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Transcript of Ecommerce digital media_and_convergence_promise_oct_10_final_v2
The E-Commerce, Digital Media and Convergence Promise:
Are we there yet ?
2© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Contents
Digital Ecosystem
Digital Media
Key Trends
Business Models
E-commerce
Key Trends
Business Models
1
2
3
4 Concluding Remarks
Challenges and Way Forward
Challenges and Way Forward
3© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
India goes online…
Claimed internet users as of June 2012 are 137 million
Wireless connections are expected to constitute about 90 percent of all internet connections by 2016
Broadband wireline connections to grow upto 51 million by 2016
Internet enables smart phones expected to reach approximately 264 million by 2016
Mobile gaming touched INR 4 billion in 2011
Tabl
ets
Smart phones
E-B
ooks
IPT
V
Onl
ine
vid
eo
Online advertising Online shopping
Evolving models Internet connections projected to grow to 400 million by 2016
Downloads
App
lica
tions
E-t
ailin
g
Online travel
Social media
Emailing
Internet Online music
Live
str
eam
ing
Mob
ile h
and
sets
Online gaming
Online music
Digital TV
Applications
E-commerce Wire
less
Broadband
Digital cinema
Dig
ital T
V
Digital advertising touched INR 15.4 billion mark in 2011
Online payment
4© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The digital ecosystem is rapidly evolving with continuous growth in internet penetration and mobile device access…
Urban users are expected to reach 105 million by December 2012
Source: IMRB IAMAI 2012 report
Proliferation of new age devices...
Source: Consumer and Convergence V, KPMG in India analysis
As of June 2012, there are 137 million claimed internet users in
India
99 million – Urban
India
38 million – Rural India
Source: IMRB IAMAI 2012 report
Sept-08
Mar-09
Sept-09
Mar-10
Sept-10
Mar-11
Jun-11
Dec-11
Jun-12
Dec-12E
5763
71 7378 82 85
9299
105
Units: Million
Gadget usage
5© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Mobile connectivity will drive the next phase of growth…
Smart Phones and Tablets to drive on-line media consumption
Source: KPMG in India analysis
Demand for smart phones is driven by continuous reduction in prices
Source: Smartphone market in India 2012
Frequency of accessing internet on mobile/tablet
4-5 times a
day
Daily 3-4 times a week
Once a week
Once in 15 days
Once a month
0%
10%
20%
30%
40%
50%
39%
48%
7%3% 1% 2%
Source: Report by ViziSense & Komli Media, July 2012 - Afaqs.com
Better user interface, affordable pricing and availability of internet has led to spurt in
smart phones/tablet market in India
2009 2012
12000
3845
- 32 %
Price – INR
6© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
..powered by the youth….
Source: IAMAI, iCube report
75%
Youth driving the Internet Usage...
Smartphone usage by age-groups 15-24 yrs 31 + yrs
Total Time spent on Smartphone 3 hrs 2 hrs
Total Time spent on Browsing & Entertainment 2 hrs 1 hr
Total Time spent on Chat & SMS 31 mins 15 mins
On an average, Indian smartphone users are spending about 150 minutes a day on their phones and more than 50 percent of this time is on Browsing, Entertainment and Applications.
Source: Nielsen Informate Mobile Insights
Under 18 yrs
18-24 yrs
25-30 yrs
31-35 yrs
36-40 yrs
Above 40 yrs
5%
13%
8%
8%
8%
5%
Smartphone ownership among age groups (as a % of mobile phone users)
...and augmenting the adoption of media devices
Source: Nielsen Informate Mobile Insights
Under 18 yrs
18-24 yrs
25-30 yrs
31-35 yrs
36-40 yrs
Above 40 yrs
5%
13%
8%
8%
8%
5%
Smartphone ownership among age groups (as a % of mobile phone users)
7© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
An evolving new media segment with number of users spending considerable time and players building business models to monetize on the same…
Along with console, mobile and PC & digital TV are emerging in the gaming segment
Growth in the digital ecosystem is one of the key enabler for online video consumption
Digital books Portals Online
classifieds Search
Social networks
Emerging segments
Source : KPMG in India analysis
Television (Users)
Video (Unique Users)
639
101
Audience 2011 (Million)
Source: Comscore, KPMG in India analysis
8© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
What are users doing today…?
