E-SHOPPING

INDUSTRY STRUCTURE

STRUCTURE OF E-SHOPPING IN INDIA:

Internet retailing saw the fastest growth in retailing in 2014. Demand was entirely generated by urban consumers, who had access to the internet and computers. As the penetration of computers was still low in India, 2014 witnessed the growth of another channel, namely mobile internet retailing. Volume sales of smartphones registered growth of 69% in volume terms during 2008-2013. This led retailers to invest in their mobile internet retailing platforms, as a large proportion of demand was generated due to mobile browsing of websites. This channel witnessed growth of 151% in 2014 in value terms, which was stronger than the growth of overall internet retailing, at 85% during the year.

PORTER’S FIVE FORCES ANALYSIS OF THE INDUSTRY:

Porter Five Force IntensityCompetitive Rivalry Within The Industry HighBargaining Power Of Customers HighThreat Of New Entrants MediumBargaining Power Of Suppliers Low To MediumThreat Of Substitute Products Low

1. Rivalry withinthe Industry:

These companies faces competition in its marketplaces segment from both offline and online players. Customers can buy products from a wide range of retailers, distributors, auctioneers, directories, search engines, etc. and hence the competition is intense.Various factors such as price, product selection and services influence the purchasing decision of customers. E-shopping companies frequently engage in price-based competition to woo buyers, which limit their ability to raise prices.

2. Bargaining Power of Customers:

The huge competition in the e-shopping market allows the customers to win as companies have to keep their prices in check to attract buyers.A large number of companies has entered the e-shopping space with relatively niche product offerings. Hence, customers can always buy from some other website or some other store in case they are not satisfied with any one player.Since customers demand not only low prices, but also a large range of services and products, their bargaining power is huge and switching cost is negligible.

3. Threat of New Entrants:

The e-shopping market is characterized by low barriers to entry. It is relatively easy for newer players to enter the market and start selling products. Newer players require significant marketing budgets to compete on a large scale and this restricts entry of newer players to an extent.Additionally, security is a paramount during online payments and hence newer players which do not have the necessary brand recognition will find it difficult to attract new customers.

4. Bargaining Power of Suppliers:

Tens of millions of sellers list their products on these companies’ marketplaces; hence their individual bargaining power is limited.However, sellers can also list their products on multiple platforms and sites. Hence, if one company introduces policy and pricing changes that are unsatisfactory to sellers, then it could result in lower number of product listings on its marketplace.

5. Threat of Substitute Products:

As these e-shopping sites sells a vast range of products on its platform and hence there is no real threat from this porter five force.Further, the product range continues to expand and one can easily introduce several different types of products to adapt to changing customer trends.

INDUSTRY ATTRACTIVENESS, DRIVING FORCE AND KEY FACTORS

Increased internet penetration with surge in use of mobiles phones have made India fastest growing e commerce markets in the world. India has third largest internet users in the world with about 245 million users. The rapid surge in the mobile devices across the country has supported internet user penetration in tier II & tier – II cities together with rural areas of the country. This has enables people to explore and get exposed to e commerce opportunities.

MARKET SIZE AND GROWTH:

KEY DRIVERS IN INDIAN E-SHOPPING ARE:

Increasing broadband Internet (growing at 20% month over month) and 3G penetration. Rising standards of living and a burgeoning, upwardly mobile middle class with high

disposable incomes. Availability of much wider product range (including long tail and Direct Imports)

compared to what is available at brick and mortar retailers. Busy lifestyles, urban traffic congestion and lack of time for offline shopping.

Lower prices compared to brick and mortar retail driven and reduced inventory and real estate cost.

Increased usage of online classified sites, with more consumer buying and selling second-hand goods.

Evolution of the online marketplace model with sites like amazon , Flipkart, Snapdeal ebay etc.

The Market Size:

India's e-shopping market was worth about $3.8 billion in 2009, it went up to $12.6 billion in 2013. In 2013, the e-retail market was worth US$ 2.3 billion. About 70% of India's e-shopping market is travel related. India has close to 10 million online shoppers and is growing at an estimated 30% CAGR vis-à-vis a global growth rate of 8–10%.

Electronics and Apparel are the biggest categories in terms of sales.Morgan Stanley expects the size of the Indian e-shopping market to rise from $11 bn( billion) in 2013 to $137 bn by 2020 and market capitalization of these internet businesses could touch $160-200 bn from the $4 bn at present. India’s internet market was at $11 bn (gross merchandise value) in 2013, of which $11 bn was online travel and e-shopping was $3 bn.

Growth Due To Convenience, Vast Opportunities And Monetary Benefits:

Online shopping has become main stream where both consumers and merchants benefit. The advantage of selling online has encouraged merchants and brands of all sizes to explore online medium as their main selling channel while they have multi channel strategy. The consumers have the freedom to shop as per the convenience, from anywhere and get the products delivered at home, no need to go from shop to shop searching for products. Also the e tailers are offering mouth watering discounts, hence people go to malls, shops, see the products, note the prices. Then compare the same on e tailers websites and buy from e tailers. This has led to serious concerns amongst the shop owners, malls where there sales are dwindling. However it is competitive market and only fittest will survive. This has been observed in last Diwali of 2015 where e - tailers like sanpdeal, amazon, flipkart had created quite a buzz in market place.

Not Just Electronics:

On line shopping is not just limited to mobile phones or digital gadgets. Now people are buying fashion products, furniture, food products and even flowers on line. One of the leading e tailer in India has given some interesting statistics about on line shopping – ( every 2 seconds mobile is sold, every 5 seconds home electronics is sold , every 13 second kitchen equipments are sold, every 11 seconds cloths are sold and every 35 seconds fitness equipments are sold ). This shows the penetration on line shopping has made in market place.

