The Hyper-Local Retail Revolutionand a case study on mobile retail

The India Experience

Yuvraj Ruia | October 2015

This presentation is a snapshot of the hyper-local retail revolution in India. It includes a case study on India’s mobile retail category and the adoption ofhyper-local format by The Mobile Store, a leading player in the country’s organized mobile retail market. As one of the world’s fastest growing economies,the Indian market is an area of interest for businesses worldwide. The presentation attempts to contextualise retail purchase trends over time and focuseson the emergence of new trends that are shaping up in response to the country’s young and growing consumer base.

About the author: I am a student intern with The Mobile Store, India.

1. India – one of the world’s largest consumer markets

2. Mobile – India’s favorite purchase

3. Retail – How India buys bought

4. New India – Rise of E-commerce

5. The paradigm shifts again!

6. Emergence of Hyper-local

7. Hyper-local at The Mobile Store – a pioneering case study

8. The FED advantage [Fastest, Expert, Delivery]

9. Looking Ahead

10. Summary

Report Index

2

India – one of the world’s largest consumer markets

3Source: KPMG, FICCI

Total Market Retail Market

Unorganized Organized Online

#1.29 billion population, growing annually by 1.2%

#2 largest and continually growing consumer base

#65% share of youth (age <35) in total population - 84 mn

#5 largest consumer market in the world by 2030*

#12.7X rise in gross annual income over 2009-2030

(from INR 56,332 bn to INR 717,127 bn)

Among the world’s largest & fastest growing economies, the Indian consumer market is witnessing format evolution & global interest

4

Mobile market in India Mobile share in total e-commerce sale

#1 billion mobile subscribers in India

#12% CAGR for mobile subscriber growth annually

#250 million mobile handset sales annually

#270 million smart phone users, and growing

#16 billion USD mobile market size by value -:

0% 10% 20% 30% 40% 50%

India

China

UK

France

Brazil

Australia

USA

Germany

Russia

Japan

2014

India’s share highest in the world

4.4 5.9 7.9 8.913.6 16

0

20

2010 2011 2012 2013 2014 2015F

Mobile – India’s favourite purchase category

Source: KPCB Mary Master Internet Trends 2015, Technopak Research

Mobile, as a category, shows path-breaking trends and insights, given India’s vast and ever-growing mobile penetration

Retail – How India buys bought

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Traditional Retail Purchase Preference Enablers for Changing the Purchase Pattern

Brick and mortar shop format prevalent

‘Touch and feel’ of product – an important factor

Known and trusted retailer preferred

Scepticism for online purchase and payment

Low penetration of online banking system

#330 million have access to Internet today

#80% of online access is through mobile

#25% mobile users have Internet access

Secure & convenient payment gateways

Price discounts & tax saving on online purchases

Purchase pattern in India has evolved – move from completely offline based stores to e-commerce channels

Source: www.internetlivestats.com

New India – Rise of E-commerce

6

455

1152

3…

212

0.6

76

0

200

400

600

800

1000

1200

1400

1600

2012 2021

E-retail

Modern Retail : Brick and Mortar

Traditional Retail:brick and Mortar

$1440bn

$490bn

0.40%3%

5%

24%

0%

5%

10%

15%

20%

25%

30%

2014 2020

Total retail

Organized retail

Indian retail market size (USD bn) E-tail’s share in India’s retail sector (net sales)

E-commerce share of organized retail to become 5 fold in the next 5 years going up to 24% of the total market

Source: Technopak Analysis, Gartner Research

The PARADIGM SHIFTS Again

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Challenges with E-commerce Opportunities for a New Paradigm

Last mile logistics: poor connectivity & access

Diluted customer experience due to outsourced delivery

High demand for cash on delivery: 30 day cash turnaround

Customer segments (esp. rural) seek product ‘touch & feel’

Product return/rejection + lack of confidence in after-sales service

Need to create local product centres near the customer

Enhanced and value-added approach to product delivery

Shrink the time & space gap between billing & booking cash

Find a way to retain best of both worlds – Brick & Click

Add a physical face to the online space for comfort & assurance

Need gap identified in the market for the benefits of E-commerce to be coupled with advantages of traditional retail

Emergence of Hyper-Local

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What is Hyper-Local

Hyper-Local retail is oriented around a well-defined community with its delivery mechanism, backed by mobile devices & GPS

technology, directed from and towards the population (both suppliers and customers) within that area.

It therefore offers a speed and ease of servicing that is unmatched by e-commerce giants, thereby shortening the delivery

period and giving customer a ‘touch and feel’ reminiscent of the ‘brick and mortar’ retail experience.

