E-commerce – penetration and value of retail sales, across 5 countries

In Q4 ’15, India surpassed the US to become the #2 market in terms of Internet users behind China. However, e-commerce sales in India are nowhere near the value they generate in the U.S. or in China. So here’s a look at internet penetration, digital buyers and e-commerce sales of the top 5 countries by total retail Sales.

We’ve been interested in this topic for a few years now ; in this post almost two years ago we tried to gauge the penetration of e-commerce in four BRIC countries by comparing the proportion of their population that was active online vs. the proportion of population that actually shopped online. In today’s post, we’ve gone one step further and looked at the value of sales originating from those that shop online, i.e. the proportion of total retail sales value that is contributed through the e-commerce channel. For this purpose, the countries that we’ve chosen are those that are the top 5 in terms of total value of retail sales, namely USA, China, Japan, Germany and India, in decreasing order of sales value.

ECom_Contrib

[Since there’s a lot of information in this infographic, here’s how to read it :

Each of these five countries is linked to two sets of concentric circles, one in the top half of the chart and one in the bottom half of the chart. The set of concentric circles on the top had population numbers and that at the bottom has sales figures. Now for the details.

Let’s consider India as an example. The outermost circle in the top set of concentric circles for India tells us that our country has 925 mn people aged 14 years or more. The circle inside it shows that of these 925 mn people, 221 million or 24% are internet users. The innermost circle shows that only 82 Mn – or 9% of the 925 mn people – are digital shoppers and make online purchases of goods and services other than travel and events.

The bottom circle linked to each country shows the total value of retail sales and the proportion that is conducted via e-commerce. For instance, total retail sales in India are estimated at 818 Bn USD, and that conducted over e-commerce is just 14 Bn USD, or 1.7% of the total.]

So in spite of all the hype around this channel and the huge spend on advertising by the e-commerce players, a mere 9 % of our population shops online, and these purchases account for only 1% of total retail sales. Why only 1% ? Either due to a lower frequency of shopping online vs. visiting a retail store and / or due to a lower value of goods being purchased online. The latter seems unlikely since a large proportion of online sales are for mobile phones and accessories, followed by apparel and footwear, so it must be the low frequency to blame. Two big obstacles for e-commerce to surmount are now clear – the low penetration of online shopping amongst internet users, and the low frequency of online shopping among those that do shop online.

On to our neighbour China. While 56% of their total population is online, over half of these make purchases online. No wonder that sales through the e-commerce channel are 15.9% of total retail sales in China, as the bottom circle shows.

Surprisingly, though the US has a far greater proportion of population that makes purchases online ( 65% of its total population buys through e-commerce), these account for only 7.1% of total retail sales. Wonder whether it’s the ugly frequency problem rearing its head again, or whether it’s due to low unit value of goods purchased.

  • Ravindra Ramavath

July 25, 2016 at 11:16 am Leave a comment

Does this smell ring a bell ?

About the link between fragrances, our memories and emotions, and buying behaviour.

Our last post described the phenomenon behind ‘petrichor’- that marvellous freshly wet mud smell, and why we love that smell so much. In this post, we intend to touch upon a few other such fragrances – natural as well as man-made.  But first, a few facts about our sense of smell.

Humans have five to six million odour detecting cells ; if that sounds like a lot, consider the fact that your pet dog has about 100 – 220 million, depending on the breed ! Multiple sources mention that the human nose can sense about 10,000 distinct scents ; though a paper published in the journal Science in 2014 stated that this number was closer to a trillion scents ! Incredible, isn’t it ? So how does our sense of smell work ?

When an odour enters the nose, if affects the olfactory epithelium that is made up of millions of nerve endings ; the nerve endings pass the ‘message’ along the olfactory tract to the olfactory bulb and it then enters the limbic system. The limbic system comprises a set of structures within the brain that are regarded by scientists as playing a major role in controlling mood, memory, behaviour and emotion. This is why fragrances have such a strong link to our memories, emotions, and moods. Hence the soothing influence of some fragrances (e.g lavender) and the energising effect of others (e.g lime).

This article goes a step further and mentions that smell sensations are relayed to the cortex, where ‘cognitive’ recognition occurs, only after the deepest parts of our brains have been stimulated. Thus, by the time we correctly name a particular scent as – for example – ‘vanilla’, the scent has already activated the limbic system, triggering more deep-seated emotional responses.

