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APRIL 2015 VOL.14 NO.4 `100

E – COMMERCE – THE GROWTH ENGINE FOR RETAIL INDUSTRY IN INDIA

AS THE E-COMMERCE MARKET MATURES, SAME-DAY DELIVERY WILL BECOME INEVITABLE

HOW ‘ACQUISITIONS’ ARE CHURNING GROWTH IN E-COMMERCE

SECURING THE FUTURE OF MOBILE PAYMENTS IN INDIA

E-COMMERCE COMES OF AGE IN INDIA

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The e-commerce sector in India has witnessed an unprecedented growth in last couple of years. The huge investor interest in India’s e-commerce market and tremendous growth shown by Indian players such as Flipkart and Snapdeal talk volumes about the immense potential of the market. Even the international e-commerce mammoths have made their foray in the country, players such as Amazon and Alibaba have further intensifi ed the much sought after e-commerce market of India.

E-commerce eco-system is witnessing the birth of a new industry which is at the cusp of development with new rules getting defi ned, future scenarios being revisited and predicted, innovative technologies being put to use and businesses strategies taking new shapes.

E-commerce revolution has been witnessing ground breaking innovations; breakthrough technologies, digitized personalization’s and above all an aware and internet savvy consumer. It has become evident that the world is rapidly moving from the traditional brick and mortar business model to click and shop one. Although e-tailing is still a small contributor to retail, accounting for only 0.4 per cent of the overall market, it is on a rapid growth trajectory. E-commerce players have posed various challenges in front of brick-and-mortar retailers by breaking their business geographies, converting the tier II and III consumer which otherwise was untapped, creating their own demand by generating impulse purchases, attractive bargains, targeted advertising, easier returns, faster delivery, multiple payment options (like COD, EMI schemes), offl ine activation, and mass media campaigns and 24/7 convenience and many more.

In this special e-commerce focused issue of IMAGES Retail, we have tried to analyse the trends and developments announcing the e-commerce revolution for the coming years. However, we still believe that the e-commerce sector has come a long way, but it is just the tip of the iceberg and it still has miles to cover, before reaching its fi nal destination.

APRIL 2015 • PAGES 132 • VOL. 14 NO. 4

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APRIL 2015 CONTENTS

14 INTERNATIONAL ROUNDUPGlobally online retail is getting edgier with every passing day.

18 NATIONAL ROUNDUPThe growth of online retail in India has brought a fresh lease of life for the start-ups, who are supporting their growth in a big way.

22 SUCCESS STORY In, a candid interview with Images Retail, Amit Maheshwari, VP, Fashion, Snapdeal talks about the evolution of e-commerce in India

24 IN FOCUSIndia’s e-retail revolution has grabbed the headlines with blockbuster valuations and skyrocketing sales.

28 EXPERT SPEAK Budgets come and budgets go, but the reckoning for a good budget, is that it should bear out its term, by providing employment.

32 STRATEGY Acquisition seems to be the latest buzzword in Indian e-commerce scenario. In this article we will analyse the rationale behind the major mergers and acquisitions that has taken the e-commerce world by storm.

34 PERSPECTIVEWe are living in the age of online! retail and E - Commerce s driving the future growth for this industry.

38 PROFILE Established in 2007, Flipkart is one of the most sought after online retailers in India founded by Sachin and Binny Bansal.

40 PROFILE Vikas Purohit, Head Amazon Fashion, India, talks about the company’s audacious business manoeuvres.

44 HYBRID RETAIL With offl ine players seamlessly getting into the online space either with their exclusive e-commerce portals or partnering with marketplaces.

50 FUNDAMENTALLY With 4G taking the Indian market by storm, the demand for

smartphones is taking an upward swing.

84 AWARDS IFA Presented by Snapdeal, the 15th edition of India Fashion Forum celebrated the biggest night of the Indian fashion retail fraternity

88 TRENDS Biggest playing fi eld for global retail giants, the Indian subcontinent has witnessed increased spending power coupled with an infl ux of payment options.

52COVER STORY

The eco-system is witnessing the birth of a new industry which is at the cusp of development with new rules getting defi ned, future scenarios being revisited and predicted, innovative technologies being put to use and businesses strategies taking new shapes etc. As a result, players are increasingly becoming convinced about the strength of e-tailing.

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12 . IMAGES RETAIL . APRIL 2015

APRIL 2015 CONTENTS

92 FUTURISTICIndia is in the throes of the mobile revolution with 903.36 million mobile subscribers according to the February 2014 data released by TRAI.

94 IDEATION As the story of retailing in India is gradually becoming hat of e-tailing, it is interesting to take note of niche e-commerce portals mushrooming everyday.