Urban Population 2012339 Mn
Computer Literates 133 Mn
Claimed Internet Users 99 Mn
Active Internet Users 80 Mn
Mobile Phone Users 628 Mn
Mobile Internet Users 59.4 Mn
Rural Population 2012833 Mn
Computer Literates 70 Mn
Claimed Internet Users 38 Mn
Active Internet Users 31 Mn
Mobile Phone Users 323 Mn
Mobile Internet Users 3.6 Mn
Activity Urban
E-mail 87%
Social Networking 67%
Chat 61%
Music/Video/Photos 49%
Information search 42%
Activity Rural
Music/Video/Photos 75%
E-mail 56%
Online Services (for educational purposes and Online Jobsites)
50%
E-commerce 34%
Social Networking 39%
Online Finance 13%
Rural Needs 16%
Penetration of activities amongst internet users
Source: IAMAI_Internet in India 2012
9© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Accelerating commerce on the internet…
Source: IAMAI digital commerce 2011, KPMG in India analysis
814614030 16600
2170028500
40300
55600
77100
107800
0
20000
40000
60000
80000
100000
120000
2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E
INR
Cro
res
CAGR – 36.8%
CAGR – 39.5%
E-Commerce market in India Numbers of users transacting online
35
79
1115
21
28
38
0
5
10
15
20
25
30
35
40
2007 2008 2009 2010 2011 2012 e 2013 e 2014 e 2015 e
No
of u
sers
(mn
)
Source: Avendus Research Bain Research, Press Articles
The growth in e-commerce market in India is driven by
Broad segments
Source: IAMAI digital commerce 2011, KPMG Analysis
Online travel
E- retailing
Online financial services
Digital downloads
Other online services
• Rising income levels
• Better education
• Payments infrastructure
• Government initiatives
10© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Provision of viable payment options is also one of the key enablers to drive e-commerce in India
Indian electronic payment-wide array of choices for the consumer
Source: KPMG in India analysis
Case : Indian Railways
50%Net
banking30%
Credit/ Debit cards
20%Prepaid cards
In 2010-11, online ticketing at over INR 80 billion accounted for 40 percent of reserved accommodation of Indian Railways. Such payments were made through
Cash on delivery (COD) plays a significant role in making consumer comfortable with online transactions
40 – 60 % Overall transactions coming through cash on delivery across categories in e-commerce
Advantages
Eliminates long/complex payments
process
Choice to touch and feel the product
Transfers risks from consumers to supplier
incase of delivery failures
Option of reverse logistics
11© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Online consumption, improved connectivity and technological advancements … fueling growth in both digital media and e-commerce
Payment options
Young active users
Mobile connectivity
Internet users
Smartphones / tablets / feature
phones
Social media / research / emailing
Digital books, portals, video….
12© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Contents
Digital Ecosystem
Digital Media
Key Trends
Business Models
E-commerce
Key Trends
Business Models
1
2
3
4 Concluding Remarks
Challenges and Way Forward
Challenges and Way Forward
13© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Digitization – A game changer across major media segments in India
Subscriber base in Television is expected to shift towards digital in coming years
Similarly, digital sales have surpassed physical sales in Music industry
Source: KPMG in India analysisSource: KPMG in India analysis
Source: KPMG in India analysis
Exhibition – Digital cinema
Digital print continued to grow during 2011
Digital now accounts over 80 percent prints
of Hindi film releases
Leading to significant cost savings
Print - Emerging sources of news consumption
Television
Blogs
Social Networks
Online news
websites
Source: KPMG in India analysis
14© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Mobile becomes the preferred device for content access
Source: Mobext India Survey_Role of the Connected Device in the branding and buying cycle of a Consumer
Device purchases cannibalise other media consumption habits
Mobile80%
Laptop/desktop 13%
Tablet7%
Primary Access device
Communication
Entertainment
Information
46%
43%
40%
Use of Mobile/Smartphone
Mobile is the device of choice Mobile dominates media consumption
• 21 percent read less printed books
• 22 percent watched less TV
• 16 percent reduced time on Internet via desktop/laptop
• 30 percent read fewer books in print
• 31 percent watched less TV
Tablet UsersSmartphone Users
44% of total media time is spent on the mobile
As per a survey by Mobext India in 2012 among mobile/smartphone, laptop and tablet users:
15© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Online video takes off in India
2010 2011
0
20
40
60
80
100
120
79.79
101
Online Video: Unique Users
Mill
ion
2010 2011
0
1
2
3
4
5
6
7
8
4.8
7.6Online Video: Time spent
Ho
urs
pe
r u
ser
pe
r m
on
th21 %58 %
India
UK
Germany
US
0 5 10 15 20 25
8
17
20
21
Time spent watching Video online
hours per user per month
79 74 70 69 6655 55 52
4233 33
25 23 23 22 21 20 20 19 15 15
% Reach of online activities on Smartphones
Source: Nielsen Informate Mobile Insights
Source: ComScore, KPMG in India analysis Source: ComScore, KPMG in India analysis
Source: ‘KPMG n India analysis
After activities like communication and search, video is the most popular activities for smartphone users in India
Compared to matured international markets, Indian market still has significant potential to grow
Growth in both users and time spent on Online video
16© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
E-book market presents a new growth opportunity
Source: Bowker
Educational Con-tent70%
Other30%
INR 140 billion Total Book market in India
While the current penetration of e-books in India is just 2 percent, the market is likely to take-up with the following opportunities in India:
World’s third largest book market
Rising literacy rates
Rising adoption of e-readers and tablets
Source: KPMG FICCI Report 2012
3 Lakh tablets sold during Jan-March 2012 and expected to grow by 25% annually
Purchased an e-book during last 6 months
Likely to buy an e-book during the next 6 months
0 10 20 30 40 50 60
20
50
As per Bowker's survey in India (Feb 2012)
% of respondents
Source: KPMG FICCI Report 2012
17© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Consumers now willing to receive targeted advertisements on their personal devices
Source: Consumer and Convergence V, KPMG in India analysis
70% consumers willing to be tracked for advertising
18© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
A shift in ad-spend – Growth of digital media
Advertisers shifting their focus from traditional media to digital media
Source: Zenith Optimedia
Source: KPMG in India analysis
Percentage share of advertising spend by media
Growing contribution of internet ‘s share to the World ad-spend...
TV39%
Print46%
Radio4%
OOH6%
Digital Advertising5%
Digital has surpassed radio in terms of advertising spend
19© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Contents
Digital Ecosystem
Digital Media
Key Trends
Business Models
E-commerce
Key Trends
Business Models
1
2
3
4 Concluding Remarks
Challenges and Way Forward
Challenges and Way Forward
20© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Globally, content providers are experimenting with different business models for online content
A combination of ad supported and paid models are used to monetize content in developed markets
PlayerSubscription (Paid/Free)
Monetization/Pricing
Spotify 2.5 M; 10 MFree with ads; USD 4.99 per month for web; USD 9.99 / month for web and one mobile device
Deezer 1.4 M; 20 MAd supported free streaming (Eur10 m); free, medium tier (4.99 Eur) and premium tier (9.99 Eur)
7Digital3 M registered
usersFree with ads; USD 4.99 per month for web; USD 9.99 / month for web and one mobile device
Netflix 24.6 M$7.99 for unlimited streaming movies OR unlimited one-disc at a time rental service ($11.99 for 2 unlimited). $15.98 a month for unlimited streaming and discs
Hulu 2 M
All content is ad supported. Non paying users can only watch on computers. For $7.99. Hulu Plus customers can watch shows in high-definition and access programs on mobile devices, video game consoles.