This explains the phenomenon often noticed in consumer research on fragrances ; even people who struggle to name a fragrance or to describe it in simple terms like fruity / flowery / lemony / woody / musky etc., can often describe how it makes them feel or what they associate it with –their first girlfriend, grandmother’s morning prayer rituals, a sun-dappled garden with rows of brightly coloured flowers, a hike to the top of the hill in the rain, cake baked by mum fresh from the oven, you get the picture, right ? This is noticed far more during consumer research in India than abroad, as our vocabulary for fragrances is not as developed ; everyone recognises sweet / flowery and citrus / lime, but few can tell a woody fragrance from a musky or a green one, making the act of decoding through associations even more important.

To return to the topic with which I began this post, apart from petrichor, which other fragrances are universal ones, that all or most of us recognise ? In India, jasmine would be one recognised by everyone – whether by the name ‘chameli’ in the North or ‘malleepu’ in the South; sandal would probably be another – calm, soothing, eternal. There probably are a lot of man-made fragrances that we all recognise too. For instance, some of the most common scent associations are those related to food. Ever stood near a shop selling freshly-made chhole-batoore and inhaled deeply before reaching for your wallet ? Or walked past Mysore Concerns in Matunga area of Mumbai and felt the fragrance of freshly ground coffee beans waft up to your nostrils and languorously beckon you to the counter? Maybe it’s just me, but I can think of loads more – fragrant biriyani, or cardamom chai (any masala chai, actually), ripe mangoes, the smoke from a tandoor, garlic naan are among the few that come to mind. Some of this understanding is used commercially too – noticed how there’s often a baking smell that you inhale as you walk past a cookie-shop in a mall ? That’s to make you feel hungry and tempt you to loosen your purse-strings.

But not all universal scent associations are food-related. There’s the salty tang of the sea, mild but still perceptible even in the polluted waters off Bombay, the smell of wet khus on coolers in North India during summer, the smoky smell hanging in the air after a lot of fire-crackers have been burst, the strong antiseptic smell associated with hospitals, the warm n’ fuzzy ‘awww’ inducing smell of a freshly powdered baby after a bath.

There are powerful stories and anecdotes about the way consumers’ relate to the fragrances of products and their strong connection with the same. For instance, consider Johnson’s Baby Powder, a product with one of the most recognisable scents in the world. Introduced in 1893 to soothe irritation on plastered skin, it was soon being used to help alleviate diaper rash too. The aroma of Johnson baby powder is so strongly connected to the image of a happy, clean baby that it is often identified as ‘the baby smell’. In fact, close to a decade ago, a baby products brand trying to enter India found this an impassable barrier and had to retreat – while young mothers liked their products and were happy with them, the grandmothers were rejecting them as ‘the baby didn’t smell like a baby anymore’. What the grannies were missing, in fact, was the smell of the Johnson’s baby powder on their precious grandchild, but their identification with it was so complete that it was ‘the baby smell’ to them.

 

fragrance - iconic products, some ingredients 2Scents are such powerful triggers to our emotions – thence to our loyalty, and commercially speaking, our purse-strings – that many iconic brands have kept the initially successful fragrance unchanged for decades or more. Examples of such instantly recognisable fragrances are Johnson’s Baby Powder, Pond’s Cold Cream, Dettol antiseptic liquid, Old Spice cologne, Pears soap etc.  Of course, a challenge faced by such brands is remaining contemporary and relevant to their audience while retaining the physical product attributes such as fragrance. But that’s another story, meant for another post altogether.

  • Zenobia Driver

 

July 7, 2016 at 12:12 pm Leave a comment

Updates – fragrance of the rain

Thanks to two readers of our blog, we have some more information related to our last post.

Click on this link to read about Geosmin, one of the molecules that plays a role in petrichor. In fact, its name is derived from the Greek words ‘Earth’ and ‘smell’.  Another interesting point, the human nose is extremely sensitive to geosmin and is able to detect it at concentrations as low as 5 parts per trillion. Geosmin is responsible for the muddy smell in many freshwater fish ; Geosmin breaks down in acidic conditions and becomes odourless, hence vinegar and other acidic ingredients are often used in recipes to cook these fish. Thanks for all this info, Oinks.

