RESEARCH

eCommerce in India-
Fueling a billion digital dreams
Scope of the Report – To understand the evolution of eCommerce landscape,
trends, drivers and business segments emerging in India
1

Global
eCommerce
Industry
landscape
and trends

eCommerce eCommerce
6 and 2
in India
the future

Scope of
the Report

Key enablers,
M&As, VC/ PE Evolution of
5 3
Investment the Industry
Trends Emerging
trends,
drivers and
business
segments

eCommerce in India-Fueling a billion digital dreams 02

Summary – key findings of the report

Ø
The global eCommerce industry generated revenues of USD 1.5 Trillion, growing at 20 per cent; the US being the world’s largest market,
followed by China

Ø
The Indian ecommerce industry today is worth USD 14 Billion, growing at a CAGR of over 30 per cent

Ø
Growing internet penetration, entry of global majors, rise in smartphones adoption, innovations in mobile technology, security, and
payments, and access to funding helping accelerate the growth of eCommerce

Ø
eCommerce is reinvigorating demand and catalyzing growth in the Indian retail industry, in addition to unlocking value in India’s economy
by tapping untapped customer segments, driving innovation and fostering entrepreneurship

Ø
The industry is moving from eCommerce 1.0 model which focused on price, to the eCommerce 2.0 model which focuses on high quality,
intuitive, curated and personalized, omni channel user experiences

Ø
Diverse demographics and inadequate infrastructure will catalyze the transformation of the eCommerce sector into a hyper local, on
demand market

Ø
The Indian eCommerce industry can grow 20X, and cross USD 200 billion in gross merchandize value by 2030, driven by augmented
transaction values, increased data usage and higher online shopping penetration

eCommerce in India-Fueling a billion digital dreams 03

Global eCommerce – A >USD 1.5 trillion economy

The global eCommerce industry continues to evolve rapidly, and is experiencing speedy growth in addition to driving technology adoption across the
world. With revenue of USD 1.5 trillion in 2014, the worldwide eCommerce industry is growing annually at 20 per cent. Among the regions, while the
Americas currently have the biggest share, APAC is expected to become the biggest market with one-third share by the end of 2015.

Global retail business trends suggest that brands are taking a similar view of eCommerce markets all around the world. As the ecosystem is maturing,
the emerging markets tend to become more lucrative and hence, pushing the providers to extend their capabilities further.

• China is the behemoth of eCommerce

Ø
China and the US remains the world’s leading ecommerce markets in terms of revenues, combining for more than 55% of global internet
retail sales in 2014

• India, a key geography in the underpenetrated Asian market

Ø
The $14 billion Indian ecommerce market promises to be extremely massive in the near future, but remains early-stage today

• Latin America is rising in importance

Ø
Increasingly hitting the radar of global brands selling online. In 2014, US-based retailers Costco, Home Depot, and Lowe’s all launched
eCommerce sites in Mexico, while other brands such as Nikon and Calvin Klein launched eCommerce in Brazil

eCommerce in India-Fueling a billion digital dreams 04

Global eCommerce industry – Flying high

eCommerce eCommerce: US remains the main market; Asia Pacific fueling growth
Growth ~20 per cent

100%=USD 1500 billion

USD Central & Eastern Middle East &

1,500 Bn Europe, 4% Africa, 2%
2014
Latin America,
4%

Norh America,
USD
33%
1,250 Bn
Western Europe,
2013 25%

The most popular categories remain - Asia Pacific,

31%
• Tours & hotel reservations
• Airline tickets & reservations
• Clothing and non-consumable - durables and entertainment related products

Source: eMarketer.com, Forrester, Gartner, Nielsen, VisionMobile, NASSCOM

eCommerce in India-Fueling a billion digital dreams 05

App economy fueling growth of the global eCommerce industry
• Uptick in emerging markets; >15 per cent
growth in Brazil, Mexico, South Africa etc.
• Growing internet penetration,
smartphones adoption, mobile rich
interface, enabling infrastructure
• ~21-34 years active age group; ~60 per cent
shopping online
• Millennials as highest purchase intenders
Source: Forrester, Gartner, Nielsen, VisionMobile, NASSCOM
eCommerce in India-Fueling a billion digital dreams
• eCommerce companies launching mobile
websites and innovative mobile apps
• Developers are finding opportunities
towards fast-growing Asian markets such
as India
• Mobile traffic and sales to climb-up
• Growing adoption across emerging
regions
06
Emerging economies on the verge of dominance in Global eCommerce...

China –Dominating the global eCommerce

Estimated sales growth in select economies for 2014 (in %)
562
LEADERS
China* 64%
350
India 32%

Brazil 19%
94
Russia 17%

Canada 14%
Top 3 countries by retail eCommerce sales, FY2015E
United States** 12%
as on Dec 2014 (in $ billions)
UK 12%
• The disruptive growth in China’s eCommerce market is slowly widening
South Korea 7% the gap between the top two countries and China will likely to exceed US$
1 trillion in retail eCommerce sales by 2018 (accounting for more than 40%
Japan 7%
of the total revenues worldwide). The US will continue to maintain its
Australia 6% position as the second-largest eCommerce market in 2018, totaling nearly
$500 billion in revenues

• The $14 billion Indian ecommerce market promises to be extremely

Note: massive in the near future – rapidly crossing above $20 billion mark soon
E: Estimate
*Excludes Hong Kong; **Excludes events tickets
Source: eMarketer.com, VisionMobile, NASSCOM

eCommerce in India-Fueling a billion digital dreams 07

…Replicating the success of Goliaths – Alibaba and Amazon
ALIBABA (CHINA)
The largest online
retailer on the planet
QUICK FACTS
• NYSE: BABA
• Foundation: April 1999
• Revenues: US$ ~9 billion
Overview
• Employees: 26,845 (2014)
• Active buyers: 334 million (Dec 2014)
• Market Valuation: US$ 204 billion
• E-commerce, Online auction hosting,
Product portfolio Online money transfers, Mobile
commerce
• Value proposition: Smaller businesses
• Offers a scalable web platform that
Business Model
facilitates the exchange of goods
between merchants and buyers
eCommerce in India-Fueling a billion digital dreams
AMAZON (USA)
The most disruptive
force in eCommerce
QUICK FACTS
• NASDAQ: AMZN
• Foundation: July 1994
• Revenues: US$ ~88 billion
Overview
• Employees: 154,100 (2014)
• Active buyers: 270 million (Dec 2014)
• Market Valuation: US$ 172 billion
• Online shopping, Web hosting,
Content distribution, Appstore, Book
Product portfolio
depository, Game studios, Instant
music and video streaming
• Value proposition: Customer centricity
Business Model • Selling directly to consumers and deal
with all of the logistics and other
physical aspects that go along with it
08
Trends that defines the year 2015 for eCommerce

