Tuesday, October 21, 2014

Know how Flipkart, Amazon, Snapdeal offer huge discounts

E-commerce companies including Flipkart, Amazon and Snapdeal are funding discounts on their sites using mechanisms as complex as the complicated structures some have adopted to circumvent foreign direct investment (FDI) laws in India.

The three major e-commerce companies operating in India—Flipkart, Amazon and Snapdeal—all operate as marketplaces. That’s primarily because Indian law doesn’t allow FDI in e-commerce sites that sell directly to customers, but allows it in marketplaces that link sellers and buyers. The marketplaces also provide services such as payment, storage and delivery.

As direct retail is banned, marketplaces are not allowed to exercise control over the product prices of the sellers on their platforms, including on the matter of discounts. Still, Flipkart, Amazon and Snapdeal do actually have a significant say in deciding product prices as all the three sites finance part and, in some cases, the full amount of discounts offered by sellers albeit in an indirect manner, according to six people with direct knowledge of the matter. None of them wished to be identified, given the sensitivity of the matter. The indirect manner of funding discounts (detailed below) may pose another headache for state tax authorities, which are already struggling to understand the business models of e-commerce firms.

The Karnataka commercial tax department has stopped Amazon India from selling electronics and several other products from its warehouse in the state by cancelling the licences of third-party merchants that work with the local unit of the world’s largest online retailer, Mint reported on 15 September. Discounts are essential for e-commerce firms. Shoppers have taken to online shopping in a big way, mostly because of the lucrative discounts offered by e-commerce firms. At the same time, the deep discounting has attracted the ire of brick-and-mortar retailers, which are fighting to survive after losing customers to online retailers. The discounting process highlights some of the ways in which these sites spend the huge amounts of money that they have raised from investors, or in Amazon’s case, received from its parent company.

Since starting out in 2007, Flipkart has raised $1.8 billion from investors such as Tiger Global Management and Naspers, including $1.2 billion this year. Snapdeal will soon receive more than $600 million from investors led by Softbank Corp., adding to the $233.7 million it raised earlier this year, Mint reported on 18 September.

According to analysts, the various methods of offering discounts adopted by e-commerce firms also reinforces the need for state governments to issue clarifications on e-commerce and come up with a clear tax code addressing the nascent but fast-growing business.

Monday, October 6, 2014

Digital awareness fuelling e-commerce growth in India

The e-commerce industry was in its infancy for the larger part of the previous decade. However, in last three years, the industry has witnessed an incredible growth of 150%, increasing from $3.8 billion (INR 19,249 crore) in 2009 to $9.5 billion (INR 47,349 crore) in 2012. 

A number of business models for e-commerce have evolved and are in varying stages of maturity. Of the various business models that are prevalent, consumer e-commerce is perceived to have a wider and stronger impact on retail or direct consumer and has engaged entrepreneurs, VCs/ PEs and others. It is expected to grow by 33% in the year 2013. As India moves towards becoming a consumption driven economy, this consumer centric model presents a very large and transformative opportunity.

Various demand and supply driven factors aided by dynamics in external (government/ regulatory) environment are supporting the growth of the industry. Favourable demographics, increasing number of urban households, growing internet penetration in smaller towns and rural areas, proliferation of mobile devices and emerging need for convenience, choice and access are acting as prime movers from the demand side. 

The e-commerce and allied companies have also turbo-charged the e-commerce growth engine by introducing innovative business models, by offering convenient payment options and by introducing technological innovations and customer friendly policies to capture online time and wallet share. Concepts such as flash sales, ‘by invite only’ sales, India ‘Cyber Monday’ or the ‘Great Online Shopping Festival’ have been smashing hits in the past and such innovations will continue to play an important role to promote online shopping. These tactics, in addition to the existing sales, coupons and deals are welcome by the Indian customer.

The government and regulatory bodies are also playing their part by investing in infrastructure and policy support. These bodies have also initiated awareness drives to get wider users (including SMEs/ MSMEs) on to the e-commerce bandwagon.

The e-commerce industry offers great benefits to the Indian economy, the customers and the society at large, especially to small businesses, small merchants, semi urban and rural population. In recent years, the growth of the global e-commerce market has made cross-border transactions an intensifying force in India’s foreign trade, offering millions of enterprises, most of which are SMEs/ MSMEs, to expand beyond the domestic market. 

Over 30,000 sellers sell on eBay India annually to 4 million consumers in 3,311 Indian cities. Over 15,000 sellers export a variety of Indian handcrafted products to 112 million customers in over 190 countries. It must be noted that this is just the tip of the iceberg.

Read the full KPMG & IAMAI report.

