Posts filed under ‘E-commerce’
E-commerce – Proportional contribution by categories
Our last post was on the penetration of e-commerce and the proportion of retail sales contributed by e-commerce , across 5 countries. After reading it, one of our loyal readers asked us for some more information about e-commerce in India. Hence, this time we’re looking at the total value of e-commerce sales contributed by various categories of purchase / transaction.
The pie-chart above shows the proportion of e-commerce sales contributed by various categories in India :
(Data source: IAMAI IMRB Icube 2015 )
- In India, the total value of e-commerce transactions was a whopping Rs. 125, 732 cr in 2015, and it grew at 28% CAGR between 2012-15.
- That online travel drives a bulk of e-commerce revenue in India is a fact that anyone who reads a newspaper is aware of ; this chart adds the details – 61% of the total e-commerce revenue of Rs. 1.25 lakh crore was driven by online travel. Of this, domestic air tickets are the largest chunk, followed by railway tickets, and then international air tickets.
- While online travel grew at a CAGR of 30% over the three years from ’12 to ‘15, rail tickets (17% CAGR) and domestic ticketing (22% CAGR) are slowing down the growth
- What we typically call e-commerce and should more accurately be termed e-tailing – i.e. the purchase of various types of products online – is actually just 30% of the total value of e-commerce transactions.
- However, e-tailing grew at a CAGR of 80% from ’12 to ‘15
- The 3 categories within ‘e-tailing’ that are driving the growth are ‘Mobiles phones’ (126% CAGR),’consumer durables’ (135% CAGR) and ‘home furnishings’ (94% CAGR).
- The ‘Food delivery’ segment , albeit relatively small at just 1.4% of total e-commerce, also grew by leaps and bounds with an 89% CAGR from ’12 to ‘15.
Now that we’re familiar with the data for India, let’s compare the proportional split of e-commerce sales in India by category with that in the U.S. :
(Data source: IAMAI IMRB Icube 2015 ; eMarketer Apr 14 for US showing 2015 projection, validated through other sources )
- In e-tailing in India, there is an over-dependence on ‘computers, durables and consumer electronics’ as compared to the U.S. – almost 50% of total e-tailing in India vs. 22% in U.S.
- If we benchmark to U.S., most categories in India – e.g. ‘apparel’, ‘personal care’, ‘home furnishings’, ‘books’, ‘auto and parts’ – have the scope to grow faster than ‘computers, durables and electronics’. Of course, benchmarking to the U.S. is something that could led to wrong conclusions too, as so many e-commerce firms in the hyperlocal space have seen recently ; hence the need to tread carefully after investigating consumer needs, current satisfaction levels and the nature of the gap
- Interestingly, ‘Auto and components’ is something that hasn’t taken off in e-commerce in India at all, while in the U.S. it is 10% of e-commerce by value. The Indian online car market is limited to ‘second hand cars’ which is mostly a ‘classifieds’ business.
- Ravindra Ramavath
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.
[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
Why Snapdeal sponsors Big Boss, and Flipkart / Pepperfry / Fabfurnish / Jabong / Amazon etc. advertise on mass media
The sudden surge in e-commerce firms advertising on mass media has surely not gone unnoticed by readers of this blog. While Flipkart has been advertising on TV for a few years now (read our posts on their ads here and here) , in the last few weeks every e-commerce firm (with deep pockets and / or investors) has jumped on the bandwagon. Switch on TV and ads for Pepperfry / Fabfurnish / Jabong / Amazon etc. appear as often as those for soaps, soft drinks and biscuits ; drive on any major artery in Mumbai and alongside posters of political parties that contested the just concluded state elections you’ll find those for Pepperfry.com ; print media has been used extensively too with some players even splashing their ad on the front page.
Of course, with the Dussehra – Diwali festival season approaching, one would expect any retail venture to step up promotions and advertising, we see almost all brands and supermarkets doing so too. But what drives the young e-commerce firms to advertise on mass media ? Surely they’re masters of advertising on the internet and on social media, which are not only cheaper media, but allow the brand to fine-tune targeting their audience in a manner that mass media simply cannot match. So why spend big bucks on a (relatively) scatter-shot approach when you have a finely tuned laser at your disposal ?