Mobile becoming • Fulfillment

the new shopping Streamlined logistics and
• Multi-channel delivery integrated supply chain
hub – offering
immense growth • Access ‘Last mile’ management triggers
• Everywhere transformation
opportunities, in • Precise delivery
addition to • Personal access
disrupting • ‘Quick’ to explore & choose
• Last minute buying

• Social influencing purchase -

‘Lead generation’ tool
Omni-channel
retail integration; • Analytics profiling
a seamless • Re-platforming Technology’s
marriage of continued
• Integration to the ‘core’
online and offline focus on
channels • ‘Integration’ with physical world innovation
• Consumer-defined and value addition

• Channel flexibility
• Hyper-personalization

eCommerce in India-Fueling a billion digital dreams 09

eCommerce in India – High Growth, High Impact

eCommerce in India has experienced remarkable growth, radically altering the way people live. Today, the industry accounts for revenue of USD 14
billion growing at a CAGR >30 per cent (last 5 years). India’s mobile penetration is estimated at >75 per cent of its population. Consequently,
consumers expect and are able to get anything and everything via the internet –from books, toys, Jewellery to electronics/consumer products,
apparels, local groceries, etc. The 2014 annual Great Online Shopping festival saw 7 million unique visitors vis-à-vis 2 million in 2013 which is a clear
demonstration of rapid adoption of eCommerce in India.

Clearly, supporting enablers, ease of access, multiple funding avenues, adoption by tier II/III regions and fundamental revolution of new opportunities
are the pillars behind the cerebral growth of the industry:

• The rise in smartphones adoption, availability of and growing penetration of internet services at affordable rates remain the key enablers

• Connectivity has enabled easy access to consumer-centric services – train/hotel bookings, taxi services, movie tickets booking, mobile payments
etc.

• Growing ease to a digital enabled financial system; 400mn people in India have bank accounts and “Jan Dhan Yojna” scheme embarking easy
access to unbanked

• Globally, interest of VCs turning towards India as evident by 10X growth of home grown companies like Flipkart and Snapdeal to enter the club of
billion dollar Unicorns

• eCommerce is broadening across cities with Tier II/III cities gradually emerging as mainstream revenue generators, unlocking value in India’s
economy by tapping untapped markets/regions and customer segments

• The past few years have experienced a fundamental revolution with the entry of online giants like Amazon. There is increased consolidation and
emergence of different models like marketplaces with pure-play businesses expanding to becoming one-stop-shop for everything

eCommerce in India-Fueling a billion digital dreams 10

eCommerce in India – High Growth, High Impact

A secure online transaction environment, Cash On Delivery (COD), low pricing and strong focus on customer service has instilled trust of consumers in
online shopping. Further, the addition of deep discounts, coupons, referral systems, better logistics, shorter delivery timelines, zero delivery prices,
reverse logistics, etc. are seen as a clear reflection of transformation in the industry

eCommerce is reinvigorating demand and catalyzing growth in the Indian retail industry, in addition to unlocking value in India’s economy by tapping
untapped customer segments and markets. According to the Morgan Stanley survey research 2015, 73% of the online shoppers are found to be
shopping more than once a month, with almost ~20 transactions in a year on an average, with higher income groups shopping online as many as upto
27 times a year. Lower price and convenience are the primary benefits cited by current online shoppers.

Apparel and fashion (including footwear, eyewear, personal care and lingerie) has emerged as the top category within eCommerce followed by
electronics (both mobile and tablets and other consumer electronics) as the next largest category. Both categories constitute about 65% of total
eCommerce sales currently and the proportion is likely to remain static in the near future.

Online activity for niche categories (such as furniture & home décor, jewelry and groceries etc.) is still under penetrated because the level of
standardization is low for such products, however, the growing advent of differentiation and consumerisation will definitely foresee a shift in the
demand.

eCommerce in India-Fueling a billion digital dreams 11

 eCommerce in India – The Fastest growth segment

KEY TRENDS
Fastest growth segment in India

• ~30 per cent CAGR since FY2010 USD 14 billion

Growth ~33 per cent market
• ~USD 10 billion added in last 5 years
USD USD
10.5 Bn ~14 Bn • Above 40 per cent growth over 2014 e-Tailing
Fastest growing
• Apparel, mobile & consumer segment
2014 2015E electronics - biggest share

• 70 per cent market share Online travel

eTailing: Fastest growing segment Largest segment
• Movie tickets, travel, hotel & tourism
>6X since FY2010 - gaining interest
100%=USD 14 billion • Better infrastructure, logistics, Key growth
Financial Services broadband and internet-ready smart drivers
eTaling 6% devices
17%
Classifieds
• Mobile apps, payment mechanisms
5%
Others*
2% • Rapidly emerging eCommerce Tier II/III cities
consumers
Online Travel
70%

* Others includes online discounted deals, coupons, search sites, etc.

Source: ASSOCHAM, DINODIA Capital Advisors, IAMAI, IMRB, PwC Analysis, NASSCOM

eCommerce in India-Fueling a billion digital dreams 12

Connectivity, funding and consumerisation of technology fueling growth

Growing access to connectivity Consumerisation - Changing industry dynamics

Growing base: ~300 million internet users – 2nd largest • Advancements in technology enable access to untapped consumer markets:
base; Rapid internet penetration: ~173 million mobile users

Fueling demand: Better infrastructure in terms of logistics,

broadband and internet-ready devices Innovation in mobile Analyse Consumer shopping Omni-channels/multi-
technology and payment behavior – enabling cross- channel models; mobile
Rise in adoption: Smartphones and tablets pulling demand options adding convenience selling and up-selling eCommerce solutions
from non-metros

Easy access: Digital enabled financial system; “Jan Dhan • New business models and industry dynamics (due to entry of online majors like
Yojna” scheme embarking access to unbanked Amazon):

