Digital Commerce 2011

8/2/2019 Digital Commerce 2011

1/20

March 2011

DIGITALCOMMERCE


2/20

IAMAI, 2011All rights reserved. No part of this report may be reproduced,

either in part or in full, without the prior permission ofInternet & Mobile Associaon of India


3/20

Contents

Page

Execuve Summary..................................................................................... 4

Methodology ............................................................................................. 5

Glossary of Terms........................................................................................ 6

Introducon .............................................................................................. 6

Market Size of Product Categories ............................................................. 9

Online Travel ............................................................................................. 9

E-tailing .................................................................................................. 10

Financial Services ..................................................................................... 11

Digital / Mobile downloads ...................................................................... 12

Other Online Services .............................................................................. 13

Indian Online Shoppers ........................................................................... 14

Mode of payment .................................................................................. 15

Reasons for not shopping online ........................................................... 16

Promising Future .................................................................................... 18


4/20

4

Net commerce on India has evolved over the past decade in terms of magnitude. Total net

commerce market of India is esmated to be INR 19,688 crores in year 2009 and is expected

to grow to INR 31,598 crores by year 2010. It has come a long way since 2007 when the mar-

ket size was just INR 8,146 Crores. The detailed usage paern, however, has remained quite

uniform and skewed over the years. Certain services connue to dominate the overall market

while other sll lag behind.

As of 2009, among Internet users, online travel leads the pack with 76% share in Net

Commerce (INR 14,953 crores) while eTailing takes second posion with 7.82% share (INR1,550 crores). In eTailing, computers and computer peripherals account for INR 560.52

crores while cameras, mobiles and MP3 players contribute INR 389 crores. Other major con-

tributors to net commerce include online classifieds (jobs, online matrimonial, cars, real es-

tate and others), buying movie ckets, food delivery and gaming subscripon is esmated to

be INR 1,210 crores. Financial service transacons over the Internet comprise nearly 7.8%

of the market size (i.e. 1,540 crores).

Online users in India have exhibited willingness to make purchases over the Internet; this is

quite evident from the growing net commerce industry. In the last few years, the interacons

have been skewed towards specific categories such as travel or certain products in eTailing.

Executive summary

NET COMMERCE MARKET SIZE FROM 2007 TO 2011

Year Dec 2007 Dec 2008 Dec 2009 Dec 2010+ Dec 2011+

Total market size 8,146 14,030 19,688 31,598 46,520

Online travel 6,250 10,500 14,953 25,258 37,890

industry (77%) (75%) (76%) (80%) (81%)

Online non-travel 1,896 3,530 4,735 6,340 8,630

industry (23%) (25%) (24%) (20%) (19%)

(Figures in crores. Percentages indicate share of the overall market size)

*Financial aervices were not calculated in the years prior to 2008. + Esmated figures

e-Tailing 978 1,120 1,550 2,050 2,700Digital downloads

or paid content 238 290 435 680 1,100

subscripon

Financial services * 1,200 1,540 2,000 2,680

Other services

incl. classifieds 680 920 1,210 1,610 2,150


5/20

5

The results of the report have been arrived at by conducng primary research among Inter-

net users in 15 cies as well as secondary research for triangulang the findings from exter-nal sources.

Primary Research: Primary informaon about net commerce was collected by 800 individu-

als through face-to-face interviews during I Cube 2009, a syndicated product of eTech, IMRB

Internaonal. These individuals were interviewed in 15 cies across India.

Secondary research was done to understand the structure and dynamics of the net com-

merce market in India. Informaon from various published resources was used to perform a

data validaon check. Informaon collected from secondary as well as primary research was

thoroughly analyzed in preparing the report.

Methodology

CITIES BY STRATA

Top 4 Metros Delhi, Mumbai, Chennai, Kolkata

Other 4 Metros Bangalore, Hyderabad, Ahmedabad, Pune

Small Metros Patna, Cochin, Lucknow, Ludhiana, Indore

(More than 1 million pop.)

Non Metros Guwaha, Bhubaneshwar

(Between 0.5 and 1 million pop.)

This behavior has evolved recently and is expected to blanket different kinds of products

and services purchased over the Internet and mobile networks. Given the increasing aware-

ness and acknowledgement, the overall industry is slated to experience a high growth in thenext couple of years. While online travel will connue to comprise a major proporon of the

overall market, e-Tailing and digital downloads could experience a high growth. Mobile/Digi-

tal downloads are expected to grow given the high proliferaon of mobile devices in the

country among different users as well as introducon of interacve content over the Inter-

net.

