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Industry Study:

Indian Online Retail: Where Is It


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Dion Global Solutions
Published: Sep 2014
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Quick facts
Sources: Crisil, Dion Research and Analysis
What constitutes online retail?
The online retail market in India comprises six broad segments, which further has five sub-segments and
approximately 42 players within, making the space one of the most complex and competitive in nature,
Online ticketing or travel account for approximately 65% of the total online retail sales in India in 2013


The broader segments
Ticketing for
air, rail, bus
travel,
hotels/ cruises,
travel
packages,
movies, events
Retail products
sold through
the online
route
Platforms
where sellers
and buyers
transact online.
Does not
include
classifieds
Deals are
purchased
online
by consumers
Includes car,
job, property
and
matrimonial
portals
Travel Specialist Retail Marketplaces Online Deals Other Portals
65% 17%
17% 1%
Negligible
Total Online Retail Sales in India =US$13 billion (2013)
Note 1: % of total online retail sales in India 2013
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The growth story
Indias online retail industry has grown at a swift pace in the last 5 years from around US$2.5 billion
revenues in 2009 to US$13 billion in 2013, translating into a compounded annual growth rate (CAGR)
of over 50%
The 9-fold growth came on the back of increasing internet penetration, changing lifestyles and
convenience of shopping and was primarily driven by books, electronics and apparel segments
According to a primary research conducted by Dion Global Solutions, convenience of shopping and
attractive pricing schemes are primarily driving the growth of online shopping in India
Online retailers save huge operational costs of running physical stores, which they pass on to the
consumers in the form of discounts
Typically, Indian customers can save 20-30% per item if they shop online
2.5
4.9
6.2
8.5
13.0
2009 2010 2011 2012 2013
Online Retail in India Market Size
(US$ Billion, 2009-2013)
Sources: Crisil, Dion Research and Analysis
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The comparative picture
Where online segment stands in Indias
overall retail landscape
Overall retail market in
India: US$520 bn
Organised retail
market in India: US$39
bn
Online retail market in
India: US$13 bn
Sources: Crisil, Dion Research and Analysis
In terms of size, Indias online retail industry
currently constitutes a miniscule portion as
compared with both organised and overall
(organised and unorganised) retail industry
landscape
As of December 2013, the organised retail
constitutes approximately 7.5% of the
overall retail and online part constitutes
approximately 2.5% of the overall retail
and 33.3% of organised retail
Industry analysts expect the online retail
industrys revenues to more than double to
around 18% per cent of organised retail by
2016 from around 8% in 2013, based on
current demand scenerio
Yet, its share of the overall retail
(organised and unorganised) pie is
expected to be just over 1%, comparing
with 9-10% in the US and UK, and around
4-5% in China
It's very simple. A large section of Indian
consumers are not yet ready to trust and buy
online. The e-commerce industry is yet to build
that trust or need. Till this gap is bridged, there
will be a huge disparity between the number of
Internet users versus the number of online buyers.
In the US, 85 per cent of online users transact
online versus 8-10 per cent in India: Ashish Jhalani,
Founder, Etailing India
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Impact of online retail on traditional retailers
Sources: Crisil, Dion Research and Analysis
39
23
1
15
2009-10 2010-11 2011-12 2012-13
Net Store Additions for Traditional Retailers
(Number of Stores, 2009-2013)
Over the last couple of years, competition from
online retailers such as Flipkart (in books, music
and electronics segments), Myntra and Jabong
(in apparels) has eaten into the revenues of
physical retailers
Specifically, competition in the last three
years has been intense compelling many
established traditional retailors to go online
even as their net store additions slowed to a
single digit growth
The impact of online retail is most visible in
segments where the product specifications are
standard and differentiation remains low, such
as books, music and electronics segments
Failing to match the huge discounts offered by
online retailers, traditional booksellers and
music stores are either shuttering outlets or
folding up
A case in point will be Planet M it has been
closing stores since 2012 ; as a part of this
restructuring, PlanetM has adopted a kiosk-
based model for expansion
Note: Number of stores includes the Shoppers Stop
Department stores and Speciality Stores (viz Home
Stop, Mothercare, Crossword Bookstores, Arcelia,
Mac, Clinique, Estee Lauder & Airport Business). It
also includes stores of Trent and the ones operated
by JV Inditex Trent Retail India Private Limited
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The leading segments (1/2)
Sources: Crisil, Dion Research and Analysis
1
Electronics and Fashion
After electronics, fashion and lifestyle is the largest category in online retail, with a
25% share
Unlike electronics, however, it is more the domain of specialists than marketplaces
Myntra, part of Flipkart, and Jabong are the leaders, competing with discounts and
for exclusive brand partnerships
Myntra has gone a step ahead and launched several private labels, including
Roadster and Dressberry
While external brands give a margin of up to 35%, in-house labels go up to 55%
Jabong, which has exclusive partnerships with international brands and designers, is
also lining up its own labels
2
Furniture
Furniture is becoming the third largest segment in e-commerce, after electronics and
fashion and lifestyle
Pepperfry and Urban Ladder are the leaders, while among marketplaces, Snapdeal
has launched, and Flipkart and Amazon are exploring
It is, however, difficult to build a traction in this space as existing players took nearly
two years to build perfect logistics and supplies
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The leading segments (2/2)
Sources: Crisil, Dion Research and Analysis
3
Grocery
With an estimated market of $350-400 billion, the grocery segment is larger and
dyanamic than anything else
One needs to build hyper-local sourcing, warehouses and supply chain to succeed in
this business and therefore, expansion across regions is staggered
On an average, Online players stock 12,000-13,000 products, against some 400-500
odd by local kirana stores
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The Specialists
Sources: Singapore Tourism Board, Dion Research and Analysis
Healthcare is one segment
where niche portals have
managed to build strong
franchisees
While the focus of
Healthkart is protein
supplements and personal
care, that of Lenskart is eye
care, which currently does
around 2,000 shipments
per day of both prescription
glasses and sunglasses, up
from 600 in 2013
Other startups in the
healthcare segment include
Healthadda, Healthgenie
and Saralhealth