Improving landscape-
Funding/ VC investments crosses USD 3 bn Better logistics, COD
Consolidation between Pure-play businesses shorter delivery timeliness,
Access to funding: 91 deals worth USD 3.9 billion in 2014
existing players expanding to one-stop-shop zero delivery prices,
(Source: Venture Intelligence)
reverse logistics
Funds from multiple sources including individuals,
corporates and private equity firms • Evolving models: Inventory-led/ marketplace model (E.g., Flipkart growing its
logistics arm E-Kart vs. Amazon practicing marketplace model and strengthening
SoftBank, Japan (largest investor in Indian eCommerce) to its delivery network)
invest ~ USD 10 billion over the next few years
• New avenues of growth: While metros continue to lead, Tier II/III cities seeing
Big Indian businessmen betting high on the market –E.g., greater traction; for e.g., Jaipur, Ahmedabad, Chandigarh along with emerging
Ratan Tata invested in 5 eCommerce ventures till date areas like Guntur and Tada (AP), Karthikappally (Kerala), Ghattia (MP), Chorayasi
(Gujarat), etc.
Source: eBay Census 2014, IAMAI, Press articles, PwC Analysis, NASSCOM

eCommerce in India-Fueling a billion digital dreams 13

eCommerce users spanning regional and income levels; increased internet
access spurring online shopping

Growing penetration by tapping large domestic market across regions and customer segments; rise in transactions volume

Rise in online shoppers

Location
All Respondents 20

Location
Respondents (in %) Top & Cities 29%
Online shoppers Top 8 Cities
Internet users (n=3,900) 26
28% Other Cities 27%
Other Cities 13

Monthly HH Income
Upto 15000 21% Upto 15000

Monthly HH Income
11

15001-50000 32% 15001-50000 20

50001+ 27
50001+ 41%

eCommerce across cities and Number of transactions per person

income levels in a year (x)

Consumers with > 5 years of internet usage shop ~5X more than consumers with 1-3 years of experience Key Benefits of online shopping

1 Lower Price

2 Convenience

3 Wide range of products

Movie Jewelry Groceries Food Baby Travel Furniture Consumer Mobile/ Books Apparels/
tickets takeaway products & Home electronics Tablet Fashion
/ Delivery furnishings
1-3 Years of internet usage >5 Years of usage
Source: Morgan Stanley (AlphaWise survey Dec 2014), NASSCOM

eCommerce in India-Fueling a billion digital dreams 14

Top eCommerce categories- Apparel & fashion, Mobiles and tablets, and
other Consumer Electronics

eCommerce top categories Overall Top 8 Other

(Ex-Travel) cities cities

Apparel / Fashion 1 2 1

Mobile 2 1 2 65 Apparels/Fashion 73

57 Mobile, Tablets 51
Consumer
Consumer Electronics 3 3 3 41 33
Electronics
26 Books 42

Books 4 5 4 23 Movie tickets 33

18 Baby Products 22

17 Groceries 18
Movie / Entertainment 5 4
Food
14 20
takeaway/delivery
16 Home Furnishings 15
Baby Products NEW
10 Jewelry 20

Source: Morgan Stanley (AlphaWise survey Dec 2014), NASSCOM

eCommerce in India-Fueling a billion digital dreams 15

The Indian eCommerce industry fast maturing

The evolution of eCommerce in India started with the advent of various online matrimonial portals which further extended with a boom in online
travel and eTailing segments.

• While entry of online travel sites such as IRCTC and MakemyTrip changed the way Indians booked their travel tickets and later hotel
reservations and tour packages, the acceptance of eCommerce on a larger scale gained popularity with the opening-up of eRetail segment,
offering wide category of options to shoppers.
• Online retailing has taken the centrestage and is now experiencing a faster growth with emergence of several start-ups in vertical focused
categories along with newer areas e.g., online financial services, utility bill payments and recharge, discount coupons, online grocery, home
furnishing etc.

The fast evolving eCommerce market in India is set to close $20 billion mark soon – driven by hyper growth in affordable smartphones, improving
infrastructure, evolving payment landscape with a propensity to transact online. The market dimensions collectively enumerates the key levers
supporting the dynamic shift in eCommerce:

• A key enabler for the internet economy - Launch of 4G services in India and development of telecom infrastructure at a rapid pace
• 2014 has been a seminal year for eCommerce industry – The segment has seen funding to the tune of above USD 3 billion and growing
significantly since then. It is also attracting global interest as is evident from SoftBank’s (Japan) investment of USD 10 billion in India over the
next few years. The growing valuations of Flipkart, Snapdeal, Quicker, Olacabs and Zomato is a clear testimony to the mounting fortitude of
Indian eCommerce sector to demonstrate its continued existence in the ‘Billion dollar elite club’.
• Payments landscape is evolving across channels - innovations in mobile technology and security is facilitating digital payments
• The industry has also seen creation of niche/ new job roles in the ecommerce domain. The thrust behind building core-edge technology
platforms is driving eCommerce companies to bet high on international talent with proven tech record along with substantial hiring of skilled
candidates at different positions.

eCommerce in India-Fueling a billion digital dreams 16

Industry evolving rapidly with a gamut of offerings across categories

Rise of the eTailers

2011 onwards

Momentum for E-Tailing segment continue to rise

Decade of online travel - Multi-category/ segments
2000–2011 - Emergence of vertical focused categories
- Brick-and mortar stores entering the online
Online travel agents space

Online Boom Emergence of new segments e.g., online Entry of Global MNCs like Amazon; proposed entry
retail, classifieds, web aggregators, financial of E-commerce giant, Alibaba
Upto 2000 firms, real estate
No. of firms: >1,000 firms
Online job portals No. of firms: ~150-250

Online B2B and other online

matrimonial portals
No. of firms: ~50

*Myntra was acquired by Flipkart last year

Source: ComScore report on Internet, DINODIA Capital Advisors, NASSCOM

eCommerce in India-Fueling a billion digital dreams 17

Indian Start-ups driving innovation and fostering entrepreneurship

Above 60 percent of start-ups focused on digital; nearly

500 are in the e-commerce space Rise of the eTailers
Indian Start-ups breakdown as of 2014
eTailing/ Retail Classifieds
Apparels, fashion & lifestyle, Offering classifieds space to
~200 ~50-60
mobile handsets & advertise product, job,
accessories, electronics, etc matrimony sites, etc
~3,100 Start-ups
Financial services
~2,000 Digital focused
Online sale of insurance
~15-20
related services, utility bill
payments, other transactions