Wednesday, July 9, 2014

E-commerce ecosystem in India

India is at the cusp of a digital revolution. Declining broadband subscription prices, aided by the launch of 3G services, have been driving this trend. This has led to an ever-increasing number of “netizens.” Furthermore, the likely launch of 4G services is expected to significantly augment the country’s internet user base.

Internet has become an integral part of this growing population segment for remaining connected with friends, accessing emails, buying movie tickets and ordering food. The changing lifestyles of the country’s urban population have also led many people relying on the internet for their shopping needs. The convenience of shopping from the comfort of one’s home and having a wide product assortment to choose from has brought about increased reliance on the online medium.

The trend of online shopping is set to see greater heights in coming years, not just because of India’s rising internet population, but also due to changes in the supporting ecosystem. Players have made intensive efforts to upgrade areas such as logistics and the payment infrastructure. Furthermore, the Indian consumer’s perception of online shopping has undergone a drastic change, and only for the good. Given these developments, venture capital investors, who were restricting themselves to the sidelines, are now taking a keen interest in the country’s e-Commerce market.

In this report, we seek to provide an insight into India’s e-Commerce market. The report focuses on the various sub-segments of the e-Commerce market and highlights factors driving growth across these segments. We have also elaborated on challenges faced by stakeholders.

The e-Commerce market in India has enjoyed phenomenal growth of almost 50% in the last five years. Although the trend of e-Commerce has been making rounds in India for 15 years, the appropriate ecosystem has now started to fall in place. The considerable rise in the number of internet users, growing acceptability of online payments, the proliferation of internet-enabled devices and favorable demographics are the key factors driving the growth story of e-Commerce in the country. The number of users making online transactions has been on a rapid growth trajectory, and it is expected to grow from 11 million in 2011 to 38 million in 2015.

Venture capitalists (VC) and private equity players have demonstrated their faith in the growth of e-Commerce in the country. This is amply substantiated by the significant increase in the total investments (US$305 million in 2011 against US$55 million in 2010).

Online travel has traditionally been the largest e-Commerce sub-sector (by revenue) in India. Nevertheless, online retail is catching up fast and is expected to match online travel revenues by 2015. To improve margins, online travel players are diversifying their offerings to include hotel reservations, along with the regular ticketing services. To make the most of this move, players will need to develop skill sets that are different from the ones required in the ticketing segment. They will have to manage challenges associated with a diverse supplier base, technological constraints, customer experience, authenticity of information and grievance re-dressal.

The online retail segment has evolved and grown significantly over the past few years. Cash-on-delivery has been one of the key growth drivers and is touted to have accounted for 50% to 80% of online retail sales. Players have adopted new business models including stock-and-sell, consignment and group buying; however, concerns surrounding inventory management, location of warehouses and in-house logistics capabilities are posing teething issues.

Classifieds, the earliest entrant in the e-Commerce space in India, is undergoing a shift in operational model from vertical to horizontal offering. Players now offer a gamut of services ranging from buying/selling cars to finding domestic help/babysitter.

To ensure that e-Commerce maintains the steam that it has gained in recent years, the government needs to focus on the regulatory front. Unlike many other countries, India still does not have dedicated e-Commerce laws. The Sales Tax laws need to be revised, as they are posing issues for online retailers while they decide warehouse location. e-Commerce is set to continue on its growth path on the back of the stabilization of the ecosystem and interest demonstrated by VC players, combined with support from the Government of India (GoI).

Friday, June 27, 2014

Indian e-commerce firms to begin massive hiring

E-commerce, one of the most hot and happening sectors in India, is on a hiring spree with both domestic and global firms stepping up their recruitment efforts. While Amazon, Flipkart and several others are already bullish on increasing their headcount, the entry of newer foreign entities such as Alibaba, Rakuten and Walmart that are seriously eyeing the Indian market, are further expected to result in a hiring boom in the country.

A report published by HR consultancy Randstad India last month noted that hiring activities in e-commerce are expected to grow by over 30% which may help create up to 50,000 jobs in the next one year. Some other analysts anticipate that the number may go up to 80,000-100,000 jobs this year alone with the rate at which the sector is growing in recent months.

The foreign invasion

China’s largest e-commerce company, Alibaba.com, and Japan’s online market place Rakuten are likely to enter the $12-billion (including online travel portals) e-commerce space in the next 6-8 months, reports Business Line. Rakuten, which also runs a travel portal along with its other e-tailing services, has reportedly leased out an office space in Bangalore that is also home to large players such as Flipkart, Myntra and Amazon, among others. This implies that it will ramp up its hiring efforts soon.