Ah, take a look at the results of the same. As per this news report, Snapdeal’s sponsorship of the popular teleserial ‘Big Boss’ resulted in them recording highest ever sales. This article quotes Vikram Chopra, CEO and co-founder of FabFurnish, “During and after a few months of the television campaign, our traffic increased two and half times.” And I’m not even getting into describing Flipkart’s Big Billion Day sale, as the furore afterwards has ensured that everyone knows all about the record number of prospective customers that logged in on the day. Would advertising on digital and social media alone give e-commerce companies the same outcome ?
One simple fact can help answer this. Amongst the Indians who are active online, a low proportion actually shop online; we gave the data related to this in a post a few weeks ago. For instance, in Russia and China, almost half of the population that are active online also shop online ; whereas in India this proportion is a little less than 10%.
There are various reasons for this. Firstly, the number bandied around as the number of Indians that are active online includes even those who access the internet infrequently. As this post shows , in the top 35 cities which account for 42% of Active net users, only 54% access the internet daily. The All-India figure for percentage of active internet users who access the net daily is much lower.
Now, layer this with the fact that a significant proportion of sales for e-commerce firms are from tier 2 cities, and you see the importance of getting their residents transacting online. The best media for targeting these markets is still TV. As this article mentions Snapdeal CEO Kunal Bahl saying during a conference, “All e-commerce companies want to penetrate the tier-II market and Big Boss is a great medium for that.”
Hence, the necessity for e-commerce firms to advertise on mass media and attract more people onto online media, simply advertising on digital media just won’t suffice as not enough people are active online.
- Zenobia Driver
Internet penetration and the proportion that shop online – a comparison across four countries
After last week’s post on segmentation in the apparel e-tailing space, we thought we’d share some information on internet penetration in India and the proportion of the population that makes purchases online. To make this more interesting, we decided to compare the data across four countries, and represent this in an easy – to – understand graphic.
- Ravindra Ramavath
Segmentation in the apparel e-tailing space
A friend who recently purchased some kurtas online made a chance remark about how only certain sites stocked the kind of kurtas that she was looking for and this set me looking through the catalogs of various e-commerce sites.
As the apparel e-tailing space in India has grown and evolved, various brands are consciously segmenting their audience (basis demographic variables, occasion of use etc.) and targeting specific segments ; this is evident from the conversations on their facebook pages, their ads, and of course, the offerings in their online catalogues. Even within a particular type of apparel – for instance, women’s ethnic wear, the styles, colours and prints of salwar-kameez sets or kurtis varies, as do the ages and the demeanour of the models in the pics.
For instance, consider the salwar-kameez collection of Utsav Fashion and Zohraa. In the case of Utsav Fashions, which started off as an offline store and switched to the online model only when they realised that a significant percentage of their business was coming from NRIs abroad, it is not surprising that the focus is on occasion wear. On the other hand, Zohraa, a relatively young firm whose site started operations during the second half of 2012, recognised the opportunity to differentiate itself in a crowded online market-place and consciously decided to focus on occasion – wear, or as their website expresses it, ‘….. our collection of elegant and opulent occasion wear…. that reflects the sensibilities of the royal wardrobes of the past, while ensuring that the cut and the drape are modern, comfortable and practical for the woman of today.’
Then consider Jabong, which started operations in January 2012 and is targeting a younger, more westernised demographic. Their youthful and light-hearted – even sometimes irreverent – attitude is displayed in the ‘fashion nikla mann fisla’ series of ads (links to the ads here, here and here). To match this, even the collection of women’s ethnic wear at Jabong is far younger, more casual and breezy, witness the difference between this set of pics and the earlier ones.