~5,00 eCommerce Travel/ Ticketing Other online services

~70 Ticketing services, hotels and ~50 Online discounted deals,
tour packages online coupons, search sites etc

Delivery & logistics Consumer marketing intelligence Real time analytics & tracking

Mobile payments Mobile advertising

eCommerce enablers

eCommerce in India-Fueling a billion digital dreams 18

eCommerce – Everything for everyone with a strong player ecosystem in
every dimension

Travel/ Ticketing Marketplaces Fashion & Lifestyle Verticals/ Niche

Classifieds Real estate Local Deals & Comparison

Transport Payments/ Wallets Logistics Online Recharge

eCommerce in India-Fueling a billion digital dreams 19

A customer base that is increasingly going online through mobile driving
growth for eCommerce in India

Rise in online consumers – Offering scalability Mobile ready Infrastructure – Helping gain adoption
online buyers (million nos.) eCommerce sales via mobile medium (% share)

65

40

<20

75%
89%
2013 2014 2015E

Rise in online shoppers – Gaining trust 25%

orders per month (million nos.) 11%
>12 2014 2017P

Desktop medium
4 5
Mobile medium

2013 2014 2016E

Source: Accel, ASSOCHAM, NASSCOM

eCommerce in India-Fueling a billion digital dreams 20

Ecosystem – Key enablers for hyper growth in eCommerce falling in place

Enabling infrastructure
Indian telecom infrastructure ecosystem is evolving fast, creating a launch pad for higher internet penetration in India

Capital infusion
Big ticket investments by active global investors; US$2bn commitment by Amazon Inc. into its Indian e-commerce arm;
large amounts of capital commitment from Softbank ($10bn) and Alibaba (through Ant financials), besides other global
firms to support and mentor thereby building the ecosystem

Evolving payment landscape

Cash on Delivery (COD) used as ‘preferred’ lever to boost the eCommerce activity; payment landscape evolving
across channels

Tech and talent driven

eCommerce has enabled creation of niche/ new job roles in various domains. The thrust behind building core-edge
technology platforms is driving eCommerce companies to bet high on international talent with proven tech record
along with substantial hiring of skilled candidates at different positions

Government initiatives
Digital India initiative; financial inclusion; FDI in eCommerce

eCommerce in India-Fueling a billion digital dreams 21

Indian Telecom Infrastructure on a overdrive

Indian telecom infrastructure ecosystem is evolving fast, creating a launch pad for higher internet penetration in India

Spectrum Fibres/ Towers

- Post spectrum auction in Mar 2015,
India now has spectrum to enable pan-
India 3G coverage
- Government expects National optical
fiber network will cover 250k villages by
Dec 2016
- 9% Fiber coverage and 25%- 30%
3G/4G coverage currently
- Capex ramp up by telcos/R-Jio and
govt.’s Digital India will help ramp up
capacity and coverage

Devices Tariffs
Telecom
- Cheapest 3G/4G handsets are available Infrastructure - Data tariffs have reduced by c.20% in
for US$40/150 the past 2 years
- 4G ecosystem in China will provide - Introduction of 4G by RJio/ telcos could
enough supply of 4G handsets in India reduce data tariff further in the next 3
years

Network of forces coming together

Source: Goldman Sachs Global Investment Research

eCommerce in India-Fueling a billion digital dreams 22

Multiple sources of funds driving growth in eCommerce…

VC funding maturing – Flow of venture capital investments turning into a flood High value VC funding deals in Q1 2015

VC Investment (in USD mn)

3.9 91

59
3.3
1.5
21
0.8
0.4
0.1 0.6 0.7
0.2
Jan - Apr 2014 Jan -Dec 2014 Jan - Apr 2015

VC Investment (<$100 mn) VC Investment (> $100 mn) VC Investment (Nos)

Six unicorns in billion $ club, room for more

• With the buzz created by the worlds of Alibaba and Flipkart, eCommerce is
now considered as the preferred sector for VCs to bet high
• eCommerce marketplaces like Flipkart, Amazon, and Snapdeal cracked big
ticket investments from global investors, at the sametime, niche start-ups
$15 billion $5 billion $2.5 billion
like Urbanladder, Firstcry, Limeroad, PrettySecrets etc. had also managed
to catch their sweet spot in the sun
• Investment in service based portals (unlike physical goods) also picked up
high, with millions of funds invested across service portals like Ola, Quikr,
Commonfloor, Housing.com etc. $2.5 billion $1.5 billion $1 billion

Source: Venture Intelligence, WSJ, Yourstory, NASSCOM

eCommerce in India-Fueling a billion digital dreams 23

…With global pioneers in the internet sector eyeing investments in India
Illustrative
SoftBank Sequoia Capital Tiger Global Management Accel Partners SAIF Partners

eCommerce in India-Fueling a billion digital dreams 24

Diverse demographics and inadequate infrastructure catalyze the
transformation of eCommerce into a hyper local, on demand market

India’s attractive demographics – the youngest population in the world – should lead to 300mn+
new online shoppers in the next 15 years Within these bottlenecks, lies
an opportunity for eCommerce

DEMOGRAPHICS – Potential for widespread adoption

Hyperlocal delivery platforms
Rise in online shoppers; under • Allows users to order via their
>1.2 billion people A growing economy ~49 million
penetration offer opportunities mobile app
Youngest population with Growing mid-income households; • Offer location specific
>50 per cent >150 million advantages
25-30 age group one of the biggest across the world

Population with <35 years of age; • Tackles problem of poor

>75 per cent Growing needs Rise in consumption from Tier II/ III cities connectivity as well as limited
growing online user base
presence of organized retail

Lack of infrastructure is a big catalyst for faster adoption:

# people per Hyper market ('000) 2,974 Traditional logistic providers offered
1 added ecommerce solutions, E.g., India
Post, Blue dart, Aramex, DTDC, Fedex

Emergence of specialized
2 e-commerce logistics start-ups, E.g.,
425 Delhivery, E-Com express, e-kart etc
74 233
43
Emergence of logistics aggregators,
3 E.g., Kart Rocket and Zepo
UK USA China Brazil India

Source: Goldman Sachs, Press releases, NASSCOM

eCommerce in India-Fueling a billion digital dreams 25

Payment landscape evolving across channels

Online payment landscape – Easy installments and payment options Mobile based payments fast evolving – Enabling
online transactions by mode of payment, 2014 (in %) digital inclusion
Payment approach Providers
EMI/3rd party 1%
10% Cash on delivery (COD) Aramex, FedEx, Blue Dart,
wallets JAVAS, Delhivery etc.
9%
Credit/debit card/net Visa, MasterCard, American
12% banking express, Diners club, etc.
Netbanking 18%
34% Payment gateways - CCAvenue, Billdesk, PayU,
card linked Citrus, Zaakpay etc.

