : 94
• Infi-beam : 116
• Amazon vs Walmart : 121
•Financials and Profitability : 127
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 Industry Overview

3
 E-commerce industry is expected to reach Rs. 5800 bn to Rs.
5900 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?

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9
10

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Sales per month5
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9

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10
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16
19
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25
28
31
34
37

Title
40
43
46
49
52
55
58
61
64
67
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79
82
85
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97
100
Sales per month
 Consumer Behavior Trends

10
 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

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

ONLINE RETAIL: SIZE AND GROWTH

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

SHARE OF E-RETAIL IN OVERALL RETAIL

2016-17

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

E-RETAIL PENETRATION

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 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% 35 to 37%

Accessories, Shoes etc)

Books 10% 2-3 % 1-2%

Groceries Negligible 5 to7% 10 to 15%

Others (Jewellery, Furniture 5% 10-15% 8 to 10%

etc)

Source: Industry, Company sources

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 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%

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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.

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SEGMENT WISE GROWTH EXPECTATIONS

Source: Crisil Research

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SEGMENT WISE GROWTH EXPECTATIONS

Source: Crisil Research

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 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

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 Online Grocery

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 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

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 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

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 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.

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

TOP PLAYERS IN ONLINE GROCERY SEGMENT

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 BIG BASKET : OVERVIEW

• Largest player in the online grocery segment and operates in 25 cities.

• 75000 to 80000 orders day and customer base of 7 .3 million.
• More increased its revenues from Rs. 1197 crores in FY 2017 to Rs. 1606 crores in
2018
• The company managed to control it’s losses very well. Net Losses reduced from
Rs. 653 crores in FY17, from Rs 310 crores in FY18 (in terms of percentage of
sales , losses came down from 54.% to 19.3%.
• Received $ 300 mn funding from Alibaba in January 2018 and raised $150mn in
March 2019 from Alibaba, CDC and Mirae Asset. The company’s estimated
valuation was $2.3 bn in 2019

Source:
• https://inc42.com/buzz/bigbasket-controls-losses-by-53-revenue-rises-34-for-fy18/
• https://www.businesstoday.in/buzztop/buzztop-corporate/bigbasket-enters-unicorn-club-with-
150-million-funding-valued-at-228-billion/story/332191.html
• https://www.exchange4media.com/marketing-news/the-biggest-challenge-is-to-get-the-supply-
38chain-rightmarketing-headbigbasket-89507.html
 BIG BASKET : RECENT INITIATIVES

• BigBasket has completed the acquisition of three ventures- 100% stake in

RainCan and Morning Cart and a Controlling stake in Kwik24.
• RainCan and Morning Cart were milk delivery start-ups while Kwik24 is a smart
vending machine start-up
Milk-Delivery
• BigBasket has branded the milk delivery service as BB Daily, a subscription
service which allows customers to order milk and other daily essentials the
previous night and have them delivered the following morning.
• Milk delivery orders were around 90000 to 100000 per day in April 2019.

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 BIG BASKET : RECENT INITIATIVES

Grocery Vending Machines -

BBinstant
• Big Basket has rebranded Kwik24
vending machines as BBinstant.
• Customers can use their app to
access the machine and buy
products.
• The only human intervention is in
re-stocking.
• Target to have 2,000 such sites
across the 10 large cities where
they operate
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 BIG BASKET is investing heavily to

INVESTMENT IN TECHNOLOGY AND SUPPLY CHAIN

• Big Basket operate with inventory turns of 36 times (as per Marketing Head,
Meera Iyer). This is considered to be very good.
• Company targeting to enable 2 hour delivery in top 10 cities by 2019.
• To shorten the delivery time, Big Basket is establishing multiple small
warehouses in the city (Dark Stores).
• Planning to invest $100 mn in technology and supply chain in 2019.

Source:
• https://www.exchange4media.com/marketing-news/the-biggest-challenge-is-to-get-the-supply-
chain-rightmarketing-headbigbasket-89507.html

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 GROFERS TURNAROUND STORY

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/
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 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/
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 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. 1450 in March 2018
• Daily orders increased from 13000 to 14000 in 2016 to 35000 to 40000 in 2018.
• 40% of sales in 2017 came from private label brands
• 30% reduction in the delivery costs.
• 45% of the revenues come from NCR.
• The company ended FY18 with sales revenues of Rs1200 crore, up from Rs250
crore in 2016.
• Losses in terms of percentage of sales have come down ( Rs. 259 crores in 2018 vs
Rs200 crore for both financial years 2017 and 2016)
• Major investors – Softbank, Tiger Global, Sequia. Valuation $425 mn in March
2019 (after raising $60mn funding).
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://www.moneycontrol.com/news/business/startup/grofers-raises-60-million-
44 valuation-jumps-to-425-million-report-3597301.html
HYBRID MODEL: LIKELY WAY FORWARD

• Inventory model is profitable in the long-term but difficult to scale up quickly

while hyper-local model is easy to scale-up but difficult to achieve profitability.