All large retail players working with new start-ups specialising in on-ground quick-turnaround logistics, especially for low value

high frequency purchases like groceries & food delivery.

Hyper-Local matches immediate demand with the nearest available supply in the most cost and time optimized manner

Adoption of Hyper-Local in India

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Best of Both Worlds: Brick & Click Quick Wins for Hyper-Local in India

Hyper-local has emerged as a result of:

Rise of internet users, surge of payment options

Proliferation of geo-location aware devices

This growth fostered primarily by the need for:

Rising impatience among consumers

Need for excellent last mile delivery experience

2014 witnessed a rise of hyper-local delivery start-ups in India

~100+ start-ups founded in the last 18 months

USD 130mn+ invested across 28rounds, bulk in past 6 months

Top segments: Groceries, Food Delivery and Horizontal B2C

Top players: Grofers, TinyOwl, Swiggy, ZopNow, PepperTap

USD 15bn food delivery market, growing 40% YoY in India

Groceries and food delivery segments have seen a sudden increase in the entrance of hyper-local retail players, other categories slowly catching up

Case Study:pioneering Hyper-Local for Mobile Retail in India

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Introducing The Mobile Store (TMS) – the One Stop Mobile Solution Shop

TMS is India's first countrywide chain of telecom retail outlets. The format is that of a one stop mobile solution shop that provides

complete telecom solutions, offering a wide range of multi brand Mobiles, Mobile Accessories, Connections (Prepaid and Postpaid),

Mobile Repairs, Mobile Exchange, Bill Collections, VAS etc. all under one roof. Consumers can avail of After Sales Services not only in

the city of purchase but at any of TMS outlets across the country. TMS has forayed into other mode of retailing as they launched

their first E-Commerce website in 2008 (themobilestore.in) and 2nd (theelectronicstore.in) in 2013. It has made inroads into the

hyper-local delivery market by tying up with existing E-Commerce giants and strike a co-existing model retaining the best of both.

Introducing The Mobile Storepioneering Hyper-Local for Mobile Retail in India

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Category Disruption and Growth Plans at TMS

200mn USD revenue (2014-15)

150 SKUs (Stock Keeping Units) across 19 brands

550 stores in 92 cities

44 distribution centres

1 million handsets sold per annum

Multi-channel retail: physical, online & hyper-local

Capture the digital ecosystem: mobile & related

800 stores in 200 cities

80% coverage of the smart phone market

10 million handsets

Current: Vision:

The Mobile Store: Quick Factspioneering Hyper-Local for Mobile Retail in India

Hyper-Local at TMS: Why do it!

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Traditional Retail

Physical face of seller

Speed of delivery

Assurance of service

Online Retail Hyper-Local Retail

Convenience of shop from home

Electronic payment gateway

Attractive price discounts

Order from comfort home

Expert delivery from next door seller

Price of online, service of offline

Brings the store to your door

BRICK & CLICK: Combining the best of both worlds!

TMS: First in the country to pioneer the Hyper-Local format in the Mobile Retail category

TMS’ unique competitive advantages enabling Hyper-Local:

Multi-channel approach: physical stores, online sites & mobile app

Integrated presence across value chain & customer life-cycle

Partnership with other players – product brands & ecommerce

No other player in the category has in-house infrastructure to match Brick with Click;

aided by Technical Know-how!

Hyper-Local at TMS: How it works!

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Powered by FED: Fastest, Expert Delivery

FED is a Hyper-Local Service offering with a unique edge of providing fastest deliveries with expert assistance

It fulfils an increasing number of online customers who are willing to avail paid express delivery options

It replicates The Mobile Store purchase experience at the customer’s door step:

Expert Technical Assistance

Bouquet of expert services that are unmatched by any other hyper-local mobile seller:

Free phone set up

Free data transfer

Touch & feel of product Best price, paid online

Two year complete cover

Best operator plans

Easy financing options

Best buy-back price

FASTEST EXPERT DELIVERY

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Layer 1

Layer 2

Layer 3

Layer 4

Layer 5

Layer 6

Layer 7

Price Comparison Site

Marketplace Site

Marketplace warehouse

Courier pickup from market place warehouse

Courier aggregation point

Courier disaggregation point

Delivery to Customer by Courier boy

TMS Store

Delivery by Expert

Online retailers

72 Hours

Vs

59 minutes

Traditional Online TMS

Hyper-Local at TMS: Our USP!

Expert delivery targeted in 59 minutes, guaranteed in 2 hours | unmatched industry best-practice offered by TMS

Hyper-Local at TMS: What it does!