On the other hand, Suchi Mukherjee’s Lime Road, which also started in 2012 seems to be targeting a different demographic and a different usage occasion. Lime Road’s stated identity is as a social commerce site targeted at the modern woman. It seems to carry colours, prints and styles that are just perfect for the young working woman, and sits neatly in the space between Jabong’s breezy casual style and the occasion wear offered by Zohraa and Utsav Fashion.
If you’ve noticed this in other sectors of the online apparel market, do write us a comment. Meanwhile, we’re looking at other types of apparel and accessories too, and will post on this topic again if something catches our attention.
- Zenobia
Flipkart Ads – We Like!
Brand: ‘Flipkart’, the popular online shopping site
Tagline: No kidding, no worries
Our opinion: Well, the title of this post summarises my opinion rather well.
The ads break through the clutter with the use of kids in adult situations (in office, shopping, at a beauty parlour, etc.); even better, rather than use them just for cutesy – pie warm stuff, the ads use them to make a point humorously. And I like the implicit pun on the word ‘kidding’.
The two ads set in an office situation get the office situation, behaviour and dialogue bang on. And I like the way that a line that underlines childhood is popped in (the classic ring-a-ring-aroses in this one !!) at the perfect time.
This interaction at the water-cooler is my favourite
Links to other ads in the series here and here.
Do share you opinion of these ads with us.
By,
Zenobia D. Driver
Latest updates on Product Placement & Flash Sales
Update 1: Product Placement
Few months ago, we ran a series of posts on product placement (read here, here and here) – and have been receiving several hits on the topic. We recently came across this article in the Mint about the race of advertisers towards product placement and co-promotions with Bollywood films in the upcoming festive season, and thought it would make an interesting read for our readers, so here’s the link.
Update 2: Flash Sales
The latest entrant in the global flash sales space is the chain of upscale department stores, Saks Fifth Avenue. Their flash sales site is called Saks Fashion Fix. 
The first department store of the type to enter the category was Nordstrom with its purchase of HauteLook.com early this year.
The difference here is that Saks is hosting the flash sales website on its current website itself, hoping to lure in consumers to its regular items as well. Also, given its long standing relationships with vendors, it should be able to avoid the pitfall of having a shortage of merchandise to sustain its flash sales initiative.
But, given that this space is dominated by leaders like Gilt, HauteLook, Rue La La, Ideeli, etc., will Saks Fashion Fix be just another flash sales website or will it have something different and exciting to offer?
To read our previous series of posts on flash sales, click here.
By,
Escape Velocity Team.
Flash Sales – Marketing
To conclude our series of posts on Flash Sales, here’s a post on how these sites market themselves:
Flash sales are a brilliant example of viral marketing. Access to such sites is ‘by invitation-only’ which lends an air of exclusivity (although anyone can get an account if an invite is requested). It gets referrals through users’ personal networks and offers incentives (e.g. $25 credit, Rs.1000 credit, free designer bags, etc.) to current members to invite their friends to join the community.
One of the most critical things in such a sales model is that the shopping interface be user-friendly and convey premium-ness. So most websites have used rich, deep colours to give it that exclusive feel, and ensured that the website is very easy to navigate. These websites, preferably called “premium shopping clubs” are targeting 20-35 year olds who spend a lot of time on the internet. These websites have a strong presence on social networking websites like Facebook and Twitter, which act as daily reminders, discussion forums for the on-going sales as well as forums to generate interest through contests, etc.
In response to the concerns of members about the site getting too crowded, the ‘Gilt Group’ even created ‘Gilt Noir’, an exclusive loyalty program, which gives big spenders and VIPs advance access to sales, and brings private promotions from designers who refuse to sell on regular Gilt.
For differentiation, some of the websites have deviated from the original model, for instance, those visiting the ‘DesiCouture’ website do not need an “exclusive membership” to view the merchandise on sale. ‘DesiCouture’ also offers the option of special ordering – either by size or if the product is sold out. In addition, it also has the option to sort the products by product type, price, designers, etc. While most other websites sell previous season Indian designer wear, ‘DesiCouture’ works towards promoting upcoming designers by commissioning garments to be made at a price point as low as Rs.1500 alongside established designer prêt lines.