• Going forward, the players are likely to adopt a hybrid model

• Inventory-based model will constitute more than ~70% of the overall sales for

the online grocery segment over the next three years.

• Grofers which had adopted the hyperlocal model since its inception in 2013 has

shifted to inventory-based model which constitutes ~70% of its revenue

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NEW ENTRANTS

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 Online Furniture and Handicrafts

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 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

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 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.

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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.

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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 12 studios across Tier I cities, 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.

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 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.

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 INVESTORS INTEREST IN FURNITURE RENTAL BUSINESS

 Furniture rentals, a newer business model, is making inroads into the sector.
 Year 2018 saw a majority of funding interest for players involved in furniture
rentals business.
 Pepperfry also launched furniture rental service in select cities in India in
2018.

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 Top industry players are expected to move closer to break-even in
the next 2 to 3 years.

PROFITABILITY
•Since online players operate on marketplace model, gross margins are 30-50%
for non-branded products and 20 to 30% on branded products.
• Companies have been able to gradually reduce the losses.
For Example, Pepperfry reported revenue of ~Rs 3 billion for fiscal 2018 with
losses of ~Rs 1.7 billion. Losses were down 32% on-year compared to the
previous year.
• Over the medium term (2-3 years), companies in the online furniture and
handicrafts space are likely towards break-even due to:
investment in technology (as a percentage of sales) will reduce
going forward
improved volume.
Efficient Logistics.

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 Online- Jewellery

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 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

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

BLUESTONE VS CARATLANE

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 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.

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 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.

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 Different models are followed in the online jewellery segment.

OPERATING MODELS

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 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.

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 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).

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 Segmental Analysis: Online Ticketing

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

ONLINE TICKETING: SIZE AND GROWTH

Source: Crisil Research

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 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

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 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

66
 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.
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RECENT M&As

Source: Industry
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EMERGING TRENDS: PLAYERS ADOPTING NEWER MEASURES
• MakeMyTrip launched MyBusiness to tap onto the small and medium
enterprises (SME) market.
• Employees’ travel and expense form a major chunk of the cost for SMEs.
• With goods and services tax (GST) implementation, SMEs can now receive
credit on these expenditures and make up for some part of the cost.
• MyBusiness will facilitate the process for companies to claim GST credits in a
more transparent manner.
• Make-MyTrip will pass GST details of the company to the hotelier.
• When the hotel creates the bill, these will be incorporated in the invoice,
ensuring that tax charged on the invoice will be uploaded against the
company’s GST account.
• Companies will also be able to claim GST benefits against convenience fee
charged by MakeMyTrip.
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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.

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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.

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 Online Deal Sites: Size and
Growth

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 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.

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MAJOR PLAYERS IN THE SEGMENT

74
 Online deals companies follow full payment or token payment or
no payment model.

COMPARISON OF BUSINESS MODELS

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 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

76
 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.

77
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.
• 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.
• Also, the business model of online deal players is undergoing a shift as the
quantum of discounts provided by online players decline Also, online
playershave 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
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cashback, in addition to regular coupons and offers.
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.

79
 Online Portals

80
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

81
 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
82
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,
83 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.

84
 Snapdeal

85
 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 is 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
86
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.

87
 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.
88
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.

89
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.

90
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.
91
 SNAP DEAL 2.0 : MINI TURNAROUND

• Nobody thought that Snapdeal will survive beyond 2017 but the company has
been making attempts to turnaround.
•From being a sinking ship at the beginning of FY18, the company has been
making constant deliberate efforts to transform into an enterprise heading towards
break even and achieve profitability.
•In 2018, Snap-deal decided to run a leaner operation following a failed merger
with Flipkart.
•Net loss for FY 2017-2018 dropped to Rs. 652 crores (from Rs. 5143 crores in FY
2016-17). A drop in losses of 87%
•Revenue also dropped by 55% (In 2016-17, Snap-deal had a revenue of Rs. 1180.5
crores and in 2017-18, revenue had fallen down to Rs. 527 crores
Source:
https://entrackr.com/2018/11/snapdeal-2-0-revenue-loss-fy18/
 SNAP DEAL 2.0 : MINI TURNAROUND

• It sold off or liquidated it’s non-core heavily loss making businesses:

• 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.
• The company reduced their exposure to high priced electronics and mobile phones
• Pruning Expenses:
• 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.
• The company has been avoiding giving heavy discounts.
Source:
https://entrackr.com/2018/11/snapdeal-2-0-revenue-loss-fy18/
 Flipkart Vs Amazon

94
 Amazon has better engagement compared to Flipkart. Itgets almost
70% more customer visits per month than Flipkart , Myntra and
Jabongput together.

