1. An Overview & Some India Specific Growth Enablers & InhibitorsArvind Singhal 29th August 2014E-tailing in India

2. 2Indias E-Tail: An Overview 3. Indian Retail Market Will Mirror GDP GrowthIndias real GDP growth likely to ~6% over the next decade. This will translate into ~US$ 1 Trillion merchandise retail market by 2020 (at nominal prices)2014Retail:US$ 525 Bn (49%)Non Retail:US$ 555 Bn (51%)Urban:US$ 252 Bn (48%)Rural:US$ 273 Bn (52%)Organized Retail:US$ 46 Billion (~9%)GDP: US$ 1,890 BnPrivate Consumption: US$ 1080 Bn (57%)Retail:US$ 1040 Billion(45-50%)Non Retail:US$ 1060 Billion(50-55%)Urban:US$ 572 Billion (50- 55%)Rural:US$ 468 Billion(45-50%)Organized Retail:US$ 182 Billion (~17%)GDP: US$ 3,700 BillionPrivate Consumption:US$ 2100 Billion (57%)2020P3Source: Planning Commission, Technopak Analysis 4. Organized retail has a double digit penetration in most discretionary consumption categories. Consumer Electronics, Jewellery and Apparel are key drivers of discretionary spend in IndiaIndian Retail Category Mix27%20%19%10%8%4%3%Organized Retail's Share in the CategoryCategoryShare of Total Retail (%)Food & Grocery69%Apparel8%Consumer Durables & IT6%Jewellery & Watches6%Pharmacy & Wellness2%Furniture & Furnishings2%Footwear1%Others6%4 5. 6.6%14.2%15.7%USUKChinaGlobally, E-tailing Has Followed A Rapid Growth TrajectoryOnline retail growth has followed a disruptive trajectory across marketsEcosystem creation has altered the consumer behavior of a sizeable consumer mass (referred to as active internet user base)5% Share of E-tail in Retail6.0%10.6%10.1%USUKChina4.4%7.6%4.3%USUKChinaYearUSUKChinaIndia200568%70%9%2%200874%78%23%4%201170%85%38%10%201487%90%46%19%Internet Users as % of Population201420112017Source: Technopak Analysis, Secondary Sources 6. 91%83%8%14%0.4%3%20142020Organized Retail : E-tailingOrganized Retail (Brick & Mortar)Independent RetailIndependent retail will continue to thrive but e-tail will be the growth story (physical modern retail will also grow)52510404618220142020Total RetailOrganized RetailIn India, E-Tail Will Drive Growth Of Modern Retail 9%17%%Share in total retail6Overall Retail Market (US$ Bn)Share of Retail Channels (%) 7. Indias internet user base is estimated to reach 550 mn by 2020 with a penetration of ~40% from 19% currently2%2%2%3%4%4%5%8%10%13%17%19%40%0%5%10%15%20%25%30%35%40%45%01002003004005006007002003200420052006200720082009201020112012201320142020Total Internet Users - IndiaIndia Internet Penetration % of PopulationGrowth of Internet Penetration In IndiaInternet Users growth in IndiaSource: IAMAI, World Bank, Technopak Analysis7 8. 2006-2008EmailsNewsTravel2008-2010EmailsNewsTravelSocial MediaE-Commerce2011 onwardsE-mailsNewsTravelSocial MediaShoppingOnline VideoMobile / Internet BankingInternet InvolvementRapid Growth of Internet Habitual CustomersSource: IAMAI, Income Tax Department, Government of India, Indian Railways, Facebook, Industry Sources, Technopak Analysis*AnnualizedMajor Indicators (Mn.)2008201020122014No. of Facebook users0.8871114No. of Railway tickets booked online (per annum)1972116170*Number of IT returns filed online (per annum)2516298 9. E-tailing Market Category Split will EvolveE-tailing in India has been evolving beyond categories like gifts and books and is rapidly moving to general merchandise including electronics and apparel & lifestyleThe category split of E-tail is projected to evolve with apparel & lifestyle projected to capture 30% share of the market9Category Shares (est.)FY 2014FY 2020Total Market US$ Bn.2.332Electronics30%30%Apparel & lifestyle25%30%Others(Books, Music & Stationery, Home (furniture, furnishings, kitchen), health, babycare, food etc.)45%40% 10. MalesFemales1.32.46.515.313.71.83.69.723.721.9% of