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  • 1

    March24,2017

    DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright2017TheFungGroup.Allrightsreserved.

    ThisisthesecondreportinourIndiaRisingseriesfocusingontheIndianstartupecosystem.WeidentifythefollowingfourretailersasthemaindisruptorsinIndiane-commerce:Flipkart,Snapdeal,QuikrandBigbasket.TherearefiveprimaryfactorsthathaveshapedtheIndiane-commercesector:

    1) Apaucityofmodernretailstoreshasboosteddemandforproductsandbrandssoldonline.

    2) Stronglyprice-competitivee-commercemarketplacesarewellpositionedtoattractshopperswithlimitedincomes,whoconstitutealargepartofIndiasconsumerpopulation.

    3) Offeringcashondelivery(COD)asapaymentoptionallowsmoreIndianconsumerstobuyonline.

    4) IndiahasoneoftheworldslargestInternetuserbases,andIndianconsumersdisposableincomesareincreasing.

    5) GovernmentrestrictionsonforeigninvestmentinIndiasretailsectorandAmazonsandAlibabasrelativelylateentriesinthecountryhavehelpeddomesticstartupsgainastrongfoothold.

    Deep Dive: India Rising E-Commerce

    Disruptors in India

    Deborah Weinswig Managing Director

    Fung Global Retail & Technology deborahweinswig@fung1937.com

    US: 917.655.6790 HK: 852.6119.1779

    CN: 86.186.1420.3016

  • 2

    March24,2017

    DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright2017TheFungGroup.Allrightsreserved.

    TableofContents

    ExecutiveSummary.........................................................................................................................................3

    AnIntroductiontoRetailandE-CommerceinIndia.........................................................................................4

    RetailandE-CommerceinIndia.......................................................................................................................5

    FactorsthatHaveShapedE-CommerceinIndia...............................................................................................51. LackofModernInfrastructure............................................................................................................................52. Less-AffluentConsumersLookforLowPrices.....................................................................................................63. TheOptionofUsingCODasaPaymentMethodinCash-CentricIndia..............................................................74. TheScaleandYouthoftheInternetUserBaseBoostsE-Commerce..................................................................85. FDIRestrictionsandtheRelativelyLateEntryofAmazoninIndia......................................................................9

    NotableDisruptorsinIndianE-Commerce......................................................................................................10Flipkart....................................................................................................................................................................10

    WhatMadeFlipkartSuccessful?.......................................................................................................................10ChallengesFlipkartFaced..................................................................................................................................11RecentDevelopments.......................................................................................................................................11

    Snapdeal.................................................................................................................................................................11WhatMadeSnapdealSuccesful?......................................................................................................................12ChallengesSnapdealFaced...............................................................................................................................12RecentDevelopments.......................................................................................................................................13

    Quikr.......................................................................................................................................................................13WhatMadeQuikrSuccesful?............................................................................................................................14ChallengesQuikrFaced.....................................................................................................................................14RecentDevelopments.......................................................................................................................................14

    Bigbasket................................................................................................................................................................14WhatMadeBigbasketSuccessful?....................................................................................................................14ChallengesBigbasketFaced..............................................................................................................................15RecentDevelopments.......................................................................................................................................15

    TheIndianE-CommerceBubbleandtheRisingThreatfromAmazonandAlibaba..........................................16

    WhatWeThink..............................................................................................................................................18

  • 3

    March24,2017

    DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright2017TheFungGroup.Allrightsreserved.

    ExecutiveSummaryThisisthesecondreportinourIndiaRisingseries,whichlooksatthestartupecosysteminIndia.Inthisreport,weexaminefourcompaniesthataresignificantdisruptorsinIndiane-commerceFlipkart,Snapdeal,QuikrandBigbasketandidentifyfivefactorsthathaveshapede-commerceinthecountry:

    1. Apaucityofmodernretailstoreshasboosteddemandforproductsandbrandssoldonline.TotalsalesmadethroughmodernretailchannelsareverylowinIndia,andthecountryrankslowestintermsofmodernizationoftheretailindustryandinternationaltradeamongmajordevelopednationsandtheotherBRICcountries,accordingtoKnightFrankGlobalResearch.