ENGAGEMENT : FLIPKART VS AMAZON

Flipkart Amazon Myntra Jabong
Average 202.21 371.95 25.66mn 3.03 mn
Visits per mn mn
month
(November
2018 to
April 2019)
Average 00.04.52 00.04.40 00.05.58 00.05.51
Visit
Duration
Pages per 6.56 6.64 9.3 6.4
visit
Bounce 47.48% 47.72% 45.43% 40.37%
Rate

Source:https://www.similarweb.com/website/flipkart.com?competitors=a
95 mazon.in
 Flipkart Most Trusted But Amazon Offers BetterValue
proposition and Customer Experience

Source: https://www.bloombergquint.com/technology/flipkart-
most-trusted-but-amazon-offers-better-experience-survey-finds
96
97
Source: Redseer Analysis
98
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

99
 Flipkart with Myntra and Jabong has become the largest fashion
retailer in India. (considering both online and offline)

MARKET SHARE: FASHION

Sales Revenues in Rs. Crs (FY 2017)

Source: https://timesofindia.indiatimes.com/companies/flipkart-says-fashion-
biz-hits-1bn-beats-myntra/articleshow/63389292.cms
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

 Till 2017, Flipkart clocked higher GMV than that of
Amazon.

102
Amazon had overtaken Flipkart in GMV FY 2017-18

• As per Barclays report, in FY 2017-18, Amazon’s GMV was $7.5bn and

Flipkart’s GMV was $6.2bn.
• If Myntra and Jabong were included (around $2bn) , Flipkart group’s
GMV was marginally ahead of Amazon’s GMV.
• The overall growth rate of Amazon in 2017-18 over 2016-17 was 82%
while it was 47% for Flipkart.
• For the financial year, ending in March 2019, Amazon’s gross sales was
to be at $11.2 bn compared to Flipkart’s $8.7bn.
Source:
https://www.businessinsider.in/has-amazon-overtaken-flipkart-the-
answer-depends-on-who-is-asking/articleshow/66863163.cms
103
 Flipkart is still ahead in terms Festive sales

• Flipkart has maintained it’s superiority during the Festive day sales.
• During 5-day festive season sale in 2018, Flipkart’s market share was 51 per cent,
driven by sales in mobiles and fashion categories while Amazon's market share
stood at 32 per cent, with the rest of the e-commerce industry accounting for 17
per cent.
• Overall, the Festive sales in 2018 registered a growth of 64% from GMV of $1.4
bn in 2017 to $2.3 bn in 2018.
• Source:
https://www.thehindubusinessline.com/info-tech/flipkart-captures-51-market-
share-in-festive-sale-says-report/article25258134.ece

104
 Flipkart is still ahead in terms of revenues and post
lesser losses

• In 2017-18, Flipkart’s revenue was $3.8bn Vs Amazon’s $3.2 bn

• Barclays estimated Amazon and Flipkart’s combined losses to be close to $3

billion in the year ending March 2019—Amazon is expected to contribute $1.8

billion and Flipkart $1.3 billion.

Source:

https://www.bloombergquint.com/technology/amazon-beats-flipkart-to-

become-indias-largest-online-retailer-by-gross-sales

https://www.thehindubusinessline.com/info-tech/flipkart-captures-51-

market-share-in-festive-sale-says-report/article25258134.ece
105
 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.”
106
 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
107
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 50 • Free and Faster delivery

Membership • Early exclusive access to sales
Coins* • Priority customer support

108
FLIPKART PLUS : MEMBERSHIP POINTS

• With each purchase worth Rs. 250 more, you earn 1 reward coin.

• You can earn a maximum of 10 coins from a single order.

• Even if your order is worth more than ₹ 2,500 you still earn only 10

coins.

• Once you have 50 such coins, you can get the Plus Membership.

• In summary, to become a member of Flipkart plus, you should have

purchases Rs. 12,500 through at-least 5 orders.

109
 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

110
 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.