12% IMPS (Immediate payment IMPS live member banks

Debitcards 30% system) (~59 banks currently)
26% Mobile only based payments
Airtel money, m-pesa, Citrus,
16% Mobile pre-paid wallets
Paytm, Itzcash, Oxigen etc.
Creditcards 40%
0%
• Indian start-ups space is evolving fast to present
consumers and merchants with numerous transacting
60% choices including mobile/electronic wallets, payment
COD 2% gateways, mobile POS (point of sale), electronic fund
30%
transfers etc.
India US China
• Merchants/service providers are opening up for tie-ups
with mobile wallet providers, payment gateways and
credit/debit card providers
Source: Assocham, Central Banks, Goldman Sachs Global Investment Research, NASSCOM

eCommerce in India-Fueling a billion digital dreams 26

eCommerce companies are able to attract best in class talent…

eCommerce ropes in best-in-class talent; spending heavily on

Key skill set – Extensive talent requirements
hiring senior leaders across functions

• Google executive Punit Soni as chief Engineering /Technology User experience

product officer to mark its highest profile - Mobile, Big data and real - Interaction design,
recruitment in technology space time analytics visuals
• Hari Vasudev, the former Yahoo India R&D
Global customer services Vendor management
Head, as a senior vice-president for
- Business development and - Supply chain,
engineering, IT & analytics for the supply
customer experience logistics etc
chain unit
• To double the strength of technology Product managers
team to 2,000 by 2015; appointed Gaurav - Commerce platform,
eCommerce
Gupta (former Cisco executive) as Vice technology management
– ON HIRING SPREE
President Engineering

Hiring source mix is expanding as ever Employee retention – Success mantra

Interesting Work – Innovation, cutting edge
technologies etc.
LinkedIn and other Employee Social network Opportunity to Grow - Wide spectrum of career
online job portals referrals choices, career progression
Open Culture – Good working environment, perks etc.
Rewards – Stock options, Sponsorships, Skill
Hackathons & meetups Campus recruitment/ Internships development, CSR etc.

Source: Press articles, Interviews, NASSCOM

eCommerce in India-Fueling a billion digital dreams 27

…With access to technology partnerships for innovative business solutions

Solution Provider Description Benefits

Helped Flipkart run its e-

commerce business within a
private cloud. The servers From warehouse, supply chain and right through to its
were built to Flipkart's exact payment processing platform, Flipkart's private cloud
infrastructure powers the business and today it can easily
Dell specifications through Dell
support 10 times increase in traffic volume
Deployment Services & due to scalable architecture
Custom Factory Integration

Offers google analytics for the

Chumbak offline retail stores The solution offered better customer engagement and
Torchsight to help better customer increase in revenues based on various factors e.g., check-in
connect and consolidation timings to the store, variety of products often selected and
monitor activities, time spent in the store etc.
Also, help plan store opening hours, product
placements and promotional strategies
Helped Zovi proactively
engage with customers on
their website using facebook
Airwoot
integration and achieve a
10% increase in conversion
rate.

Source: Press articles, Interviews, NASSCOM

eCommerce in India-Fueling a billion digital dreams 28

Digital India – A key cog in the wheel enabling penetration
• Mobile phone & Bank accounts -
Enabling participation in digital &
financial space
• Micro-ATM programs; CSCs/ Post
Offices
Payment Landscape
Indian Government owned IRCTC runs one of the
largest online ticketing portal
“Recently, collaborated with Amazon as an official
eCommerce partner for the next 2 years. Added a
‘shop on Amazon’ tab on its homepage which
redirects to a separate landing page on Amazon.in”
Source: DeiTy, Goldman Sachs Global Investment Research, Press articles, NASSCOM
eCommerce in India-Fueling a billion digital dreams
FDI in eCommerce
• 100% in B2B e-commerce
• 100% in single brand retail (offline)
• 51% in multi-brand retail (offline)
• Complete restriction on foreign online
retailers to sell products sourced by
themselves - should rely on
marketplace model (100% allowed)
Adopting channels to
accelerate the penetration
of internet and
e-commerce
• High speed internet - Connect 250k
village councils to broadband via
National optical fiber network; 400k
internet access points
• e-governance & e-services across
government – Easy access to common
services via cloud
• Leader in IT adoption - Across health,
education, banking
Digital India
India Post with over 1.5 lakh post offices has
emerged as a best friend for the Indian Internet
retailers
“Set to launch its own e-commerce portal in a
marketplace model. Its infrastructure reach could
help deepen the e-commerce penetration further"
29
M&A’s driving customer acquisition strategies for Indian eCommerce industry

Deal size has more than tripled over last year; growing focus on the Indian eCommerce M&A deals: 48 deals worth
domestic market USD >1.4 billion since Jan 2014

M&A Deal size (in USD mn) 1,076 Inbound,

32
Outbound,
6%
17%

612

16 Domestic,
369 77%

404
7 360
• Inbound: Alibaba – One97 Communications, Global
60 Fashion Group – Jabong.com
5 9
Jan - Apr 2014 Jan - Dec 2014 Jan - Apr 2015 • Outbound: MakemyTrip – EasyToBook.com, Zomato –
MenuMania, Zomato – Lunchtime, Zomato –
Outbound Inbound Domestic Deals (Nos) Urbanspoon
• Domestic: Flipkart – Myntra, Ola cabs – TaxiForSure,
Snapdeal – Freecharge,

