E-commerce
- 2. What is E-Commerce The term e-commerce is generally used in the sense of denoting a method of conducting business through electronic means rather than through conventional physical means. Such electronic means include ‘click & buy’ methods using computers as well as ‘m-commerce’ which make use of various mobile devices or smart phones. 2
- 3. Some of the common business models which are facilitated by E-Commerce Business-to- Business (B2B) Business-to- Consumer (B2C) Consumer-to- Consumer (C2C) Consumer-to- Business (C2B) 3
- 4. Business to business When a business wants to conduct a commercial activity with another business firm online it is termed as b2b e-commerce. It has enabled various businesses to build new relationships with other businesses for efficiently managing their several business functions. B2B e-commerce could comprise of various models, which may include distribution services, procurement services, digital / online market place etc. 4
- 5. Business to consumer This is the most common form of e-commerce in which a variety of goods ranging from electronic goods, apparels, footwear, stationery, gifts, home appliances and services like travel booking, online matrimonial, online classifieds, digital downloads and financial services are available. This model reduces the cost of having intermediaries and creates a direct relationship between business and consumer. 5
- 6. Consumer to consumer Traditionally consumers have had dealings with other consumers, but only few of those activities were in a commercial sense. E- commerce has made it possible to bring together strangers and providing a platform for them to trade on. For example, portals such as olx and quikr enables consumers to transact with other consumers. 6
- 7. Consumer to business This is relatively new model of commerce and is a reverse of the traditional commerce models; here consumers (i.e. individuals) provide services/ goods to businesses and create value for the business. This type of transaction can be seen in internet forums where consumers provide product development ideas or in online platforms where consumers provide product reviews which are then used for advertisement purposes. 7
- 8. How the market evolved in India 8 August 1995, Launch of internet in India via dialup in six cities 1996, launch of online b2b portals 1997, launch of online job portals 2000- 2005, muted activity due to dot com bubble 2006, launch of online travel agents 2007, entry of number of players in e-tailing 2010, launch of first group buying website in India
- 9. First wave 1996-2000 Liberalization in 1991 attracted MNCs and brought about the growth of the IT industry The introduction of internet in India in 1995 marked the beginning of the first wave of e-Commerce in the country. The IT industry and SMEs were the early adopters of internet. This led to the emergence of B2B, job searches and matrimonial portals. 9
- 10. The first wave of e-Commerce in India was characterized by: • low internet penetration • a small online shopping user base • slow internet speed • low consumer acceptance of online shopping and • inadequate logistics infrastructure There was muted activity in the space in India between 2000 and 2005 The IT downturn in 2000 led to the collapse of more than 1,000 e-commerce businesses in India. 10
- 11. Second wave 2005-2010 The entry of Low Cost Carriers (LCCs) in the Indian aviation sector in 2005 marked the beginning of the second wave of e-Commerce in India. Travel emerged as the largest segment The success of the online travel segment made consumers comfortable with shopping through the medium, thus leading to the development of online retail. 11
- 12. 12 The growth of online retail was partly driven by changing urban consumer lifestyle and the need for convenience of shopping at home This segment developed in the second wave in 2007 with the launch of multiple online retail websites New businesses were driven by entrepreneurs who looked to differentiate themselves by enhancing customer experience and establishing a strong market presence. Starting in 2010, the group buying and daily deals models became a sought after space for entrepreneurs in India, emulating the global trend.
- 13. 13 In the second wave, social networking gained steam in the Indian online space. Initially used for staying connected with friends Social networking websites have now emerged as an anchor in any company’s digital strategy. Termed as social commerce, it is a key avenue for e-Commerce players to reach out to target customers.
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- 16. E-commerce market size in India 61% 29% 6% 5% Share Online Travel Online Retailing Financial Services Classifieds 16Source: Report by IAMAI
- 18. Commodity distribution in e-tailing 18
- 19. Consumer The Biggest Benefactor of Online Retailing 19 Why people buy online? Source: Report by Deloitte on ecommerce
- 21. Factors that will fuel growth of e-commerce in India 21Source: Report by PWC on ecommerce
- 22. 22Source: Report by PWC on ecommerce
- 23. Investments in the ecommerce sector 23
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- 26. Cloud surrounding e-Commerce laws in India • There are no specific e-Commerce laws in India. • The sector is governed by the IT Act 2000, which regulates the legal obligations of sellers and buyers of goods and services in cyberspace • Apart from the IT Act 2000, e-Commerce laws in India need to comply with other statutory laws in force in the country, e.g., the Indian Contract Act and Foreign Investment Regulations. • E-commerce companies also need to comply with banking and financial laws, where applicable Laws regulating e-Commerce in India are still evolving and lack clarity. • This poses a challenge for potential entrants and existing players. 26
- 27. Low entry barriers leading to reduced competitive advantages • The rapid growth of the e-Commerce sector is attracting new players. • The initial investment required to start an online venture is as low as a US$10,000–20,000.87 • The sector is also attracting the interest of VCs and entrepreneurs to secure funds easily. • This enables new companies to easily replicate the existing business models and, thereby, increases competition in the sector. • Furthermore, some operational aspects such as free shipping of products and COD, which were differentiators earlier, have now become hygiene factors. 27
- 28. Rapidly changing business models • Business models have been changing rapidly in the e-Commerce sector. • This could be due to heightened competition and the inability of players to sustain high costs. • Some businesses, such as online DVD rentals, have gone into obsolescence • Some companies in the online retail segment have shut shop due to their inability to sustain price wars with their competitors. • Group-buying companies, which started off by providing deals at high discounts, have now begun selling products. • Therefore, players in the e-Commerce space need to adapt to changing business models and innovate constantly to sustain their businesses. 28
- 29. Urban phenomenon • India’s e-commerce market is mainly restricted to urban areas, with the bulk of the business being restricted to cities. • Internet usage in rural areas is limited. • This could be due to several reasons including low internet speed and internet user base • Rural areas account for 70% of the country’s population. • The inadequacy of vernacular content on e-Commerce websites is another reason for low penetration in rural areas 29
- 30. Customer loyalty • E-commerce players offer huge discounts to lure people to shop online. • Since, Indian consumer looks for the lowest price before making a purchase, the cost of customer acquisition is high for these companies. • Moreover, a large number of players offer the same products at the same prices, switching cost is non-existent. • Consequently, a customer’s lifetime value is low. • This poses a challenge for players in their effort to develop sound strategies to attract and generate repeat customers. 30
- 31. Key market factors to be evaluated before entering a new ecommerce business To achieve their vision, ecommerce companies will need to understand the intricate landscape of new markets in addition to their own internal capabilities and limitations. The following factors must be considered: • Market size: Before moving too aggressively into a new market, it is important to consider how sizable the overall opportunity is. • Ecommerce readiness: It is essential to fully understanding the payment and logistical infrastructure, consumer behaviour, retail opportunity and technological developments. 31
- 32. • Scope of growth: It is also important to look at the internet penetration, demographics of the online buying population and understand which phase of development each market is in. • Barriers to entry: Players should understand the regulatory environment and connect with solution providers, content distribution networks, and digital agencies. • Competition: There is also a need to do an in-depth assessment of what competitors are doing, their online strategy and the nature of each offering 32