111
 Amazon has roped in local retailers and plans to involve
students and housewives to improve last mile delivery.

AMAZON LAST MILE DELIVERY: IHS

• 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)
• Amazon’s IHS (I Have Space) focus on last mile delivery by involving Kirana
stores
• Packages are delivered by ATS staff to the kirana stores, post which the kirana
stores take care of the item sorting, delivery/pick-up and order reconciliation.
• Amazon also plans to tap students and housewives to speed up deliveries.
• An Amazon flex delivery partner can earn Rs. 120 – Rs. 140 an hour
112 delivering packages, working four hours a day.
 Amazon has roped in local retailers to improve last mile
delivery.

AMAZON LAST MILE DELIVERY: IHS

• 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)
• Amazon’s IHS (I Have Space) focus on last mile delivery by involving Kirana
stores
• IHS associated kirana stores act as extended arms of Amazon’s captive
logistics company ATS (Amazon Transportation Services).
• Packages are delivered by ATS staff to the kirana stores, post which the kirana
stores take care of the item sorting, delivery/pick-up and order reconciliation.
• Kirana Stores are paid Rs. 20 to Rs. 25 per delivery.
113
 Almost 30% of Amazon’s last mile delivery are delivered by
Kirana stores through IHS.

AMAZON LAST MILE DELIVERY: IHS

• No.of Kirana Stores

enrolled in HIS have

crossed 12,500 in 2019

Source: https://redseer.com/articles/amazon-ihs-program-disrupting-the-
114last-mile-of-e-commerce-logistics-in-india/
 MENSA network of Myntra involve kirana store in last mile
delivery.

MENSA NETWORK: MYNTRA

• Along the lines of Amazon’s HIS, 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.

115
 Infi-beam

116
 INFIBEAM

MARKET CAPITALIZATION
$1406 Q3 FY19 FINANCIAL
mn PERFORMANCE
HIGHLIGHTS
- Revenue: INR 1,503 Mn up
104% YoY and 11% QoQ
- EBITDA : INR 457 Mn up
$424
$363 mn 145% vs INR 187 Mn Y-o-Y
mn
- PAT : INR 266 Mn up 1294%
vs INR 19 Mn Y-o-Y
Source:
April 5, May 14, May 18, https://www.equitybulls.com/admin/ne
2016 2018 2019 ws2006/news_det.asp?id=245552
117
 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]
• Buildabazaar has also extended its ecommerce platform for travel agents to
build travel booking sites for flights, hotels, buses and car rentals.
• Acquired CC Avenue (Payment Gateway)
• The Company has over 500,000 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
118
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)
119
• 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.

• Cumulative order value on GeM is currently around INR 189 billion (INR

18,894 crore) in Q3 of 2018-19

120
 Amazon Vs Walmart

121
 In 2018, Walmart’s revenue was more than double that of Amazon.

REVENUES : AMAZON VS WALMART

500.34 • Annual revenue for 2018 in $bn

232

Walmart Amazon
Source: https://www.macrotrends.net/stocks/charts/
122
 In 2017, Amazon’s profit exceeded Walmart for the first time ever.

PROFITS : AMAZON VS WALMART

10.07

Annual Profit for 2017 in $bn

9.68

Source: https://www.macrotrends.net/stocks/charts/
123
 Amazon’s market capitalization was 3 times that of Walmart in May
2019.

MARKET CAPITALIZATION: AMAZON VS WALMART

Source: Company Reports

124
 Between 2010-2018 Amazon grew by 700%. Whereas Wal-mart grew
around 23%

10 YEAR GROWTH: AMAZON VS WALMART

• Walmart has
Walmart’s YOY Amazon’s YOY
Revenues growth Revenues growth not made much
in $bn in $bn
headway in E-
2018 $500 3% $232 36%
2017 $486 1% $170 25% Commerce
2016 $483 0% $136 27% • Walmart’s E-
2015 $486 2% $107 20%
commerce
2014 $476 2% $89 19%
2013 $469 5% $74.5 22% revenues is
2012 $447 6% $61 27% only 4% -5%of
2011 $422 3% $48 41% it’s total
2010 $408 1% $34 40%
revenues
Source: Company Reports
 Amazon has multiple very fast growing segments.

AMAZON: REVENUE BY SEGMENT

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

Source: https://www.statista.com/statistics/672747/amazons-consolidated-
net-revenue-by-segment/
 E-COMMERCE : ROUTE
TO PROFITABILITY

127
ROUTE TO PROFITABILITY

• Consolidation

• Focused Funding

• Private Labels

•Exclusive Launches

• Distribution Efficiencies

• Reducing the Discounts

•Increase non-COD sales

• Increasing Loyalty
128
 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.
129
 SOME MAJOR PLAYERS SHUTTING DOWN

Major players who shut down operations in 2017

Major players who shut down operations in 2016

130
 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.

131
 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

132
 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.

133
 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.

134
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
135
 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.

136