Need For Regulation Of E-Shopping In India:

E-shopping has really flourished in India but there is no dedicated e-shopping law in India till date. India should regulate taxation, anti competitive practices and predatory pricing of Indian and foreign e-shopping websites. Meanwhile, many Indian stakeholders have raised objections about the way e-shopping websites are operating in India. These websites are providing deep discounts that have been labeled as predatory pricing by offline traders and businesses. Further, Flipkart, Amazon, Uber, etc have already been questioned by the regulatory authorities of India. A techno legal framework is long due and Indian Government has failed to provide the same so far. There is no doubt that e-shopping websites must be suitably regulated by Indian Government. However, the question is who would regulate and monitor e-shopping activities in India?According to media report, an inter-ministerial panel has requested the Telecom Regulatory Authority of India (TRAI) to take up the role of e-shopping regulator in India or suggest if there is a need for a separate regulator for e-shopping.

INDUSTRY ATTRACTIVENESS-

This growth is likely to be stimulated by a number of factors including:

The entry of more online retailers An increasing number of manufacturers going direct to consumer Product and service expansion by current online retailers and pure plays Continual growth in consumers using mobile devices to browse and purchase products

anywhere, any time and any device.

Retail categories predicted to display the strongest growth over the next five years are the:

Clothing Footwear Jewellery Fashion accessories.

These are driven by the proliferation of specialist online stores and traditional bricks and mortar retailers improving their online offerings. Growing categories include Food/Groceries and Alcohol – indicating a change within the consumer online shopping habits, where common place tasks such as buying groceries are increasingly being transacted through digital channels.

WHAT IS DRIVING THE GROWTH OF ONLINE SHOPPING?

A number of factors are stimulating growth and usage of the online channel for retail purchases by consumers in India:

consumers seeking greater value in their purchases greater variety/choice of goods widespread usage of mobile devices increasing level of sophistication and comfort amongst consumers across all age groups use of social media by both consumers and retailers to drive brand awareness Proliferation of group buying sites.

LOWER ONLINE PRICES IS INCREASINGLY IMPORTANT TO CONSUMERS

Lower prices are the key driver for shopping online, with 55% of Indian online shoppers indicating that lower prices than in physical stores is the most important reason why they shop online. The percentage was even higher for Indian consumers who purchased from offshore sites with 59% of respondents citing that lower prices were the key driver. This driver was consistent both genders and all demographic groups.

Also, improved search engine functionality, price comparison sites and a rising penetration of Smartphone, which allow anytime, any location accessibility as well as barcode scanning, are all increasing pricing transparency and allow consumers to obtain easily the best value proposition in their market.

Consumers aged 15 to 25 identified this factor as their most important reason for shopping online. This not only has implications for retailers currently targeting this demographic, but is perhaps an indication of the changing habits of future consumers.

Over the past year, online shopping has received significant mainstream media attention, particularly with regard to substantially lower pricing from international retailers representing a threat to local multi channel retailers. This has undoubtedly raised consumer awareness about online shopping locally and overseas. Retailers are also now giving more prominence to online channels through various marketing efforts, which is also likely to be contributing to consumer awareness and uptake. This will continue to drive future growth in this channel.

MOBILE DEVICES ARE A KEY ENABLER TO GROWTH IN ONLINE SHOPPING

Mobile devices usage is gradually shifting across a broader range of age groups, with the primary shopping activities being ‘finding a nearby store’ (50%) and comparing prices while shopping in store (36%). Shopping on a tablet device is still in its infancy; however there has been a notable rate of uptake in 2014 compared to 2013. This will continue to grow over the next 12 months as a greater range of tablet devices come onto the market with lower prices.

ONLINE DELIVERY SERVICE IMPROVES

Although delivery has represented a significant barrier for the uptake of online shopping, recent improvements in local delivery service is also instilling greater confidence amongst consumers. This has been driven by the major logistics providers investing in infrastructure and improving their online shopping delivery processes. Advancements in technology, such as high resolution imagery, video content, detailed descriptions, product recommendations and reviews are also bridging the gap between shopping online and the in-store experience.

THE FUTURE

With online retailing now a mainstream sales channel, new competitors entering the market , pure plays expanding their offer and consumers putting increasing pressure on local retailers to provide an increasing competitive multi channel offer to match offshore retailers, the traditional retail operating model is now at a critical junction.

Many of India’s retailers have now commenced the online journey with new strategies and major investment in supporting technology, infrastructure and teams. However the consumer is continually changing, adopting new devices, and engaging with them is increasingly complex. Technology is also continuing to evolve at a rapid rate from both a consumer and retail perspective.

The only constant is the rate of change and the ever increasing level of change.

Retailers are going to have to adapt the current retail operating model if they are going to meet the demands and engage with consumers.

The raft of new competitors are bringing new value propositions, whether they are pure plays, manufacturers, or other global retailers entering the Indian market. Consumers have shown they are more than happy to embrace these new offers.

Indian retailers need to not only embrace and invest now in online shopping but they need to understand, plan and invest in developing a new retail operating model.

In the future we are likely to see a new retail model which we have labeled ‘Consumer Adaptive Retailing’, which may well supersede traditional approaches. This new model will evolve the marketplace to meet the needs of the increasingly sophisticated consumer and to accommodate the rapid development of technologies.