98 CONCEPT Gift cards may seem like a trivial innocent expense for a consumer, but for a brand, retailer or e-commerce portal, the gift card segment alone, rakes in a lot more profi t than one might think.

100 LOGISTICS E- commerce fulfi llment has created a host of challenges and

opportunities for logistics players who are responsible for crossing the last mile.

104 MARKET ANALYSIS Organised retail has fl ourished and is still booming in Indonesia’s primate city, Jakarta.

110 MARKETING The coming of ‘Globalisation’ gave the much-required push to the marketing industry.

112 HUMAN RESOURCE In terms of cost calculations, the hiring cost of a wrong hire is way higher than the cost of rejecting candidates who fail to clear these tests.

116 COLLABORATION Collaboration is a systematic and conscious effort between two parties towards creating a positive synergy.

120 INTERVIEW Bhaskar Venkatraman, Founder & Director, Justransact.com talks about the modus operandi of their e-commerce portal.

124 SHORT TAKE Danish Ahmed,Founder & CEO of Shopsity states that M2S (mobile to stores) is larger than e-commerce.

126 INNOVATION Zydex is a young research driven company promoted by Dr. Ajay Ranka.

128 INTERFACE Nilesh Shah, Director, Rance Lab talks about the importance of technology in the changing retail landscape.

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26 . IMAGES RETAIL . APRIL 2015

IN FOCUS

In India, online marketplaces like Amazon, Flipkart or Jabong are turning more and more consumers into digital shoppers. The value proposition of these players, based on

attractive prices, convenience, and choice is answering the needs of a widening base of customers. So much so that in 2014, only a few years after their entry into the Indian market, online sales of apparel reached a record ` 3,200 crore.

Not only is India’s base of digital consumers expanding in size, it is also expanding in spread. Early adopters of digital channels were initially concentrated in big metros, but as smartphone penetration increased and marketplaces strengthened their logistics capabilities, online shopping has become a pan-India phenomenon.

Today, online apparel shoppers live in more diverse locations - including many tier II and III cities, resulting in

Across regions, states and cities, Indian consumers are increasingly turning towards the Internet to shop for apparel. As the e-retail fever spreads to new geographies, building strength in digital channels will become an imperative for apparel retailers to both secure and expand their customer base.

NEED TO HIT INDIA’S E-RETAIL HOTSPOTS

WHY BRICK AND MORTAR APPAREL RETAILERS

the dispersed set of e-retail hotspots shown in the map.

With consumers going digital in new geographies, brick and mortar apparel retailers should look at their store footprint and answer two important questions:

1. How exposed is our business to consumers’ shift to digital?

2. Could our business hit new demand hotspots through digital channels?

To obtain insights on these questions, our team took a sample of leading apparel retailers and compared their store locations to India’s top hotspots for buying apparel online.

Our analysis suggests that leading brick and mortar retailers are already signifi cantly exposed to the digital shift, and that strengthening their online presence will be essential to securing their position in existing geographies,

as well as expanding to new areas.Some leading brick and mortar

apparel retailers operate the vast majority of their stores in e-retail hotspots, where consumers already show a high interest for buying apparel online.

In these locations, buyers will have a higher propensity to navigate between physical and digital channels throughout their purchasing journey. This poses a serious threat to those players lacking a strong online presence, as customers will be tempted to shop elsewhere whenever a retailer cannot serve them across both online and offl ine touch-points.

In this context, apparel retailers with a high brick and mortar presence in e-retail hotspots should make a strong commitment to increase their online capabilities. One retailer in our sample is a particularly interesting case. This player operates almost 90 per cent of its stores in cities where

By Vlad Flamind

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EXPERT SPEAK

28 . IMAGES RETAIL . APRIL 2015

Creating suffi cient jobs is the toughest job for the Government. There are 700 million people living without dignity who need to be lifted out

of their desperate circumstances through jobs and livelihoods. On top of this, India’s acknowledged demographic dividend also makes it essential to productively employ nearly 13 million young people who enter the workforce every year.

e-commerce has the potential to create livelihoods in the remotest parts of India. It has been encouraging that innovation, e-commerce and entrepreneurship have been the key talking points for the Modi government since it took offi ce. Even a casual glance at the e-commerce sector will show that 2014 was the year when e-commerce came into its own. For e-commerce to continue growing rapidly in 2015, more attention will have to be given to the on-ground reality.