users% of usersIndia has one of the youngest online demographics globallyInternet audience has 75% people between 15 to 34 years50% of internet users between age group 25-34 visit E-Tailing websites75%55+45-5435-4425-3415-2455+45-5435-4425-3415-2475%*Internet Audience - People above the age of 15 years accessing the Internet from home or workYoung India Driving E-tailingAgeDemographic Profile of Online Users10Source: Technopak Analysis, ComScore 11. Female Shoppers Getting ImportantFemale internet users have grown from ~20% in 2009 to ~40%. By 2016, 35% of online GMV will be influenced by womenKey driver is increasing supply of women focussed categories39%49%49%45%Female Internet Users (%)Source: Technopak Analysis, ComScore, Accel PartnersChinaUKUSAIndia11 12. 31%21%11%10%25%Geographical Distribution of Indian Internet UsersTop 8 Metros> 1 Mn Population0.5-1 Mn Population0.2-0.5 Mn Population< 0.2 Mn PopulationMarkets Beyond MetrosTier 2 cities showing faster growth in e-commerce adoption than Tier 1Many e-tailers getting >50% sales beyond top 10 citiesSource: IAMAI , Technopak Analysis12 13. Fulfilment Challenges RemainGap between current state and optimal state logistics :Capacity Creation150,000 PIN codes in India. Less than20% are served by most leading 3PLCapability Development for E-tailingCost Optimization13 14. Clicks & Bricks : Growing Multi-channel RetailOffline going Online:Hybrid shoppersStructural issues with Brick & MortarIncreasing competition (from online)Wider reachOnline embracing OfflineExperienceAwarenessCredibility & Trust14 15. Niche & Specialty PlayDifferentiated spacesCustomer-centric approachAttractive break-even economicsBenefit from ecosystem creation by leading players15 16. Investors Outlook More Positive about Indian E- tailing StoryInvestors are backing leaders across mass market and specialty spacesNumber of deals have reduced but investment value has increasedYearDeal Value US$ MillionNo. of deals2012371732013592602014 (till date)1600>2416 17. 17123044108166185200920102011201220132014*Mobile Internet Users (Mn.)Users (Mn)201020142020PMobile phones257487550Smartphones674440Increasing affordability & penetration of smartphonesIncreasing mobile internet penetration 3G user base is expected to reach 300 million by 2019*June estimatesRise of Mobile CommerceSource: TRAI, CNNIC,Technopak Analysis 18. Key Growth Enablers 19. 1.Still Birth Of Modern Brick & Mortar Retail In India 20. 2.Increasing Time Poverty In Metro / Mini Metro And Then In Most Of Urban India 21. 3.Rise In Consumer Aspirations And Convergence Of Consumer Lifestyles Across India 22. 4.Rapid Increase In Penetration Of Digital Devices Especially Smart Phones 23. 5.Sustained High Inflation 24. 6.Very Rich Ecosystem Of Relatively Young, Brighter, And More Ambitious Entrepreneurs 25. Indian E-tailings Growth Inhibitors 26. 1.Weak & Inadequate Last Mile Delivery Infrastructure 27. 2.Unreal Consumer Expectations Being Created By Some E-tailers To Acquire Customers Or Boost Top-line (And Valuation) 28. 3.(Still) Limited Access To Financial Capital 29. 4.Poor Quality (Speed & Reliability) Of Data Communication Networks 30. Future Of E-tailing & Some Suggestions For E-tailers In India 31. Some Suggestions Take a pause and re-strategize using learning from own experience and then also the emerging competitive landscapeDifferentiate, and continue to focus on maintaining differentiation from myriad competitors (present and future)Put some focus on profitability too, while building business and chasing revenue growth 32. Thank You ! 33. For Further Dialogue, Please Contact : Arvind Singhal Chairman, Technopak Advisors (India) T : (+91) 124 454 1111 E : arvind.singhal@technopak.com Web : www.technopak.com