#4 acquisitions in mobile payments #7 outbound acquisitions by Zomato Organic growth supported by niche
space – Growing access to digital - Demonstrating a clear 'market tuck-in acquisitions
payments leadership'
Source: Venture Intelligence, Yourstory, NASSCOM

eCommerce in India-Fueling a billion digital dreams 30

 India eCommerce – Horizontals to standardize; niche players to personalize

India has experienced a large shift towards online, potentially the biggest in the world of this kind. The advent of eCommerce has seen various
dimensions at the same time. In today’s era, the Consumer is the ‘real king’ here and significant pricing and discounting mechanism acts as the pillars
of competition among companies to acquire customer’s time, loyalty and wallet share.

eCommerce is leading to the emergence of different business models – while horizontal eCommerce is standardizing, at the sametime, verticals are
personalizing as every company is trying to capture the limited time of an online consumer. For e.g., MakemyTrip, Yatra etc are standardizing and
integrating their offerings, at the same time, new travel start-ups are creating niche markets. App-only strategy is one such move by fashion portal
Myntra.com

Indian eCommerce - Segment Analysis

• With ~70 per cent market share, the online travel segment dominates with revenue of USD 9.7 billion. Diversified beyond ticketing; with hotel
bookings, lodging & boarding rentals is driving maximum growth and focus from the consumers. The competition is now shifting towards non-
air travel segments like hotel bookings due to high margins with promising entry of young Start-ups like Stayzilla, Oyo Rooms etc., offering
innovative solutions.
• Large scale VC funding is further elucidating the growth journey of innovative start-ups. Travel start-ups segment has seen a growth of >2.5X in
funding in just 4-5 months this year as compared to 2014
• eTailing, the fastest-growing segment has revenue of approx. USD 2.6 billion, a growth rate of >40 per cent over 2014. Its market share has grown
from 10 per cent in 2009 to 17per cent in 2014, led by increased consumer-led purchases in durables and electronics, apparels and accessories
besides traditional products such as books and audio-visuals.
• The growth of pure online-only retailers forcing brick-and-mortar stores to revamp their operations. While they are embarking upon omni-
channel strategy including multisensory consumer experiences, better logistics and in-store seamless consumer experiences, at the same time,
equally exploring candid and renewed efforts to enter the e-commerce sector

eCommerce in India-Fueling a billion digital dreams 31

Online travel – Overall market leader with 70 per cent share

Online travel: Largest share in India’s eCommerce market KEY DRIVERS

USD billion 1
Growth Highly concentrated segment
31% • ~ 80-85 per cent share by top 3 players in the segment
• Rising household income; increasing spending power of middle class;
inbound and outbound tourism; inter-city migration remain key drivers
9.7
7.4
2 Segment diversifying beyond ticketing
• Hotel bookings, lodging & boarding rentals driving growth; maximizing
FY2014 FY2015E revenues from the high-margin non-flights business
• Out-of-the-box solutions offered by new entrants E.g., Airbnb, Stayzilla.
Innovative start-ups focusing on domestic market. E.g., SeekSherpa,
Top 3 segments Padhaaro, Must See India, WeAreHolidays etc.
• Future trends - Personalized travel (online),Travel planning and travel
automation and Social travel (online)
Domestic Air
Railway tickets
tickets
30-35% share 3
50-55% share Mobile rich interface remains the differentiator
• Approx. 25 per cent of online transactions happening via mobile
medium
Int. air tickets and • Mobile contribution to traffic (visitors) is gaining visibility in Tier II/III
hotel packages cities
10-15% share

Source: IAMAI, IMRB,A SSOCHAM, PWC Analysis, DINODIA Capital Advisors, Company website, NASSCOM

eCommerce in India-Fueling a billion digital dreams 32

While online travel stalwarts are adopting new ways of engagement; large
scale VC funding has alleviated the journey of innovative start-ups

VC funding maturing in deal value as well as diversity

of focus - >2.5X increase in just 4 months
The market leader and online travel major, already 40.5
maintains a unique positioning in the eyes of
customers
• Announced $15 million ‘Travel innovation fund’
focused on young and new ventures in the online 14.8
travel technology space 9
6
• A part of the expansion strategy and acts as an
additional prong of inorganic growth strategy by
pursuing M&A opportunities in the Travel
Technology space Jan - Dec 2014 Jan - Apr 2015
• First investment in a Bangalore-based hotel booking VC Investment (Nos) VC Investment (in $ mn)
services start-up, Simplotel
Top 3 VC investments in online travel space
Innovation, new strategies and unique marketing
initiatives Oyo Rooms - USD 5 mn Oyo Rooms - USD 20 mn
• Booking cancellations via mobile app 1 (Marketplace – Budget 1 (Marketplace – Budget
hotels) hotels)
• Customer forum
Stayzilla - USD 15 mn
• COD service Triphobo – USD 3.3 mn
2 2 (Marketplace – Budget
(Travel – Iten ary planner)
• Pricewatch initiatives etc. hotels)

WeAreHolidays- USD 2.1 mn Triphobo – USD 3 mn

3 3
(Travel – Leisure) (Travel – Itenary planner)

Jan – Dec 2014 Jan – Apr 2015

eCommerce in India-Fueling a billion digital dreams 33

eTailing – Emerging as the fastest growing segment

eTailing: Expanding to niche segments KEY DRIVERS

USD billion
1 Segmented eCommerce gaining traction
Growth
>40% • Emerging niche segments such as food & grocery, Jewellery, furniture, home
furnishing, real estate, etc.
• Off late, online food & grocery start-ups has been catching the spotlight. The
2.6 segment alone has raised above USD 200 mn till date
1.7 • Entry of online restaurant discovery giant Zomato into food ordering and
delivery services will open doors to consolidation in this space
2 Emerging trends – Matching consumer needs
FY2014 FY2015E
• Consolidation (to gain market dominance and enhance portfolio). For e.g.,
Snapdeal acquired Shopo.in, Doozton.com, eSportsBuy.com, Whispicker,
Top 3 segments Freecharge and recently Martmobi to create a better ecosystem
• Investments (to grow and build scale). For e.g., USD 2 billion investment
Computers, commitment by Amazon
Apparels and
electronics
accessories • Mobile infrastructure (eTailers switching to mobile only platform). For e.g.,
& other durables Myntra's impending move to an app-only model, a first step towards the future
30-35% share
45-50% share of shopping