Budgets come and budgets go, but the street urchin still knocks on your door at the traffi c signal.As an industry, while we are trained to observe what is good for e-commerce, I cannot help but say that the reckoning for a good budget, is that it should bear out its term, by providing employment.By Ashish Jhalani

BUDGETONLY INDIRECT BENEFITS FOR E-COMMERCE

2 0 1 5 - 2 0 1 6

e-commerce industry that ended 2014 close to $14 Billion is estimated to grow to $100 Billion by year 2021. It was very surprising to not even hear the mention of e-commerce during the budget speech by the Finance Minister. The budget speech did not carry many direct benefi ts for the e-commerce industry, but it did have a few indirect benefi ts.

The e-commerce industry was pleasantly surprised when Prime Minister Narendra Modi addressing the NASSCOM community a few days later reiterated the importance of promoting e-commerce along with innovation and entrepreneurship.

Here is what the industry was expecting and did not get:Foreign Direct Investment (FDI): Larger part of the e-commerce industry (especially medium and small e-commerce ventures) were expecting the norms to be relaxed

where at least 49 per cent (if not 100 per cent) investment would

be allowed. This would have paved the path for

the global retailers and eTailers to enter India either as strategic

investors or joint ventures; which would

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APRIL 2015 . IMAGES RETAIL . 29

substantially help medium and small players with funds, knowledge and supply chain expertise.

Larger international e-commerce players that operate under an inventory model (or a mixed model - inventory and marketplace) would also be able to invest larger amounts. Currently the likes of Amazon India are operating under a marketplace model where they committed to spending almost $2 billion and if FDI is allowed, they would invest event further to build infrastructure.

At eTailing India, our belief is that FDI would allow our medium and small retailers, manufacturers, and eTailers to fl ourish over the mid and long term. There may be some teething challenges in the short term but those will be resolved very quickly. At least a partial relaxation would have been welcome but unfortunately the budget gave this a complete miss.

Tax Incentives: In order to boost investment in technical and other infrastructure, e-commerce companies have been looking at the Government to provide tax incentives. The industry was hoping that incentives be provided for building data centres, cloud services, e-commerce warehouses, and logistics & delivery networks. Unfortunately there was no mention of these incentives which

are crucial to the growth of the e-commerce industry.

Everything from data security, site speed latency, reduction of warehousing and delivery costs, delivery speed, etc., all depend on infrastructure and there has to be added incentives for the industry and 3rd parties to invest in building the infrastructure.

At eTailing India, our belief is that infrastructure is a crucial piece to

The question is, could this increase have come closer to the rollout date for GST?

Encouraging Messages from the Budget:Implementation of GST by April 2016: The government did fi nally provide a roll out date for the GST. The roll out of the GST will facilitate doing business across the country; by streamlining the movement of goods

and services (to and from customers) which today is a huge challenge.

Elimination of VAT, Sales Tax and other taxes will help declutter the tax laws which may be interpreted differently from state to state. Several e-commerce companies have already been served notices by state tax authorities on their own interpretation of the tax laws.

What we missed is a detailed plan of the rollout. The government has to have a detailed roadmap of the rollout and share that with all industries at the earliest. There are many systems and processes that need to be modifi ed by involved industries to ensure a smooth rollout.

Infrastructure Investment: The budget continued to push the need to invest in infrastructure such as Power and Roads. The proposed investments in power and infrastructure projects will help e-commerce companies reach to a customer base, which is

The recent budget speech did not carry many direct benefits for the e-commerce industry, but it did have a few indirect benefi ts.

the future growth of the retail and e-commerce industry. Lack of the infrastructure but growth in demand will lead to building ineffi cient methods and processes to fulfi l market demands.

Some surprises that the industry did not expect:Service Tax Increase: Increase in Service Tax rate created an adverse effect on the industry; though this may be short term route to implementation of GST. With a long implementation cycle for the GST there would be some effect to the overall growth of the industry as a slightly greater part of the customer wallet gets consumed towards the service tax.

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60 . IMAGES RETAIL . APRIL 2015

COVER STORY

In the following pages, we have listed some of the important e-tailers, those who have helped Indian e-commerce industry in coming of age.

Flipkart is an e-commerce company that came into being in 2007. Brainchild of Sachin Bansal and Binny Bansal, the company operates exclusively in India, with headquarters at Bengaluru, Karnataka. As per recent media reports, the company has raised US$ 700 million in fresh investment held in December 2014, from existing as well as new investors Baillie Gifford, Greenoaks Capital, and Steadview Capital. The company made it to the headlines in May 2014, for its historic acquisition of leading fashion portal Myntra.com for approximately US$ 1.5 billion.

Snapdeal.com is an online marketplace that operates from New Delhi, India. The company was started by Kunal Bahl, a Wharton graduate, and Rohit Bansal, an alumnus of IIT Delhi in February 2010, as a daily deals platform. However, it was only in September 2011 that it expanded to become an online marketplace. Snapdeal has acquired fashion portal Exclusively, put in a majority stake in fi nancial services player RupeePower, and also invested in logistics company GoJavas and recently acquired Freecharge in largest online B2C takeover.