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Purchase

Financial Assistance

CustomerAdvice

Value Creation: Technical Support and Mobile Expertise in-built in Delivery

Repeat Cycle

Buying Intent Research Accessories Data Transfer Buy BackInsurance andWarranty

Enables value capture at every step of the product purchase chain

Establishes TMS brand relationship at every step of the purchase life-cycle, as displayed above

Creates partnership opportunities with ecommerce giants and mobile brands for cross-selling & up-selling

Improves inventory management (to add estimate of targeted index reduction)

Increases same store throughput as well as per store sales, revenue and margins

Achieves brand loyalty resulting from superior customer experience and offering

Hyper-Local at TMS: What it does!

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COMPETITION: Central focal point servicing the entire customer base, increasing time and reducing speed of delivery

TMS: Concentrated spheres of delivery and dedicated focal points for each customer segment, increasing speed and reducing time of delivery, also allowing customization & value addition

Brings us closer to the customer than any other player & therefore gives us a premium on proximity

- Competition

- TMS

Challenges overcome by TMS for going Hyper-Local

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Challenges we faced How we overcame them

1 How to be visible to very large customer base, given the competition

Listing on price comparison and marketplace sites to ensure maximum reach through the very large number of visitors to these websites (my smart price, snapdeal, etc.)

2 How to offer a price that is comparable to online platforms

Collaborating with online marketplace sites and cross selling handset accessories and VAS to customer during delivery

3 How to build trust with customers to allow value-added delivery in their living rooms

Providing full security to customer by monitoring and recording interaction of customers with FED experts. Additionally ensuring fool-proof hiring, background checks and onboard training.

4 How to servicing the high demand coming through FED

Formulating an algorithm to locate nearest store in cascaded manner for speedy servicing and monitoring of every request

5 How to ensure easy and smooth purchase experience of buyer

Updating customer with real time delivery status and continuous assistance by a customer support executive for any issue and queries

Looking Ahead: What’s Next?!

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Hyper-local at TMS is ideally positioned to capitalize on national programmes & stated priorities of the Indian government

Digital Indiawill create digital infrastructure across the country and provide access to its

young and growing population

Jan Dhan Yojanawill amplify financial inclusion and provide banking facility across the

rural and urban landscape

Tie-ups with mom & pop stores

Category expansion beyond mobiles

Increase reach, enhance portfolio

Capture entire digital ecosystem

Political

• The govt. top priorities are digitization (through Digital India) and financial inclusion through the PM’s Jan Dhan Yojana

• Both these programmes are opportunities for TMS growth model as it is a perfect intersection of mobile & commerce

Economic

• As India’s young and growing population enters the workforce, it creates purchasing power that further increases demand

• Stronger microfinance engine further drives the consumption push from the bottom of the pyramid

Social

• Both parents working is increasingly the norm in most urban cities, this means less time for shopping chores

• This results in online shopping or labor migration, both require cash transfer convenience and expert delivery

Technology

• Mobile penetration and fast increasing technology reach makes India an ideal market for the hyper-local retail revolution

• With the coming of 4G tele-services and cheap data plans, online consumption will overtake traditional modes of consumption

Environment

• Reduction in paper/ metal currency is a must for carbon footprint reduction across developed and developing economies

• Online payment gateways through digital hyper-local support that cause without losing the benefits of physical transactions

Regulatory

• For wider tax net, the government will support digitized cash as it ensures transparency of transactions and online records

• There have been tax evasion concerns with large e-commerce players exporting from single point. Hyper-local prevents that.

Looking Ahead: What’s Next?!

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Hyper-local at TMS is ideally positioned to capitalize on the government’s stated priorities and industry’s changing landscape

Individual Learnings and Take-Aways from the Internship

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1. Industry knowledge Mobile and Retail are among the two most relevant categories for a growing and young consumer base This internship gave me insight and exposure to the strategic and operational aspects of both

2. Hands on experience I was assigned individual projects and targets within a small team (Project FED) This gave me the opportunity to gain hands-on implementation experience

3. Team work Working at TMS taught me the importance and relevance of collaboration This was crucial given that most of our projects involved cross-functional expertise for success

4. Time management I learnt the value of timing as a key success factor of an organization’s growth This was emphasized even more at TMS, given the fast pace at which the mobile industry is evolving daily

5. Big picture I learnt to appreciate the larger objective and longterm perspective of every single decision that a firm or a professional takes This is well illustrated at TMS as we aligned the business growth strategy with India’s national economic prerogatives

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The Hyper-Local Retail Revolutionand a case study on mobile retail

The India Experience

End of Presentation