E-Tailing which has experienced growth in few select products ll now; is another area for

growth. Recently, a lot of ecommerce iniaves have started to garner decent aracon from

Internet users (albeit in limited categories such as books and digital products). There has

also been an increase in funding for such iniaves. Further, famous retail chains are also

opening up to embrace the medium to ensure there are sales over the Internet. If this mo-

mentum connues, ecommerce is expected to be an important acvity among regular Inter-

net users.


6/20

6

I ACTIVE USER: An individual who has used the Internet at least once in the last 1 month.

I CLAIMED INTERNET USER: An individual who has used the Internet at any point in me

in the past. This gives us a clear indicaon as to how many Indians have experienced Internet

at least once in their lifeme.

I INTERNET NONOWNER: An individual who belong to a household which does not own

Internet connecon.

I INTERNET NONUSER: An individual who has not accessed Internet at any point in me.

I PC LITERATE: An individual who knows how to use a PC. While this term does not signify

the extent of PC usage, it means that a computer literate is able to work on a PC without as-

sistance.

I LFI: Internet users who Look for Informaon (LFI) for a product or a service they want to

buy.

I ONLINE SHOPPERS: Internet users who look for informaon and eventually buy a prod-uct or a service over the Internet.

Glossary of terms

Introduction

In India, Internet has primarily been used for enabling communicaons between individu-

als through various modes such as emailing, messaging or even social networking. However,

a digital interacve media is only so much successful if it fails to pervade every single acvity

an individual indulges into in their daily life. In India, iniaves over the Internet have sll

not been able to make users buy products and transact monies.

The I-Cube 2009 study clearly reflects on the limited penetraon of eCommerce among In-

ternet users. In the survey conducted in top 15 cies in the country among 17.5 Acve In-

ternet Users, who access Internet at least once in a month, there are 13.6 million users who

look for informaon regarding products. Of these, there are merely 7.4 million (40%) have

bought any product over the Internet.


7/20

7

The figure, below, illustrates the growth in the market size since 2007.

NET COMMERCE MARKET SIZE FROM 2007 TO 2011

Year Dec 2007 Dec 2008 Dec 2009 Dec 2010+ Dec 2011+

Total market size 8,146 14,030 19,688 31,598 46,520

Online travel 6,250 10,500 14,953 25,258 37,890

industry (77%) (75%) (76%) (80%) (81%)

Online non-travel 1,896 3,530 4,735 6,340 8,630

industry (23%) (25%) (24%) (20%) (19%)

(Figures in crores. Percentages indicate share of the overall market size)

*Financial aervices were not calculated in the years prior to 2008. + Esmated figures

e-Tailing 978 1,120 1,550 2,050 2,700

Digital downloads

or paid content 238 290 435 680 1,100

subscripon

Financial services * 1,200 1,540 2,000 2,680

Other services

incl. classifieds 680 920 1,210 1,610 2,150

ECOMMERCE PENETRATION AMONG ACTIVE INTERNET USERS

Acve Internet Users

Shop Online

Look For Informaon17.5million

7.4million

13.6million

Those whohave usedthe Internetfor at leastonce in amonth

Accessingthe Net fordetails onany product

Who have boughtany product/serviceon the Internet


8/20

8

Net commerce industry has grown from INR 8,146 crores in the year 2007 to INR 19,688

crores in 2009. This growth is primarily driven by online travel industry which contributes

76% to total net commerce industry in India today. Next year the market is expected to growand reach INR 31,598 crores. This strong growth is expected to connue due to the support

of service providers and regulators it has started to garner and is expected to reach INR

46,520 crores by the year 2011.

Of the market size of INR 19,688 crores; online travel, which includes booking rail and air ck-

ets, hotel accommodaons and tour packages comprised 76% of the whole pie. E-Tailing

which includes purchases of

durable products such as elec-

tronic items, home and kitchen

appliances as well as personal

items apparels and jewellery

constuted 8% of the overall

share. Conducng transacons

to different types of financial

services such as insurance pay-

ments and renewals, as well as

transacons through trading

accounts amounted to 8% of

the overall share. Downloading

mobile and digital content

comprised 2% of the overall

share. Whereas other online

services such as classifieds (jobs, matrimonial, cars real estate and others), online food deliv-

ery as well as buying movie ckets and DVD rentals comprise 6% of the overall market.