FLIPKART

SNAPDEAL

WWW.FLIPKART.COM

WWW.SNAPDEAL.COMIMPORTANT E-TAILERS IN INDIA

Flipcom200andopewitKarrep700in Das wGifStema201leafor

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APRIL 2015 . IMAGES RETAIL . 61

Amazon.com, Inc is an American electronic commerce company founded by Jeff Bezos in 1994. In the year 2013, Amazon launched its India marketplace, Amazon.in. Last year, Jeff Bezos visited India and announced an investment of US$ 2 billion to grow Amazon’s online retail business in the country.

eBay Inc. is an American multinational corporation and e-commerce company that provides consumer to consumer (C2C) as well as business to consumer (B2C) sales services via Internet. It is headquartered in San Jose, California, United States. eBay was founded by Pierre Omidyar in 1995. Today, the e-commerce fi rm is a multi-billion dollar business with operations localised in over 30 countries, including India. eBay launched in India by acquiring Baazee.com.

Jabong.com is an Indian fashion and lifestyle e-commerce portal, selling apparel, footwear, fashion accessories, beauty products, fragrances, home accessories and other fashion and lifestyle products. Co-founded by Arun Chandra Mohan, Praveen Sinha, and Lakshmi Potluri in January 2012, the company is headquartered in Gurgaon, NCR. In a recent round of funding, the company has raised US$ 100 million (Rs. 628 crore) from British development fi nance institution CDC.

Myntra.com is an Indian e-commerce company that deals in fashion and casual lifestyle products. The company, which was founded in 2007 by IITians Mukesh Bansal, Ashutosh Lawania and Vineet Saxena, is headquartered in Bengaluru, Karnataka. . The company was acquired by leading market place Flipkart in 2014.

AMAZON

SHOPCJ

EBAY

JABONG

MYNTRA

WWW.EBAY.IN

WWW. JABONG.COM

WWW. MYNTRA.COM

WWW. AMAZON.IN

WWW. SHOPCJ.COM

Shopcj.com is an online shopping site in India (formerly known as STAR CJ Network India)., which is a 50:50 joint venture between the South Korean home shopping major, CJ O Shopping Co. Ltd. and the P5 Asia Holding Investments (Mauritius). They retail multiple product categories, such as kitchen, living, electronics, jewellery and digital devices and fashion.

JabolifesappabeauaccelifesArunand the cGurgof fuUS$ frominsti

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84 . IMAGES RETAIL . APRIL 2015

AWARDS

The IMAGES Fashion Awards (IFA) are India’s highest honour for recognizing excellence in the business of fashion. The IFAs recognize most

admired fashion brands, retailers and concepts. The IFAs are presented at the grand fi nale ceremony of the three day India Fashion Forum, the largest gathering of the brightest minds, products and concepts in fashion. This annual gathering of the fashion industry is the place where fashion leaders congregate to drive the future of Fashion in India. Every year at the IFF new ideas, concepts, and equations are created; and old relationships are renewed.

The awards presentation was kicked off with Kunal Bahl, CEO and Founder, Snapdeal presenting 12 honours to its sellers and brand partners for their contribution in making Snapdeal one of India’s most iconic and successful online fashion retailers.

The 15th IFA also saw a very special segment of awards, given away by India’s fastest growing department store chain, Reliance Trends to fi ve of its most valued brand partners.

Presented by Snapdeal, the 15th edition of India Fashion Forum celebrated the biggest night of the Indian fashion retail business by felicitating its outstanding achievements in great style at the Images Fashion Awards (IFA 2015) ceremony on 19th March at the Bombay Convention and Exhibition Centre.

IMAGES FASHION AWARDS 2015

The Reliance Trends Performance Awards - across the categories of men, women and kidswear and also emerging brand - were presented by Akhilesh Prasad, CEO, Reliance Trends, Vineet Nair, CMO, Jaykumar, Head External Brands and Team.

Attended by the top honchos and celebrities the Images Fashion Awards (IFA) was hosted by one of bollywood’s leading actress, Neha Dhupia.

The evening was set on fi re by ‘MUFTI Live’ followed by an enthralling performance by UK Vocalist Cara Jane Roberts. Blending the dance forms of Broadway jazz, tango and contemporary style, Abhimanyu Singh Rathore presented a dance musical. The entertainment also included a comedy act by none other than Vinay Pathak.

“Fashion in India has come of age and Images Fashion Awards recognises the continuing evolution of the industry’s most dynamic and forward-looking brands every year,” said Amitabh Taneja, CMD, IMAGES Group.

at

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