While the Tokyo-based company will be entering India for the first time, Jack Ma’s Alibaba is making a re-entry with a different strategy altogether, according to sources. Alibaba, which had successfully expelled global giant Amazon from China, is soon planning the launch of a business-to-consumer platform soon. 

Meanwhile, Walmart, announced plans to open 50 more wholesale outlets in India and start online operations for small businesses and may look at launching a B2C service, if FDI is permitted in the sector.
Global etailers, Amazon has plans to hire almost 10,000 employees to expand their business in the country. Speeding up campus recruitments is also a part of the game plan, according to recent reports.

The domestic warriors

Domestic firms like Flipkart, Jabong, Snapdeal, Myntra etc. too are not far behind. They are planning to expand the employee base by about 60,000 personnel in the next one year, according to eTailingindia is a research firm that tracks the e-commerce industry. Ashish Jhalani, founder of eTailingindia commented that the hiring may touch 1 lakh overall, but 60,000 is a safe bet.

Flipkart is reportedly hire 12,000 people by the end of 2014 to strengthen its support and technology operations. Mekin Maheshwari, Chief People Officer of the company said that the firm will prioritize hiring in the areas of IT and senior leadership and also hire across levels and functions.

Other companies too are ready to hire strong engineering teams, customer agents and logistic support to meet the rising demand in this sector. For example, Snapdeal.com will double headcount to 2,600 from 1,300 currently, and raise the number of engineers from 250 to 500. Similarly, Jabong would hire 750 employees in the next one year and Praveen Sinha, founder and MD, Jabong.com said in a statement.

Smaller players have also joined the hiring bandwagon. Online restaurant guide Zomato will double its numbers from 650 in core functions such as IT, sales and operations as it expands in countries across the Americas, Middle East, Europe, Southeast Asia and Australia and online ticket booking portal Yatra.com will add 200 to its employee strength of 1,000, compared with 150 last year, according to the eTailingindia.
“As more people are logging on to ecommerce portals, companies are hiring aggressively and are also offering lucrative salaries to attract the right technology talents, in the areas of cloud, analytics and data mining,” Jigsaw Academy CEO Gaurav Vohra says.

“There is a positive hiring outlook in this space particularly for tier 1 B-Schools and Engineering colleges since recruiters are looking for top notch talent and are looking most for campus recruitment,” says Randstad India CEO Moorthy K Uppaluri told PTI, which suggests that the significant part of the hiring in e-commerce is at entry or junior levels which accounts for a relatively younger profile of workforce.

By Sohini Bagchi

Thursday, June 26, 2014

Scorching heat ups online shopping by 155% in India

Thanks to scorching heat, shopping trends of Indian consumers have witnessed a significant change this ‘summer season’, a whopping 155% rise in online trends over the regular shopping compared to last year (85%), reveals the Associated Chambers of Commerce and Industry of India (ASSOCHAM) latest survey.

“This summer season, there is a 155% more traffic on online retail websites and shopping on ground has taken a back seat due to rising heat. Apart from convenience, rising fuel price, online discounts and availability with abundance of choice keeping them indoors, said Mr. D S Rawat, Secretary General ASSOCHAM while releasing the ASSOCHAM survey.

As per the ASSOCHAM findings, Delhiites have left behind all other cities in India shopping online. While Mumbaikars ranks second, Bangalore ranks third in their preference for online shopping in the survey, for which around 3,500 shoppers in Delhi, Mumbai, Chennai, Bangalore, Ahemdabad, Kolkata among other cities were interviewed.

As per the survey 78% of Delhiites prefer shopping online while 14% prefer to shop in traditional markets. Around 7% of respondents said they prefer to visit a mall for their shopping needs while 1% said they prefer shopping at specialty stores, the survey stated.

In other cities like Mumbai, 45% of its population chose to buy daily routine products through e-shopping in 2012-13, which will go to 68% in this summer season for apparel, gift articles, magazines, home tools, toys, jewelry, beauty products & sporting goods categories.

Likewise, Bangalore share was 35-40% in the last year, which might go up another 65% in this season for books, electronic gadgets, accessories, apparel, gifts, computer peripherals, movies, hotel booking, home appliances, movie tickets, health & fitness products and apparel gift certificates etc.

The survey further reveals that 35% of regular shoppers are in 18-25 age group, 55% in 26-35, 8% in 36-45 and 2% in the age group of 45-60. 85% of Online Shoppers are male as against 15% female.

Majority of the working respondents said, “Online retail industry’s business is quite good. Heading out to shop on day off in scorching heat, battling traffic, parking issues, and long lines for bill payment is quite a cumbersome process and this is the main reason for the shift in trend”.