Marketing expenses are at a minimum; sales are announced by email a day to a week in advance and an email reminder is sent at the time of the start of the sale. All sales start at the same time, so as to condition members to log onto their website at the same time every day – almost making it a routine for customers – simply a brilliant way to achieving repeat visits by customers. According to New York Magazine “During the hour after its weekday sales kick off, between noon and 1 pm…its site (Gilt.com) is visited by an average of roughly 100,000 shoppers.”
Most such sites have tied up with certain designers, celebrities, stores, fashion magazines and blogs, TV shows and events. These tie-ups vary from a features spread in a fashion magazine saying “available on 99labels.com”, to a small spread on upcoming sales on popular fashion blogs like highheelconfidential.com or purseblog.com. Sites also have tie-ups with TV shows like ‘LaunchMyLine’ – a show that encourages new talent in fashion designing, and with Film Festivals and fashion events, for instance, ‘Fashion and You’ partnered with Lakme Fashion Week as their official online partners. This gains them sufficient mileage without having to spend much on marketing.
These websites also have their own blogs which talk about the latest fashion trends, upcoming designers, as well as top picks for the month from their merchandising head and leading fashionistas. The blogs also link back to relevant sales that may be going on at the time. This is also a great way to keep readers returning back to the website. Here are some links…
http://www.gilt.com/blog
http://connect.fashionandyou.com/
http://blog.99labels.com/
http://www.ruelala.com/blog
By,
Roshni Jhaveri
Flash Sales – Procurement
More on the theme of Flash Sales, which was discussed in the last two posts, here and here :
One of the challenges for such a business model is procurement.
Two years ago, Gilt did 3 sales a week and now it does about 70 sales in each week. When Gilt started, its aim was to just move the sample or private sales to the virtual world; they soon found that these were few and far – flung. They lucked out due to the financial crisis that hit the US (and the world) in 2008-2009 when loads of designer goods remained unsold and fashion houses were more than willing to liquidate their inventory.
But now, with the economy bouncing back, Gilt has adopted a new approach for procurement, utilising the relationships they have built. Now that there is far less overstock to go around for all these flash sales, it’s obvious that liquidation alone won’t suffice for the business growth. So while last season goods and liquidation stock makes up about 60% of the merchandise sold, 35-40% of the merchandise sold is acquired through specially commissioning or manufacturing merchandise to be sold through this route.
As membership keeps growing, the companies have had to work frantically to keep pace with new appetites, and to come up with creative ways to expand their pipeline. So now, Gilt acquires its merchandise directly from the fashion houses instead of buying from wholesalers (as most discounters do). For instance, the company is now sending buyers to place orders with designers at the beginning of the season. Closer home, ‘Fashion and You’ has partnered with Lakme Fashion Week, where they propose to sell the prêt lines of participating designers “fresh off the ramp”.
Some designers are reported to be creating special lower cost lines for such websites by using slightly poorer quality fabrics, locally sourced fabrics, less detailing, lesser stitching, and leftover or sample fabrics from earlier seasons. Typically, neither designers nor flash sale sites disclose that there are certain products have been made especially for the websites since this would dilute the retail price that is quoted on the products and the feeling of getting a steal. (Source: New York Magazine)
That said, this is a win-win situation for both the flash sale sites and the designers because when designers reach a certain production threshold, their cost per unit goes down, while the sale price remains the same. Therefore, they make relatively higher margins on the merchandise that sells at retail and make up for the margins lost on the merchandise sold through flash sales.
Other advantages it provides to designers and manufacturers is larger geographical presence, liquidation of last season stocks without diluting the brand, increased brand presence, alternative sales channel with minimal marketing and holding costs as well as opportunity to interact more closely with customers through blogs and advice sessions on such websites.
(Sources : News Reports – Indian Express, Outlook India, NYT, etc)
By,
Roshni Jhaveri