GROWTH OF NET COMMERCE OVER

THE YEARS (Figures in INR crores)

COMPONENTS OF NET COMMERCE

MARKET 2009 (INR 19,688 crores)


9/20

9

Online travel industry has grown from INR 6,250 crores in year 2007 to INR 14,953 in the

year 2009. The restrained growth in 2009 was due to the overall slowdown in the industry.

Due to conveniences of paying online as well as the facilitaon from the regulators the

growth is expected to grow at a much higher rate in the next few years.

At present, out of total INR 14,953 Crores Online Travel market, domesc air travel con-

tributes 63% i.e. INR 9,482 crores followed by Railway ckets contribung 28% (INR 4,184

crores) others such as internaonal air travel (INR 548 crores), Hotel bookings (INR 308

crores), Bus ckets (INR 294 crores), Tour packages (INR 86 crores) & travel insurance (INR

52 crores) contribute balance 9% to the total online travel market.

Market size of product categoriesONLINE TRAVEL

COMPONENT SHARE OF ONLINE TRAVEL TOTAL: INR 14,953 CRORES 2009

Component Percentage Market Size (INR in crores)

Domesc Air Tickets 63 9,482

Railway Tickets 28 4,184

Internaonal Air Tickets 4 548

Hotel Bookings 2 308

Bus Tickets 2 294

Tour Packages/Travel Insurance 1 138

(Figures in INR crores)


10/20

10

COMPONENT SHARE OF ETAILING TOTAL: INR 1,550 CRORES 2009


Computers, Accessories & Peripherals 36 560

Cameras & Mobiles 25 389

Personal Items (Apparels, Jewellery & others) 19 296

Electronic Durables 13 203

Home & Kitchen Appliances 4 62

Other Products (Toys, Gis, Flowers) 3 40

E-Tailing comprises of buying consumer items such as cameras, computers, home & kitchen

appliances, flowers and toys, gis online. This category has grown from INR 978 crores in

year 2007 to INR 1,550 in year 2009.

At present, PCs, laptops, computer peripherals, accessories and storage, contribute the most

36% (INR 560 crores) to e-tailing followed by cameras & mobiles contribung 25% (INR 389

crores). Personal items such as jewellery, apparels, cosmecs, apparels, shoes and watches

contribute 19% (INR 296 crores) whereas Electronic items like TV, Audio systems & other ac-

cessories account for 13% (INR 203 crores) Balance 7% is contributed by Home & kitchen ap-

pliances (4%) and other online buying (toys, gis, flowers etc.)

ETAILING



11/20

11

FINANCIAL SERVICES

Financial services market is esmated to be INR 1,540 crores and is expected to grow to INR

2,000 crores in the year 2010. Prior to 2008, there were no accurate esmates of the online

financial services. The online financial services include Insurance and related services (INR

585 crores), online transacons for financial services (INR 527 crores) and other fund-

based transacons (INR 426 crores) such as paying ulity bills.

COMPONENT SHARE OF ONLINE FINANCIAL SERVICES TOTAL: INR 1,540 CRORES 2009


Insurance and related services 38 586

Fund-based transacons (such as ulity bills) 34 527

Online transacons for financial services 28 426



12/20

12

DIGITAL/MOBILE DOWNLOADS

Digital downloads as a category has increased from INR 238 crores in 2007 to INR 435 crores

in year 2009. Given the proliferaon of mobile devices and the services available over the

Internet, the growth rate is expected to be higher in the next years.

Majority of mobile downloads is aributed to ringtone, wallpapers or pictures download

(INR 148 crores) and mobile recharges as well as bill payment (INR 148 crores) Soware &ulity applicaons for mobile account for 18% of Digital downloads (INR 78 crores), paid

music/video downloads contribute 7% (INR 30 crores) while balance 6% is contributed by

mobile games downloads.


COMPONENT SHARE OF MOBILE / DIGITAL DOWNLOAD TOTAL: INR 435 CRORES 2009


Ringtone/ Wallpapers /Pictures download 34 148

Pre-paid Recharge/ Post-paid Bill Payment 34 148

Sowares and Ulity Applicaons for mobiles 18 78

Paid Music/Video Downloads 7 30

Mobile Games Download 6 26


13/20

13

Online classifieds includes services such as online dang, matrimonial and jobs. It is es-

mated that online classifieds together is INR 1,210 crores. In the classifieds, online jobs con-

stute major share of INR 484 crores. Online matrimonial/dang services form a share of

15% i.e. 182 crores.