As per the majority of respondents, the business module is cost effective, easily accessible and profitable in many functional areas. Consumers and retailers both desire safe, simple and comprehensive online shopping that will truly realize the range of power of the Internet", adds the ASSOCHAM survey.

According to the survey, India has more than 110 million Internet users, out of which around half opt for online purchases and the number is growing every year. With such a large market size, companies, right from retail shops to consumer goods, are entering the Web space to attract potential customers, adds the survey.
The online shopping industry in India is fast catching on, not just in the larger metros but also in the smaller cities. At present the market is estimated at Rs 92,000 crore and is growing at 100 per cent per year, adds the paper.  

Mr. Rawat further said, “Customer behaviour is changing dramatically. People are not only using the Web to book air tickets and movie tickets but also do not hesitate in placing orders for apparel, cosmetic, mobiles, laptops and other consumer electronics and home appliances,"  adds the survey.

The products that are sold most are in the tech and fashion category, which include mobile phones, ipad and accessories, MP3 players, digital cameras and jewellery, among others, said Mr. Rawat.

The reasons for e-shoppers number multiplying are because of factors such as home delivery which saves time, secondly ’24×7 hours shopping with ease and availability factors for product comparisons.

Most products bought & sold off through online comprise Gift articles (58%), books (42%), electronic gadgets (41%), railway tickets (39%), accessories apparel (36%), apparel (36%), computer and peripherals (33%), airline tickets (29%), music (24%), movies tickets (26%), hotel rooms (20%), magazine (19%), home tools and products (16%), home appliances (16%), toys (16%), jewelry (15%), beauty products (12%), health and fitness products (12%), apparel gift certificates( 10%) and sporting goods (7%), adds the survey.

Of those who are averse to shopping online cited various reasons like prefer to research products and services online and then actually buy them from a store (30 per cent), find delivery costs too high (20 per cent), don’t want to share personal financial information online (25 per cent), lack of trust on whether products would be delivered in good condition (15 per cent), don’t have a credit/debit card (10 per cent).

Top reasons given by shoppers in buying through Internet:
  • ·         Safety Reasons
  • ·         Saves time and efforts
  • ·         Convenience of shopping at home
  • ·         Wide variety / range of products are available
  • ·         Good discounts / lower prices
  • ·         Get detailed information of the product
  • ·         You can compare various models / brands
  • ·         An insight into some of the problems stated by customers

While buying through Internet:
  • ·         Not sure of product quality
  • ·         Cannot bargain/Negotiate
  • ·         Not sure of security of transactions /Credit card misuse
  • ·         Need to touch and feel the product
  • ·         Significant discounts are not there
  • ·         Have to wait for delivery

Friday, June 20, 2014

Amazon unveils 3D Fire Phone

Amazon.com has unveiled Fire Phone, a 3D smartphone, as part of its strategy to boost sales of digital music, videos and merchandise from its e-commerce site.

The new smartphone features a screen with holographic images, hands-free scrolling. It also includes software that can recognize merchandise and art through its camera lens.

The Fire Phone features four cameras that can track faces to show images that appear to have depth similar to a hologram. The phone will allow users to scroll through Web or book pages just by tilting the device.

The phone is available at $199 to $299 with a two-year contract. Without a contract, the Fire phone will sell for $649 to $749.

Amazon Chief Executive Jeff Bezos, while demonstrating the phone said it has a 4.7-inch screen, which is slightly bigger than Apple's iPhone, a 13-megapixel camera and earphones that resist tangling.

Bezos said "You can take action in seconds," he said, hinting at the commercial applications. A user, for instance, could point the phone at a pack of gum and then order it. The user also could point the phone at a painting to learn about the artist and other facts.

The phone comes with one year of free membership in its $99 Prime program, which offers free two-day shipping as well as online video streaming. The Fire phone will work exclusively on AT&T Inc.

In addition, the phone will use a version of Google’s Android operating system, however it will not have access to Google's Play store, with one-million-plus apps.

Thursday, June 19, 2014

Amazon to launch 3D smartphone to incite mobile shoppers

Amazon.com is expected to launch its newest mobile device, a smartphone which will feature a 3D screen.

The new phone has 3D features visible to the eye without special glasses. Amazon's Prime membership program, which offers features such as movie streaming and two-day delivery, will be linked to the phone.

The phone is expected to boost adoption of an Amazon payments platform.

A phone is the third new device the company has introduced in 2014 after its FireTV streaming video device and Dash grocery-ordering wand.

The company recently has moved into hardware, selling its devices at cost in hopes of spurring purchases on Amazon's website.

comScore in a report said that mobile commerce has jumped at almost twice the rate of online retail during the first quarter.