March 2014

India: e-commerce for smartphone market

e-commerce in India is growing at a CAGR of 53%

• Online retail revenue in India is expected to grow from US$1.6B in 2012 to US$8.8B in 2016

• Mobile phones are in the Top 3 of products/services purchased online

• Consumers who use internet to make buying decisions spend more than less-connected peers. For instance, digitally influenced mobile phone buyers, buy products that are, on average, 46% more expensive than others.*

*Source: BCG study, Apr 2013

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Online retail market size (US$ Bn)

1 .62.4

3.7

5.7

8.8

2012 2013 2014 2015 2016

Source: Forrester study. Revenues for intermediate years are projected based on overall CAGR

In India, a high percentage of Online, as well as Offline, buyers publish their opinions online

Source: GlobalWebIndex Q2 2012

E-Commerce Engagement: LOCAL SPLIT Post Purchase Influence at a local Level(% of Indian internet users)

91% of multi-platform publish opinion online

75% of online buyers publish opinion online

79% of “offline fulfilment””publish opinion online

20% of rejecters publish opinion online

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Multi-platform: Phone & Tablet. Online: PC only

A Global comparison of Influence vs. Online Purchase shows that India is positioned quite well with respect to its peers

Markets mapped by % purchase online via a PC / Mobile / Tablet V % influence post purchase Source: GlobalWebIndex, GWI.7 Q2 2012. E-Commerce Segmentation

HOW TO READ: 65% OF USERS IN POLAND ARE ONLINE BUYERS (PC / MOBILE / TABLET) , EQUATING TO 12M. 77% OF INTERNET USERS IN THE MARKET HAVE PUBLISHED ONLINE ABOUT A PUCHASE IN THE PAST MONTH.

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Although the India Mobile Phone market is still dominated by Feature phones, fast transition to Smartphones has started

Source: IDC Worldwide Mobile Phone Tracker, March 2013

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India is expected to have the highest growth rate in Smartphone shipments

Source: IDC Worldwide Mobile Phone Tracker, March 2013Page 6

There are challenges to e-commerce in India, but these can be mitigated by the right strategies

Source: survey results cited in Abhinav Journal report Volume II Oct 2013Forrester blog says returns between 5 and 25%. % depends on category and is higher for COD (Cash on Delivery).FDI: Foreign Direct Investment

• Product returns between 5 and 25%*• High where CoD* is offered• Product delivery challenges

• Consumer concerns • 37% cite delivery issues (late, quality)• 30% cite inability to touch/feel • 8% cite website complexity

• Payment gateway issues• High failure rate (20-40%)• Number of hops a key reason

• Regulatory issues• FDI* companies cannot do direct B2C

online

• Have no CoD option in website and offer EMI options

• Alternatively, charge customer additional cash handling charges for CoD

• Partner with reliable logistics providers to address delivery concerns and reduce returns

• Suggest stores or café chains to try out products

• User experience focus in website design

• Understand technical capabilities of gateway partners

• New companies offering fewer hops leading to 15% increase in success

Challenges Mitigation

• Work with trusted partners to set up and run e-commerce operations

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Low broadband speed is compounded by poor physical infrastructure (e.g. roads, ports) and complicated customs and inter-state tax rules

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Indian government’s policy in the area of e-commerce is not clear and implementation is slow

• The e-commerce sector is yet to open up fully in India, and no comprehensive set of laws exist for this sector

• Retail trading (B2C) e-commerce not permitted for companies with Foreign Direct Investment (FDI)*

• Compliance required with several other laws like Contract law, IT Act etc

• FDI is permitted for brick and mortar Retail business

• FDI is permitted up to 100% in B2B e-commerce activities

Source: DIPP (Dept of Industrial Policy & Promotion), India

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e-commerce prospects for Smartphones in the $160-565 (INR10-35K) price range looks very promising

Overall purchase break up by price

Online purchase break up by price

17.4% of all respondents purchased online (multi-brand online or company e-store)

Source: IBM survey with 150 respondents1 USD = 62 INR assumed

23.6%

21.4%

20.2%

28.6%

25.7%28.6%

16.2%4%

14.2% 17.9%

$565+$400-$565$290-$400$160-$290<$160

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We conducted a survey of web influence on smartphone purchase in India

Which brand of smartphone do you Own?

What is the price you pa id for your smartphone?

Samsung

HTC

40%

6%

Apple14.5%

Sony9.4%

How did you purcha se the phone?

35K +

25K – 35K

18K – 25K

10K – 18K

< 10K

Multi-brand physicalRetail store

Multi-brand online retail

Company’s physical brand store

Company e-store

48%

14.4%

5%

Source: IBM survey

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A very high proportion of people surveyed went online to research product and price

Be fore buying the phone , did you research the product online for product a nd price information?

If you used the web for product re search, wha t sources did you re ly on?

0.0%

50.0%

100.0%

91.4%

Co Website/e-store

61%

3rd party website/blog

88%

Social Other

25%

The company website/store is a trusted source of product info

52% of respondents felt the online experience was very important in influencing phone purchase

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Source: IBM survey

Among those who used the company website, primary reasons for revisits are product info, deals and customer service

If you used a company website or e -store (like samsungindiaestore .com or Lenovo's thedostore .com),

what would be your primary reason for visiting the company website /e -store aga in?

Product info and price

Deals and discounts

Customer service

61%

19%

8%

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Source: IBM survey

The company website is one of the key “Go-To” options for customers requiring support

If you required customer service , whe re would you go? (se le ct a ll tha t apply)

0.0%

50.0%

100.0%

Co physical store

Co website Co call center

3rd party retailer

3rd party service center

Online forums

62%

51%

64%

13%18%

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Source: IBM survey

But of the people visiting the company website for support, more than half felt the site was useful “sometimes” or “not at all”

Yes 38%

No 17%

Sometimes 45%

If you used co. website for support, did it help in resolving your problem?

If you have used the company website support, which aspects of the website did you find he lpful

Troubleshooting guides

37%Firmware/ Software 25%

Forums

18%

Ticket Logging

15%

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Source: IBM survey

The survey also found that a high proportion of respondents were inclined to consider buying their next smartphone online

Yes 76%

No 24%

Will you consider buying your next smartphone online?

Which brand of smartphone do you think you will buy next?

Samsung

24%

Apple

33%

Micromax

8%

HTC

4%

Sony

7%

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Source: IBM survey