And this link is about a fragrance called ‘mitti attar’ made in Kannauj, which captures that refreshing energising fresh smell of wet mud after the rain. Thanks for sharing this article, Ruks. This article that is quoted in the earlier one mentions one fascinating factoid , albeit unrelated to petrichor. Apparently after the Empress Mumtaz Mahal passed away, Shah Jehaan never wore perfume again , attars had been one of the couple’s shared passions.

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Zenobia

July 1, 2016 at 1:09 pm Leave a comment

The smell of the rain, and why we like it

rain pic 2

As the monsoon advanced across South India, Wikipedia shared an apt factoid on twitter last week, ‘The smell of rain is “petrichor.” ’ The oxford dictionary defines petrichor as ‘a pleasant smell that frequently accompanies the first rain after a long period of warm, dry weather.’ No wonder most of us love that ‘fresh wet mud’ smell – it heralds an end to the sultry summer and the onset of cloudy breezy weather, but more about that in a bit.                      

The word petrichor is derived from a combination of the Greek words ‘petra’ meaning stone, and ‘ichor’, the fluid that flows in the veins of the Gods in Greek mythology. Petrichor was first described in a paper published in Nature journal in 1964 by Australian CSIRO scientists Isabel Joy Bear and Richard G. Thomas, and the process that gives rise to the fragrance we perceive is fascinating indeed.

During dry periods, plants exude an oil that retards seed germination and early plant growth, this oil is absorbed by clay – based soil and rocks (hence the words ‘petra’ and ‘ichor’). The smell itself comes about when increased humidity fills the pores of rocks, soil, etc. with tiny amounts of water. While it’s only a minuscule amount, it is enough to flush the oil from the stone and release petrichor into the air; this must be why we get that slight whiff of the rain smell before it actually starts raining. This process is further accelerated when actual rain arrives and makes contact with a porous surface; air from the pores forms small bubbles which float to the surface and release aerosols, such aerosols carry the scent and spread it. The article that I referred to for much of this information also has a super slow motion video released by scientists at MIT last year that helps explain this process.

So now you know it, Petrichor – that fresh fragrance that makes everyone’s spirits rise, is not the fragrance of the rain, neither is it that of wet mud, it’s actually due to an oil that’s released from the rocks or soil into the air just before the rain begins to fall. Did the description of the process in the last paragraph kill the romance of that fragrance for you, or make it even more interesting ? I hope it’s the latter, because more deconstruction follows – this time of why we find the smell of the rain so pleasant.

The reason petrichor makes our spirits rise may actually be hardwired into our memories, part of our collective consciousness – some scientists think it’s due to our species’ reliance on rain for a plentiful supply of plants and game animals throughout history.  This article describes some evidence that may support this hypothesis. Anthropologist Diana Young of the University of Queensland in Australia, who studied the culture of Western Australia’s Pitjantjatjara people, has observed that they associate the smell of rain with the color green, hinting at the deep-seated link between a season’s first rain and the expectation of growth and associated game animals, both crucial for their diet.

So next time you draw in a deep breath of that fresh wet mud smell and feel invigorated, think of how that reaction connects you to your ancestors from centuries ago.

Next post : Now that we’ve serendipitously stumbled upon the topic of fragrance and the collective consciousness, we’re going to take this thread further – look out for more examples in our next post.

  •  Zenobia Driver

June 11, 2016 at 8:09 am Leave a comment

Infographic – India expenditure data , rural

We’d earlier shared a set of infographics on per capita expenditure on various categories in urban India (https://escape-velocity-blog.com/2015/08/19/infographic-india-expenditure-data-urban/ ), and the trends over time therein (https://escape-velocity-blog.com/2015/09/22/infographic-india-expenditure-trend-urban/ ). This post shares similar data for rural India.

India MPCE - Expenditure data - Rural

The first point to note is that the average MPCE (monthly per capita expenditure) is much lower for rural India vs. that for urban India (Rs. 1429.96 vs. Rs. 2629.6 respectively). Hence, while the absolute value of expenditure on various categories may be lower in rural India, as a percentage of the MPCE it’s much higher. For instance, though the average monthly spend on food is Rs. 622 per capita, it is 48.6% of the total per capita expenditure ; this is closer to the proportion spent by the poorer fractiles of the population in urban India. One area on which folk in rural India spend much less than their counterparts in urban areas is housing, others are education and transportation. In almost every other category, the proportional spends (spending on category as a % of average MPCE) of rural folk are actually higher than those from urban areas.