3 Brick-and-mortar stores breaking legacy

Books • Extensive investments in technology and omni-channel offerings to accelerate
8-10% share the growth
• Revamping the traditional websites or e-commerce platform promising doorstep
delivery to consumers; Exploring avenues to tie-up with established online
retailers in India
Source: IAMAI, IMRB,A SSOCHAM, PWC Analysis, DINODIA Capital Advisors, Company website, NASSCOM

eCommerce in India-Fueling a billion digital dreams 34

Impact on Overall Retail Industry – Brick-and-mortar stores investing in
ecommerce

Future Retail and Bharti Retail merged

• Partnership: Kishore Biyani-led Future Group and Sunil Mittal-led Bharti Group have merged their retail businesses
• Details: The merger creates two companies—one focused on retail operations (Future Retail) and the other
CONSOLIDATION TO holding retail infrastructure and investments (Future Enterprises)
GAIN MONOPOLY
• Strategy: Biyani's Future Retail is known for its hypermarket format chain ‘Big Bazaar’ while Mittal's privately held
Bharti Retail runs a convenience store chain 'easyday'. The combined entity hopes to compete with India's top
retailer Mukesh Ambani's Reliance Retail as well as other domestic peers and future competitors besides e-
commerce firms

SHIFT TO EXTENSIVE
ONLINE COMMERCE
Godrej Group's premium food retail chain Natures Basket revamping itself
• Recently tied up with online retailers Snapdeal and Amazon India to take its gourmet food basket of over 400
products to 8,500 cities. Planning to tie-up with other online marketplaces to widen the reach of its retail entity
• Has also revamped its own e-commerce platform promising doorstep delivery within three hours. Earlier, the
company catered to only five cities - Mumbai, Pune, Delhi, Bangalore and Hyderabad - through its brick-and-mortar
stores
"We expect an exponential rise in traffic and conversion rates that can lead to about 10 times growth in our online
business revenues," says Mohit Khattar, CEO, Godrej Natures Basket.

Shoppers Stop leveraging omni-channel strategy

• Details: Invested Rs 20 crore to link its online (shoppersstop.com) and offline activities
TECHNOLOGY • Strategy: The company expects its omni-channel play to be up and running in about an year, and contribute five to
ADOPTION eight per cent to its overall revenue
(MULTI-CHANNEL)
"Earlier, we were multichannel but our online store was not connected with the physical stores. Now we have realised
that omni-channel would give us better economies of scale," says Govind Shrikhande, Managing Director, Shoppers
Stop
Source: Company website, Press articles, NASSCOM

eCommerce in India-Fueling a billion digital dreams 35

mCommerce – Key to drive next phase of growth for eCommerce

Making eCommerce mobile (mCommerce)

Shift from mobile also to mobile ‘ONLY’
• Myntra and Flipkart have already shut down their mobile website, urging
1 mobile users to use apps
Mobile infrastructure creating
• Many start-ups such as Zopper, Doormint, LocalOye, Holachef, Spoonjoy, opportunities for app developers
Truly-Madly and PepperTap to follow the app route only

An average smartphone user has

Mobile outstrips desktop ‘TRAFFIC’
17 apps; easy access to various apps
2 • Mobile traffic for Myntra jumped from 10% a year back to 90% KEY FACTS on play stores
• Online marketplace eBay gets over 45% of its total traffic through mobile
devices Indian users spend >3 hours on their
smartphones with ~33 per cent of
Payments landscape evolving as ‘DIGITAL’ the time on apps; 63 per cent rise in
• Initiatives by traditional banks to facilitate digital payments app usage in last 2 years

3 • Emergence of innovative payments mechanisms such as e-wallets

payment gateways and social payments to boost the e-payments
• Shift in payments from offline to POS mode (credit/debit cards) leading to
adoption of electronic payments

Source: ASSOCHAM, Deloitte, Ericson, Goldman Sachs, Morgan Stanley, Press releases, NASSCOM

eCommerce in India-Fueling a billion digital dreams 36

Indian eCommerce market to cross USD 200 Bn by 2030; driven by augmented
transaction values, increased data usage and higher online shopping penetration...

eCommerce market size to grow 20X by 2030 eCommerce market to grow to 2% of GDP by FY30E

Indian retail market size

~13%

2030P
100% = $1,641 bn CAGR 8%
GDP
3% $11,250 Offline retail
2015 13%
Retail, $1,641
100% = $463 bn CAGR ~20% 15%

2030P
Offline Retail
2030P eCommerce,$216
eCommerce 2%

KEY TRENDS

• Growth in Data penetration 71% by FY2030E • Average transaction value Inflation at about Robotics, Drones
(19% in FY15) from Rs1,800-2,000 to 6%
almost Rs4,300 by FY30E • Innovation in
• Online shopper penetration Reach 25% by • Incremental capital in next logistics and delivery
US$20bn Capital
(4% in FY15) FY2030E 5 years • ‘High speed’ supply
chain

Source: Goldman Sachs, Morgan Stanley, Press releases, NASSCOM

eCommerce in India-Fueling a billion digital dreams 37

…Catalyze the transformation of the eCommerce sector into a hyper local,
on demand market

The evolution of eCommerce till date was majorly centered around the pillars of competitive pricing, deep offers and discounts, wide range of
selection, and convenience – aptly described as ecommerce 1.0 model. With a remarkable growth story in more ways than one, this segment, which
had its humble beginnings in online job portals and matrimonial sites, today stands graciously at 14 billion USD, and growing annually well above 33
per cent.

And now, the times are changing! The growing complexity is giving a way to the new era – the futuristic eCommerce 2.0 model, that includes hyper-
local commerce with innovative platforms, payment solutions and omni-channels retail experience.. Ecommerce 2.0 will surface with new pillars
replacing the old ones - quality (of product, platform, service) replacing discounts and low price war; rich user experience replacing convenience and
ease of shopping; curation replacing selection and enabling discovery of right products; personalization replacing availability of everything “online”
and digital payments replacing COD model.