OTHER ONLINE SERVICES


COMPONENT SHARE OF OTHER ONLINE SERVICES TOTAL: INR 1,210 CRORES 2009


Online Jobs 40 484

Movie Hall Tickets and CD/DVD Rentals 35 424

Online Matrimonial/Dang 15 182

Other B2C classifieds (Cars, Real Estate) 9 109

Online Food Delivery 0.5 7

Online Gaming Subscripon 0.3 4


14/20

14

Barring few services such as online ckeng, broadly speaking, Indian consumers aren't shop-

ping online. Large numbers of surfers use Internet to look for informaon about the prod-

uct or service they want to buy followed by physical visit to shop for buying.

According to I Cube 2009, 13.6 mn In-

ternet users looked for informaon (LFI)

for purchasing product or services on-

line. Of these, 7.47 mn purchased prod-uct or services online. This indicates that

almost each alternate Internet users

who looks for informaon on products

and services on Internet, ends up buying

them online.

LFI indicates users who access internet

to search for products or services. They

may or may not buy them online.

ONLINE SHOPPER indicates users whoaccess internet to purchase product or

services. These are internet users who

transacted online and purchased prod-

uct or services over internet.

Indian online shoppers

13.6million

6.13million

7.4million

ONLINE SHOPPING BEHAVIOURS

AMONG INTERNET USERS(Base: 17.5 million

Acve Internet Usersin 15 cies surveyed

in I-Cube 2009)

NONONLINE SHOPPERS ONLY LFI(Base: 13.6 million Acve Internet Users who look for informaon)


15/20

15

ONLY LFI indicates those users who access Internet to look for informaon on product or

services, however, didnt purchase it over internet.

AMONG ONLY LFI, 61% access internet to look for informaon on Online Travel (such as ck-

ets and hotel bookings); of these 42% end up buying travel services through offline route.

Cameras and mobile is the second most looked for informaon category. 60% of Only LFIs ac-

cessed Internet to look for informaon on cameras and mobiles while 17% of them bought

the product through convenonal shops.

AMONG ONLINE SHOPPERS, 89% accessed internet to look for informaon on Online travel

services and 80% actually purchased product or services belonging to online travel using in-

ternet.

Cameras and Mobiles was looked for informaon by 62% of online shoppers, however only

12% actually bought it over Internet. This indicates that even online shoppers access internet

to know more about products, but only handful of them actually use internet to purchase

them.

Mobile downloads and personal items were purchased by 22% and 20% of online shoppers

respecvely.

MODE OF PAYMENT

Online shoppers use Debit cards/Internet banking as mode of payment for shopping online.

Credit cards follow closely at second posion. Paying against delivery comes at third posionwhereas demand dra and mobile payment is almost negligible.

MODE OF PAYMENTS(Base: 7.5 million Acve Internet Users who have made online purchases)


16/20

16

Lack of trust is the prime reason for not shopping online. According I-Cube 2009, various

reasons for not shopping online as menoned by internet users include:

LACK OF TRUST

Most of non-shoppers do not shop online due to lack of trust in transacons. This includes

reasons such as worried about personal security and distrust with quality. In other words, this

lack of trust primarily leads to security concerns one has while transacng over Internet.

SECURITY CONCERNS

Most Net commerce shopping happens through credit or debit cards. Indians, however are

sll concerned about their personal security and prefer to transact in person.

UNCERTAINTY ABOUT PRODUCT AND SERVICE QUALITY

Unlike convenonal shopping, buyers worry about online shopping. They arent sure if they

will get good quality products online.

FULFILLMENT ISSUES

When person is transacng over Internet, they are not sure who is sing across the table.They are worried about delivery of goods. It includes issues such as delay in or non delivery

of goods.

Non delivery of goods: Apart from shopping experience and convenience, one of the major

factors for net commerce not taking off in India is due to the on-me dispatch of goods. De-

livery delays invariably have le people wondering if their money was lost in the transacon

and are averse to conducng future online transacons. Merchants start order processing

and shipping only aer the receipt of money through credit card or online banking payment.

Reasons for not shopping online

(Base: 6.1 million Acve Internet Users who do not purchase online)


17/20

17

SHOPPING EXPERIENCE

Buying a product or service is many mes associated with shopping experience. It includes

shopping experience includes fun, entertainment and the sasfacon derived from shoppingof product or service. While transacng online, most users lack this experience and it has re-

sulted in people refraining from shopping online.