    2. DespitethefactthatIndiaseconomyisgrowing,manyconsumersinthecountryhavelimitedincomes.Stronglyprice-competitivee-commercemarketplacesarewellpositionedtoattractIndianshoppers.

    3. ManyIndiane-commercesitesofferacash-on-delivery(COD)paymentoption,enablingmoreshopperstobuyonlineinacountrywheremorethantwo-thirdsoftransactionsaremadeincash.

    4. IndiahasoneofthelargestInternetuserbasesintheworld;some462.1millionpeopleaccessedtheInternetinthecountryinJanuary2017.AgrowingpopulationofyoungInternetuserswithincreasingdisposableincomeshascontributedtothegrowthofthefourcompaniesweprofileinthisreport.

    5. Governmentrestrictionsonforeigndirectinvestment(FDI)inIndiasretailsectorandAmazonsrelativelylateentryinthecountryhelpeddomesticstartupsgainastrongfoothold.

    Amazonisamajornewthreattodomestice-commerceoperatorsinIndia.TheUSgianthasbeenexpandingitsofferingintonewcategoriesandisnowtryingtomuscleinonthegrocerymarket.WithnearlyathirdofconsumerspendinginIndiadedicatedtofood,Amazonislookingataverylucrativegrocerymarketinthecountry.Recently,AlibabaalsoclearlyindicatedthatitisreadytocompeteformarketshareintheIndianonlineretailsector.

    Unlesshomegrownrivalsprovidetrulyinnovativeofferingsratherthanjustattemptingtograbmarketsharewithpromotionaldealsduringfestiveperiods,therewillbelittlestoppingAmazonfromstealingsharefromlocalplayers.

  • 4

    March24,2017

    DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright2017TheFungGroup.Allrightsreserved.

    AnIntroductiontoRetailandE-CommerceinIndiaOfflineretailismuchlessdevelopedinIndiathanitisinWesterncountries.Yetthereisnoshortageoftech-drivendisruptorsbringingmorechoice,greaterconvenienceandlowerpricestoIndianconsumersthroughe-commerce.Infact,ratherlikeChina,Indiaseemstobealmostleapfroggingtheintermediarystagesofretailande-commercedevelopmentandmovingdirectlytowardmobile-centered,marketplace-focusedretailing.

    ThecountryappearstobeskippingovertheretailstagesseenintheUSandEurope,whereleadingnationalchainsemergedbyestablishingasmuchphysicalretailspaceaspossibleandwheree-commercewassubsequentlyestablishedthroughdesktopshoppingatretailerswebsites.ThetablebelowillustratesourviewofhowIndiaisshortcuttingthetraditionalmodelofretailevolution.

    Figure1.WesternRetailDevelopmentvs.IndianRetailDevelopment

    WesternRetail IndianRetail

    Predigitalraceforphysicalspacebynationalbrick-and-mortarchains

    Adoptionofe-commercealongsidetheexpansionofmodernchains

    E-commercefocusedondirectretailing(retailerholdsinventory)

    E-commerceledbymarketplacecompanies(websiteisanintermediary)

    E-commerceestablishedasadesktopactivity

    Mobile-firste-commerceadoption

    Source:FungGlobalRetail&Technology

    Inthisreport,thesecondinourIndiaRisingseries,whichlooksatthestartupecosysteminIndia,weexaminefourcompaniesthataremajordisruptersinIndiane-commerceFlipkart,Snapdeal,QuikrandBigbasket.Weconsiderthefactorsthatshapede-commerceinIndiaandwelookatwhythesecompanieshavebeenparticularlysuccessful.

    E-commerceisthesubjectofournextreportinthisseries,too.Theemergenceandexponentialgrowthofe-commerceinIndiahasledtothedevelopmentofancillaryfirms,suchasITsolutionsprovidersandcourierdeliverybusin

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