The new trends emerging in this model will rely heavily on technology enabled differentiation along with exploring new ways of dealing with growing
expectations of customers -

Customized offerings Verticalised solutions

Mobile-commerce based on data analytics Hyper-local commerce
Niche becoming
Intuitive approach Curated user preferences On-demand
mainstream

eCommerce in India-Fueling a billion digital dreams 38

Case Studies
Amazon India unveils 'Kirana Now' service with
same-day delivery

• June 2013, Amazon launched its online marketplace in India offering books, movies and television shows for sale. And later
expanded to more categories
• Domestic presence – Gurgaon (HO) with presence in ~50 cities including Mumbai, Bangalore, Delhi-NCR and Pune
• Recent funding – USD 2 billion investment for expansion plans in India
Amazon • No. of warehouses/ fulfilment centres – #11 (recently announced its 11th and largest fulfillment centre on the outskirts of
In India Hyderabad)
• Pioneered in India – premium delivery (same release day - delivery)
• Amazon pick-up – 1000+ pick-up points, coverage of ~50 cities
• Easy ship model – 78% of the demand is fulfilled by Easy ship

• March 2015 – A pilot launch in Bengaluru covering 5 pin-codes currently; available only via mobile
KiranaNow – • DnA - Combining it’s core strength in technology, Innovation and extensive delivery mechanism with Kirana stores products
A new and local belongingness
experience • Delivery model –Easyship model (25 kms proximity with a promise to deliver the goods "within 2-4 hours“) using its own
logistics OR the neighborhood store's staff OR logistics partners)

• Offering customers an instant and convenient access to the ecosystem of local stores for their everyday needs via mobile
phones
• Express delivery platform, better service offering, continued innovation and customer engagement
Benefits
Achieved • Kirana Now is an India-specific innovation built particularly for the local market. This is a by-India, for-India service. "We
want to provide maximum convenience to customers when shopping for their everyday needs and enable them to shop from
the ecosystem of their local stores on their mobile phones and get things delivered when they really need it” said, Amit
Agarwal Country head, Amazon India

eCommerce in India-Fueling a billion digital dreams 40

Chumbak trending an ‘integration’ strategy; driving
online to offline and vice versa

• Mar 2010, Chumbak started with an initial amount of INR 45 lakh to offer design-focused quirky Indian themed souvenirs,
following both online and offline format together as a differentiated strategy
• Domestic Presence – Bangalore (HO) with flagship stores in Delhi and Bangalore
• No. of offline stores – Approx. 40 Pop Up stores (top 8-9 cities across the country) along with exclusive partnership
Chumbak (offline/online) to retail out a wide range of products categories
In India • Pioneered in 2012 –With additional funding, Chumbak initiated a kiosk model in different malls (adding 20 to 25 in another
year and a half). Last year onwards, it introduced the concept of larger formats with home products (furniture, lighting, wall
art etc.) added to its portfolio
• Chumbak overseas - Two years ago, tied-up with retail stores in Japan and have close to 70 stores. Initiated online retail in
Middle east as well

• Convergence of online and offline channels to drive demand

Trending • Buy online and pickup from store – on the way while going back home
offline/online –
An omni-channel • Using technology for better engagement – shopping cart selected online will allow discount when a customer shops offline
via stores
strategy
• Offer loyalty points on offline purchase at the stores to shop online next time (thrust on generating second time user
demand)
• Key factor: Ensuring customer satisfaction – make sure people buy across platforms

• Better engagement with customers; repeat orders

Benefits • Manage and maintain traction via mobile and healthy conversions
Achieved
• Innovate consistently for online and offline integration to differentiate

eCommerce in India-Fueling a billion digital dreams 41

Oyo Rooms disrupting the travel market with its
‘out-of-the-box’ strategy

• Founded in 2012, OYO Rooms currently offers a chain of branded budget rooms with “standardized experiences”
• Network of technology-enabled budget hotels (Almost 350 hotels in 15 cities)
Oyo Rooms • Inventory of almost 4,000 rooms
• Latest funding - USD 20 million from Greenoaks Capital along with existing investors (Sequoia Capital India and Lightspeed
Ventures)

Launch of mobile app platform for hotel booking as well as booking stay experiences
• Allow customers to not only book rooms in less than 30 seconds, but also order room service directly from the app
Trending mobile
platform • App enables customers to search for the nearest available OYO Room; Search options available for specific location in a city
and explore available rooms on the map
• Also provide details of all the amenities available with the pictures

• Better engagement with customers

Benefits • Convenience and comfort
Achieved
• Offer its users an industry-first three-tap room booking experience

eCommerce in India-Fueling a billion digital dreams 42

CashKaro a ‘differentiated’ value proposition in the fast
growing cashback & coupons segment

• Started in April 2013, CashKaro is one of the largest and funded cashback site growing at 30-40% per month
• 3X – 10X times larger than other cashback sites
• Driven over Rs 150 crores of sales to its partners and offered over Rs 10 Crores of real cash as Cashback to its members
CashKaro
• Free coupons via 500+ partner sites in India with over 2 crores products
• Raised $750,000 funding in August 2013 by a group of angel investors.

In 2015, launched new website with a product discovery & price comparison search engine
“Product
• Facilitate users curate deals by products, brands and retailers and help earn ‘Extra’ cashback on every transaction
discovery”
and “price • Offering a combination of “more shopping, more earning”
comparison”
• Combines consumer’s buying pattern and changing consumer behavior and offer better comparison across products
feature

• Better engagement with customers

• Enhance user experience
Benefits
Achieved • Help discover cashback offers and coupons as available at the product level, thereby making an informed buying decision
across sites

eCommerce in India-Fueling a billion digital dreams 43

Housing.com emerging as a ‘renewed face’ of the real
estate classifieds market

• Started in June 2012 as a rental service finder in Mumbai, Housing.com has expanded its presence to 60 major cities in India
• Offers an online real estate platform which allows customers to search for housing based on geography, number of rooms
and various other filters
Housing
• Nearly 4,000 listings in a day
• Latest funding - USD 90 million in Series C from SoftBank along with existing investors

In November 2014, Housing launched a 3D interactive home booking platform called “Slice View”
• Enables users to take a virtual walk through houses, by providing 3-D renderings of apartments
“Slice View”-
An interactive • Provide details of floor plans, possession, facilities, and various payment options
platform
• Further, it allows customers to book their homes online
• Plans to launch Slice View across multiple platforms on Web and Mobile

• Better engagement with customers

Benefits • Complete virtual experience for users who are keen on purchasing flats in projects under construction
Achieved
• Interactive exploration of the house along with easy booking experience

eCommerce in India-Fueling a billion digital dreams 44