Lack of touch & feel: Touch & feel of product being purchased lacks while shopping online.

Online shopping is best suitable for products and services that do not require touch & feel ex-

perience by buyer. Probably thats one of the reasons for books & ckeng being more suc-

cessful than apparels while shopping online.


18/20

18

Promising futureThe online users in India have evolved and are acvely seeking to include their digital in-

teracons into their daily acvies making purchases and indulging in transacons being

one of them. Although the behaviour in online transacons has been a lile skewed in the

past wherein travel comprised the majority of the market; this has changed since 2009.

As per the primary research, e-Tailing is one the primary growth driver and will remain so

in the near future. A major reason for such growth is the connuing niche and generalized

websites that are being introduced over the Internet. These websites serve certain seg-

ments that are willing to transact monies for the products such as high-end Fashion and per-sonalized products, due to the convenience and range of products it offers. There have also

been certain iniaves that include mass market; for instance, certain aggregators and

traders are offering their products over the Internet to reach wider audience in the non-

metro markets. As Internet seeps more into the Tier-II and Tier-III cies there is bound to be

increase in the number of online users that would be willing to indulge in online purchases.

Financial services over the Internet is another area that holds promising growth. Al-

though there were no esmates prior to 2008, the online financial services amounts to a

sizeable proporon of the non-travel online interacons. Given the characterisc of the fi-

nancial services, it is very bound to experience a high growth. Instead of indulging in beau-

rocrac methods of compleng financial transacons, online modes of obtaining such

services will always be beneficial. There is no inherent need of transactors to be present in-

person to get financial services as there is no need for a touch-and-feel experience. Con-

sequently, most of the transacons involving financial services such as renewing insurance

or paying ulity bills can be completed over the Internet.

An important aspect in ensuring connuous growth of the net commerce industry is the

increasing awareness of exchanging money over the Internet by all the stakeholders as well

as the acknowledgement of such possibility by the regulators. As the online and mobile

medium grows, the regulators are in the process of formulang guidelines to make opons

available to the users as there are substanve benefits in transacng money over the Inter-net. Not only providing convenience, online transacons also reduce personnel and re-

source overheads that organizaons and the government have to bear. As the issue of

security minimizes due to stringent methods adopted by banks and financial instuons;

large numbers of retailers and online aggregators are providing services to Internet users

for their varied purchases they make on a daily basis.


19/20


20/20

IMRB Internaonal

e-Tech Group | IMRB Internaonal (a specialist unit of IMRB Internaonal) is a re-search based consultancy offering insights into IT, Internet, Telecom & emerging

technology space.

Our connuous link with industry and a constant eye on the pulse of the consumer

ensures that we can decode the movements of technology markets & consumers.

To our clients we offer an understanding of the present market environment and a

roadmap for the future.

Internet and Mobile Associaon of India (IAMAI)

The Internet and Mobile Associaon of India is a not-for-profit industry body regis-

tered under the Sociees Act, 1896. Its mandate is to expand and enhance the on-

line and mobile value added services sectors. It is dedicated to presenng a unified

voice of the businesses it represents to the government, investors, consumers and

other stakeholders. The associaon addresses the issues, concerns and challenges

of the Internet and Mobile economy and takes a leading role in its development.

The associaons acvies include promong the inherent strengths of the digital

economy, evaluang and recommending standards and pracces to the industry,

conducng research, creang plaorms for its members, communicang on behalf

of the industry and creang a favorable business environment for the industry.

Founded in January 2004 by leading portals in India, IAMAI in the only specializedindustry body in India represenng the interests of online and mobile value added

services industry.

Contact details

Dr. Subho Ray, President, IAMAI

406, Ready Money Terrace, 167, Dr Annie Besant Road, Mumbai - 400 018

Tel: +91-22-24954574 | Fax: +91-22-24935945 | hp://www.iamai.in

Published By: Dr Subho Ray, President, on behalf of Internet and Mobile Associaon of India

406 Ready Money Terrace, 167, Dr Annie Besant Road, Worli. Mumbai 400018.

Contact details

eTech Group | IMRBIMRB Internaonal

A Wing, Mhatre Pen Building

Senapa Bapat Marg, Mumbai

Research team for this report

Balendu Shrivastava, Group Business Director([email protected])

Tarun Abhichandani, Insights Director

Ashwin Godbole, Insights Director

Digital Commerce 2011

Documents

Transcript of Digital Commerce 2011