etailing india jaipur conclave- 2013 mehul agrawal- furniture e-tailing – why furniture as a...
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Mehul Agrawal is a co-founder at FabFurnish.com, who heads the operations and logistics departments with great zeal and enthusiasm. Under his strong leadership and great aptitude, FabFurnish.com has emerged as a strong brand in a short span of time. Mehul is a Silver Medalist from the prestigious Indian Institute of Management –Calcutta. His professional experience prior to FabFurnish.com includes Investment banking at Morgan Stanley and management consulting at The Boston Consulting Group. His multitude of experience across industries – telecom, banking, retail, consumer goods, airline engineering, and across geographies – London,New York, Sydney and India, coupled with a strong vision to become an entrepreneur, led him to FabFurnish.com where he has displayed incredible expertise across the diverse portfolios which he manages.TRANSCRIPT
-‐ Mehul Agrawal Co-‐founder and Managing Director
Relevance of online platform for Furniture
Industry
AGENDA
E-commerce - Why e-tailing?
Furniture e-tailing – Why Furniture as a category will do great online?
Understanding Customers - Who are they and what’s in it for them?
Implications – What do brands/vendors need to do?
Before we start – What do you think of online?
Online is for discount mongers – cheap cheap cheap! • 60%+ sales without discounts • Repeat purchases are significant – shows genuine interest Online is for urban population – hi-tech youngsters! • 40% sales outside top 10 cities; expected to rise to 60% Only low value products sell online • Maximum basket size – 2.5 Lacs; 70-80% revenues from orders above Rs. 3,000
Online has excessive returns – loss making proposition • <5% returns when managed properly, and doubles the conversions online
E-‐commerce – Why e-‐tailing?
Indian retail market is largely unorganized E-tailing is providing impetus to growth of organized segment
However, overall share of e-‐commerce in India will s5ll be miniscule (~1%) compared to US (~9%) and China (7-‐8%)
3% 5%
12%
20%
2005 2010 2015 2020 0%
10%
20%
30% Organized as a % of Total Retail
13-‐15%
25-‐30%
60%+
Overall Retail Organized Segment e-‐Commerce
CAGR OF RETAIL
CAGR
>90% market sCll unorganized today E-‐commerce is expected to grow 5 Cmes
faster than overall retail
Source: Broker Research
29
36 46 60 80
137
190
273
376
3%
3%
4%
5%
7% 10% 15
% 22
%
30%
0
100
200
300
400
2007 2008 2009 2010 2011 2012 2013 2014 2015 0%
25%
50%
Unique Users (million) Penetra5on (%)
Increasing penetration of internet is fueling e-tailing growth
4 5
7 8
11 13
21
28
45
2007 2008 2009 2010 2011 2012 2013 2014 2015 0
25
50
Users transac5ng online (million)
Exponen5al growth of users that will be transac5ng online
By 2015, 30% of Indian populaCon will be using internet
10% of Internet users are already transacCng online
Source: Avendus Es<mates
Consumers are also spending more time online to aid their purchase decisions
71%
64%
29%
24%
15%
9%
6%
3%
19%
10%
0% 20% 40% 60% 80%
Family
Friends
Online product reviews
Product web sites
Search engines
Discussion forums
Social media sites
Influen5al bloggers
TV
News sources
SOURCES OF RECOMMENDATIONS FOR PURCHASE
30 45
2011 2015 0
25 50 75 100 125 150
DAILY AVERAGE TIME SPENT ONLINE
Minutes spent online (India) USA
9% 13% 18%
33%
19%
8%
<5 5-‐10 10-‐15 15-‐20 20-‐30 >30 0%
15%
30%
45%
% of P
urchase Sessions LENGTH OF A PURCHASE SESSION (MINUTES)
Online sources are aiding purchase decision of Indian consumers…
…who conCnue to spend more Cme online, sCll behind global peers though
Source: Avendus Es<mates Source: B2C e-‐Commerce report
Diversified access ensures that next growth wave comes from smaller cities and towns
80%
60%
40%
2007 2012 2016 0%
25%
50%
75%
100%
% of total customers
Online players are gaining increasing business from smaller ciCes and towns…
…as the pla_orm provides an instant vast reach compared to offline organized players
Source: Avendus Es<mates
IllustraCve depicCon of reach of organized players
Broadband reach and 3G penetraCon are key drivers
% of revenues coming from top 10 ciCes
Bottomline: Indian e-commerce will witness a huge growth ~$70 bn by 2020
0.3 0.4 0.6 1.6
9
2009 2010 2011 2012 2016 2020 0
5
10
15
20
INDIAN E-‐COMMERCE MARKET SIZE ($ BN)
Total Market Size
55-‐60% CAGR expected 5ll 2020
Source: Industry reports, Analyst es<mates
70
Online Home & Furniture Retail – Why?