 

  • Ravindra Ramavath

 

June 6, 2016 at 11:55 am 1 comment

English-Vinglish, and all that jazz

Read this article about the English Dost app via a friend’s Facebook feed and was reminded of a few incidents that I’ve witnessed during the last year.

On the day a friend left Mumbai for Singapore, among those who visited her house to say goodbye was her maid. The maid had brought her adolescent children along too, and I was amazed at the difference between the maid and her children. Had the mother not introduced me to her daughter, I’d never have guessed how closely they were related; the maid seemed like someone one step away from the ancestral village, while the daughter seemed a native of a big city.

While the mother wears a sari, cannot speak much English and is rather diffident, her daughter prefers jeans and a shirt, speaks good English and is much more confident. While the mother is uneducated, she’s ensured that her daughter got a school education and learnt English, and encourages her to attend college; even though the young girl has to hold down a part-time job in order to meet her education expenses at college ,she’s determined to obtain a college degree that will get her a better job than her mother’s and a brighter future.

A few months later, I was at Bodh Gaya for the sales and marketing module of a Cream training program. The participants comprised micro-entrepreneurs from villages in Gaya and Muzzaffarpur district of Bihar. They could speak some English, but not much ; hence classroom sessions were conducted in both English and Hindi, with constant translation of any English sentence by an interpreter. All our training material (slides , hand-outs, question papers) had also been translated into Hindi for the benefit of the participants. Yet we witnessed an amazing zeal to learn new English words that pertained to their businesses, as if they saw these words as currency for garnering status in the eyes of their peers (remember that these were all rural micro-entrep[reneurs). There were participants who’d stop us mid-sentence and ask us to spell out ‘negotiation’, ‘consumer’ etc. and earnestly write down the English word in their notebooks.

English learning appsNo wonder there’s such a huge market for English learning apps and so many of them available now. There’re generic apps like Busuu through which anyone can learn English ( or another of a set of languages) by having conversations with native speakers of that language. There’re English Dost and enguru, both of which use a game with real-life situations to help users learn English, these seem to target those joining the corporate sector in junior management roles. English Seekho by IMImobile and IL&FS Education & Technology Services limited target a very different audience – junior level clerks, traders, unskilled laborers, frontline staff, taxi drivers, restaurant waiters etc. There’s also the British Council site that has several English learning apps, podcasts etc., and even an app to help Taxi drivers learn English to communicate better with their customers ! Clearly there’s a ton of demand from a large number of segments.

  • Zenobia Driver

December 10, 2015 at 1:18 pm Leave a comment

Updates

We’d run a series of posts on the population distribution of various nations a few years ago and shown the transition of the age-wise demographic distribution of many countries from pyramid to either kite, dome or cylinder (read posts here, here, here). This video from the Economist shows how the population pyramid of the world is changing with time, and here’s an article from the same publication that mentions that from now on children in schools and colleges will learn about the population ‘dome’ and not the population ‘pyramid’ ! Monumental change, isn’t it ?

We’d also looked at some implications of India’s so-called demographic dividend in two posts (read them here and here ). This article from the Mint offers a worrisome perspective on how the low skill levels of our young workforce may undo much of the benefit we hope to reap from it in the manufacturing sphere. It isn’t a very encouraging perspective, so if you’re already in a blue mood, read the article anther day.

Changing topics, a few links on interesting articles related to behavioural sciences.

This video on the Backwards Brain Bicycle is a rather entertaining look at biases – or neural pathways that are so natural we don’t even recognise them, unlearning the bias and then learning to think differently, and how much time it takes.

One article that’s about changing people’s behaviours and an experiment to test which works – facts, science, emotion, or fear.

An article on language, surprisingly on how the language you use changes your view of the world. Incidentally, bilinguals have a lot of tangible benefits, including protection against dementia – so that should be good for all us Indians who know English and Hindi and a mother-tongue, and often Sanskrit or French or some official third language from school.The last paragraph is especially interesting – ‘when judging risk, bilinguals also tend to make more rational economic decisions in a second language. In contrast to one’s first language, it tends to lack the deep-seated, misleading affective biases that unduly influence how risks and benefits are perceived.’ I wonder whether this lack of bias also manifests itself when bilinguals think of other subjective issues in a second language, say opinions of politicians, or climate change, or co-workers for that matter.

Collated By,

Zenobia Driver

November 7, 2015 at 6:06 am Leave a comment

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