FirstCry
FirstCry is a specialist in
babycare and kidswear
products
"Globally, and in India,
the babycare category
has always had a
specialised leader that
has captured dominant
market share. With repeat
buying rates above 70%,
this category has huge
capital efficiency in
marketing," says Manik
Arora, MD of IDG Ventures
Indi, an early investor in
FirstCry
FirstCry is also is
partnering international
brands to provide free
hospital kits to parents of
newborns in about 6,000
hospitals in top 18 cities
Healthkart and Lenskart Jewelry
During the time when the
physical stores struggle
with growth, Caratlane, the
leading player in this
segment, is doubling by the
year
According to Mithun
Sacheti, Founder & CEO of
Caratlane, The biggest
challenge in jewellery
retailing is the cost of
inventory. We don't
maintain inventory and
follow just-in-time
manufacturing, which
allows us to spend on
marketing and on
acquiring new
customers."

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About Dion Global Solutions
Dion is a leading provider of research, information, and technology solutions in the financial domain globally. Dion's aim is
to take the pain and risk out of financial technology in a constantly changing market, by providing a consistent, reliable and
approachable source of value added solutions. From flexible pricing models, to fuss-free implementations, Dion's business
model is about providing a straightforward approach that is responsive to client needs and enables them to turn financial
technology into real business opportunities.

The company draws on its presence across the financial markets, the depth of its global expertise and the breadth of its
product development resources to serve the specific and localised needs of its clients. Dion continually strives to make
available new solutions that deliver the value that clients are looking for, both through in-house development and strategic
acquisitions. As a result, Dion is the single source for a comprehensive and developing range of solutions, from which
financial services firms can select those that meet their business needs both now and in the future. The company has over
550 clients in more than 80 countries supported by a worldwide staff of 600, including 200 in product development.
Company provides solutions that span investment, retail and commercial banking, institutional trading and investment and
private client wealth management and stock-broking.
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This report and information contained in this report is solely for information purpose and may not be used as an offer
document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. The investment as
mentioned and opinions expressed in this report may not be suitable for all investors. In rendering this information, we
assumed and relied upon, without independent verification, the accuracy and completeness of all information that was
publicly available to us. Dion global solutions limited and its affiliates shall not be liable for any direct or indirect losses or
damage of any kind arising from the use thereof. Opinion expressed is our current opinion as of the date appearing in this
report only and are subject to change without any notice
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