Furniture Jewellery
Home Furnishing Kitchen Health Products
Apparels Fashion Shoes Cosme5cs
Books Electronics Computers Appliances
Nascent Categories
Mature Categories
Furniture Retail is on its course of being the next big category for e-commerce
Source: Global Webindex
Early signs indicate a promising yet untapped opportunity
362%
119%
100%
98%
90%
76%
75%
13%
3%
3%
2%
2%
10%
15%
0%
100%
200%
300%
400%
0%
5%
10%
15%
20% GROWTH ACROSS CATEGORIES IN E-‐COMMERCE
YoY Growth % Reach %
Source: Report – State of e-‐Commerce in India
Internationally, furniture has already emerged as next big trend in online shopping
• Home products are 50%+ sales
• Turnover: $150M (2012E)
• Turnover: $200M (2012E)
• 100% YoY growth; 75% repeat rate
• 1B+ online visitors (Alexa Rank: 294; Zappos: 737)
• 25% growth in online sales
• Turnover: $600M (2012) • Turnover: $150M (2012E)
Home goods market in U.S. is $500bn and 6% of it is online
Source: Press release, news ar<cles
Case in point –
11 Million members across 26 countries
33%
33% sales via Mobile device
Purchase Repeat
66% Repeat purchases by members
50% sales are home products
In 18 Mon
ths
15000 products online 15% exclusive
90% not available on other major websites
66%
Source: Press release, news ar<cles
Online search volumes are also rising rapidly Expected to follow trajectory of established categories
2007 2008 2009 2010 2011 2012 2013 0
25
50
75
100 ONLINE SEARCH FOR ITEMS IN GOOGLE
Shoes Furniture Wall Clocks Bed Sheets
2006 2007 2008 2009 2010 2011 2012 2013 0
25
50
75
100 Furniture
2007 2008 2009 2010 2011 2012 2013 0
25
50
75
100 Bed Sheets
Source: Google Trends
Even for e-tailers, Home and Furniture provide a great business case
Higher Margins and Lot of Private label
50% lower returns than industry standards for other
categories
Purchase Repeat
2-‐3x basket size – both number of items & Ccket size
Nascent but already seeing repeats at 15-‐25%
Flurry of e-‐commerce ventures dealing in Home & Furniture over last year…
…as it provides a great business opportunity compared to other categories
And there are significant advantages over the traditional physical model too
Network reach Operational hours Range of products
Product launches Product pricing Basket size Floor negotiations
Retail Investment Sales force Warehousing cost
After sales Delivery timelines Product assembly
Scale & Presence
Sales
Investmen
ts
Service levels
Physical Online Physical Online
E-‐com catching up through local presence
Lastly, you can do so much more online…
Assortment + Depth • Why make a choice? Go wide and go deep Be closer to customers • Get instant and accurate feedback on what customers want and what they perceive
Leverage market intelligence • Data/Analytics/Behaviour/Patterns everything is at disposal
Run pilots/exclusivity campaigns • ‘Will it work’? Push customers online by maintaining exclusive ranges
Trigger impulse buying?
Understanding Customers – Who are they and what’s in it for them?
51%
0%
10%
30%
26%
14%
9%
5%
7%
49%
0%
11%
26%
23%
14%
9%
6%
10%
Total Customer
Less than 20
20-‐25
25-‐30
30-‐35
35-‐40
40-‐45
45-‐50
More than 50
Female Male
25-35 years is the key age group for Home However, gender split remains equal
Given only 20% online shoppers are women, the category has a significantly higher penetra5on among women
Source: Industry es<mates
60% sales comes from top 10 cities South is the largest region with a ~40% share
29%
7%
25%
37%
2%
% OF SALES FROM DIFFERENT REGIONS
North East West South North-‐East
35% of all sales come from Metros; 60% comes from top 10 ciCes
South provides the largest pla_orm for online sales contribuCng ~40% of sales
35%
25%
40%
Metros Next 6 Ci5es Rest of India
% OF SALES FROM DIFFERENT CITIES
% of total sales
Source: Industry es<mates
2,095
1,549
1,634
1,825
2,165
2,278
2,323
2,412
2,391
2,748
2,988
1,675
2,443
2,591
2,940
3,482
3,247
3,418
Total Customer
Less than 20
20-‐25
25-‐30
30-‐35
35-‐40
40-‐45
45-‐50
More than 50
Female Male
Basket Size
Men have a significantly higher basket size than women across age groups
Source: Industry es<mates
Repe
at Rate
% customers m
aking ne
xt purchase
20%
10%
12%
16%
21%
24%
24%
26%
25%
15%
11%
9%
12%
15%
17%
19%
20%
23%
Total Customer
Less than 20
20-‐25
25-‐30
30-‐35
35-‐40
40-‐45
45-‐50
More than 50
Female Male Male
However, women depict greater loyalty and have higher repeat rates
Source: Industry es<mates
Critical to address consumer sentiments across the board to enable online purchase
Can I trust the website? Will I receive the products safely?
Will the products get delivered 5mely?
How do I raise my queries/concerns? What 5me of the day can I make the purchase? What kind of payment op5ons are available?
Is the variety of products sufficient? Are the products different/unique?
Is the overall deal aorac5ve?
What exactly will I get? How can I experience the products? How will the products get assembled?
Trust and Safety
Added convenience
Value proposiCon DemysCfying products
1
2 3
4
Can I trust the website? Will I receive the products
safely? Will I receive the products
Cmely?
Guaranteed Delivery in 8-‐13 days
Addressing consumer sentiments: Trust and Safety
1
What exactly will I get? How do I experience the product – Touch & Feel?
How will the products get assembled?
Addressing consumer sentiments: Demystifying products
2
Is there a sufficient variety across categories?
Are the products different or unique?
Is the overall deal asracCve?
Foldable Wall Shelves
350
200
75
50
50
50
Living Room Furniture
Bed Room Furniture
Dinning Furniture
Outdoor Furniture
Bar Furniture
Workspace Furniture
0 250 500
# of SKUs
Addressing consumer sentiments: Value proposition
3
LOVE Wall Shelves
How do I raise my queries/concerns?
When can I make my purchases?
What kind of payment opCons are available?
0%
50%
100%
11 AM -‐ 9 PM 9 PM -‐ 11 AM
% OF SALES BY HOUR
33%
Addressing consumer sentiments: Added convenience
4
ImplicaCons – What do brands/vendors need to do?
• Focus on online
• Exclusive range
• Invest into systems and processes
• On time delivery
• Be flexible – allow returns
A genuine focus is all it needs
Thank You