New York Times 0.5 MFree for 10 articles a month; Three paid packages ranging from $15 to $35 per month to include access on the website, phone apps, iPad app
Financial Times 0.3 MFreemium model with limited free content and tiered pricing ranging from $4.95 per week to $8.59 per week (which varies considerably across geographies)
Mus
icV
ideo
Prin
t
Source: KPMG in India analysis, news articles
21© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
While there is a growing demand for video content, consumers have not shown a willingness to pay for the content leading to a primarily ad funded model
Monetization of video content online is primarily through ad funded models
Ad Funded Paid Models
• Ad rates have been rising especially for video ads and are around 400-500 on a CPM basis
• Challenge: ad rates remains low compared to TV ad rates
• Low willingness to pay for content compared to developed markets
• Ditto TV, launched by Zee offers premium content online with monthly subscriptions starting at Rs 21 per month
Innovative monetization models for video online
• Sponsorship of entire web property
• Bundling sponsorships with television
• Supplementing TV content with online platforms:
• Using existing TV content innovatively online
The freemium model is expected to become popular in India for music online
• In India, 90% of digital music revenue comprises of caller ring back tones
• Gaana.com, Saavn.com provide ad funded streaming services
• Players such as Flyte, from flipkart, and Hungama offer downloadable music content at attractive prices
• Freemium models are expected to become popular where consumers get an option between ad supported content or
paying for premium content
22© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Contents
Digital Ecosystem
Digital Media
Key Trends
Business Models
E-commerce
Key Trends
Business Models
1
2
3
4 Concluding Remarks
Challenges and Way Forward
Challenges and Way Forward
23© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Overdependence on ad revenues
Measuring ROI for advertisers
• Lower ad rates compared to developed markets
• Ad revenue is shared by platform providers and aggregators
• Numerous options for advertisers to advertise online .e.g Google, Facebook, Twitter, Pinterest, YouTube
• Difficulty is measuring returns accurately
Digital Piracy
• Digital piracy is a big threat to content monetization
• India ranks 4th globally in terms of illegal movie downloads
• Content providers will have to build revenue models that involve consumer payments
• Improved targeting through data analytics
• Introducing alternate rates such as charging advertisers only when an ad is viewed
• Focus on developing quality content suited for the medium and educating consumers on piracy
Challenge Outlook
Overdependence on advertising, lack of systems for measurement of ROI and digital piracy are the challenges faced by the digital media industry
24© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Contents
Digital Ecosystem
Digital Media
Key Trends
Business Models
E-commerce
Key Trends
Business Models
1
2
3
4 Concluding Remarks
Challenges and Way Forward
Challenges and Way Forward
25© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Travel and retail are the biggest segments in the e-commerce space
Online Travel80%
Online Retail7%
Online Financial Services6%
Online Digital Downloads2%
Online Other Services5%
Source: IAMAI digital commerce 2011
E-Commerce segments - Market Share
26© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Among online retail segments, apparel has shown the fastest growth while comparison shopping dominates the reach
Apparel is the fastest growing subcategory in online retail
Comparison shopping leads in terms of reach
% Reach among online users (July 2012)
YoY Growth % (July 2011 – July 2012)
Source: ComScore report _State of e-Commerce in India
27© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Growing internet penetration, incomes and living standards have spurred e-commerce transactions in non metros and rural areas
Source: India Goes Digital, Avendus; Internet in India (I-Cube 2011), IAMAI; CRISL, News Articles
Total(Mn) 32 46 50 63 82
Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12
3.3 3.75.5
8.512.1
1720
2427
31Rural active internet usership (%)
Growing internet penetration, income levels and living standards in the non-metros....
28© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
E-commerce transactions spur in non metro cities and rural areas
Source: India Goes Digital, Avendus; Internet in India (I-Cube 2011), IAMAI; CRISL, News Articles
Tier 2 and 3 cities contributed about 40% and
Rural India contributed 9% of all e-commerce
transactions between July’10 to June’11
3311 cities shopped online between July ‘10 to
June ’11, of which 1267 were non metros
Metros
Key Motivators*
Convenience
Non Metros Non availability of products
* Ebay Census 2011
Yepme.com
Contribution from non metros (%)
~ 60%
Lenskart.com 50%
Bagskart.com 70%
Watchkart.com 28%
Flipkart.com 60%
....Giving a thrust to e-commerce
Many e-commerce sites now have majority of their sales coming from
non-metros
Source: eBay Census 2011
29© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
While VC/PE funding continues to grow in the e-commerce space, most of it is goes to the large players
Note:The above chart includes investments in the entire ‘online’ space and is not restricted to only E-Commerce
Source: Venture Intelligence, KPMG in India analysis
2010 2011 2012 (till Sept)0
100
200
300
400
500
600
107
485 470
US
$ m
n
4.5x
Deal Volume
25 81 69
CompanyInvestment (US$ mn)
Investors Date
Flipkart 150 Tiger Global, Accel India, Iconiq Capital, Others
Feb-12
JustDial 60 Sequoia Capital India, SAP Ventures
Jun-12
Ybrant Digital 48 Oak Investment Partners, Asia Pacific Capital, Others
Jan-11
Yatra Online 45 Intel Capital, Norwest, Valiant Capital
Apr-11
Pubmatic 45 Helion Ventures, Nexus Ventures, DFJ, SVB, August Capital
Jun-12
Snapdeal.com 40 Kalaari Capital, Nexus Ventures, Bessemer
Jul-11
Fashion and You
40 Sequoia Capital India, Intel Capital, Norwest, Nokia Growth Partners
Nov-11
Quikr 32 Warburg Pincus, Norwest, Matrix Partners India, Others
May-12
Private equity investments in online space
Largest investments during 2011-12 (ytd)
Together secured 67 percent of the total estimated investment in non-travel e-commerce between June 2010 to May 2012
Flipkart
Smile Group
Snapdeal
MyntraSource: Juxt Research
Source: Venture Intelligence, KPMG in India analysis
30© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Signs of consolidation emerge in different segments reducing fragmentation
Reasons for consolidation
Highly competitive market Only 11 million e-commerce users, while more than 400 non-travel online retailers exist
High customer acquisition costs
INR 50-100 mn a month spent on marketing, overheads and salaries by top e-commerce companies
Lack of capitalSeries B funding dying down for many companies as investors become choosy about companies they invest in
Acquirer Target Nature of acquired company Date
Fashion and You Urban Touch Fashion and beauty retailer Aug-12
Hushbabies Mangostreet Babycare retailer Aug-12
Yatra.com Travelguru Hotel aggregator Jul-12
Yebhi Stylishyou Fashion jewellery portal May-12
Snapdeal Esportsbuy.com Sports goods retailer Apr-12
Flipkart Letsbuy Electronics Retailer Feb-12
Recent acquisitions in the e-commerce space
Source: Press releases
31© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Contents
Digital Ecosystem
Digital Media
Key Trends
Business Models
E-commerce
Key Trends
Business Models
1
2
3
4 Concluding Remarks
Challenges and Way Forward
Challenges and Way Forward
32© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
E-commerce companies globally have adopted diverse operating formats and revenue models
Parameter Amazon Sears eBay Asos Gilt Birchbox Polyvore
Model Consignment Click & Mortar Market place Consignment/Private Label Flash Sales Subscription
model Content curators
Revenue in 2011(mn) 48,070 41,600 11,650 550 370 ~1 Na
Unique Visitors per month (Mn) 120 12 89 17 1.5 0.15 10
SKUs (in Mn) 39mn (books) + 11mn (others) Na 1.5 Na Na Na Na
Warehouse Area (Sq.ft) 44.1 mn
46 mn (integrated with
offline) 3.2 mn (GSI) 3.5 mn Na Na Na
Acts as an intermediary providing a platform for
buyers and sellers, Eg- E-bay, Etsy
Directly sells to consumers Eg- Amazon
Combines aspects of offline & online retail Eg: Sears
Business Model Comparisons
Source: Company Websites, Internet sources, KPMG in India analysis
Operating Formats
Format
Market Place model
Click & Mortar
ConsignmentModel
Revenue Models
Sell directly to consumers through direct retailing, flash sales, group buying etc .
Curators of content charge brands to promote their products online. Eg. Polyvore
Provide goods monthly to subscribers. Eg. Birchbox, Dollarshave club, Lost Crates
33© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Some sites had to rework their strategy mid-way to stay relevant to the Indian consumers. Companies had to strategically balance scalable, high margin and sustainable offerings with good consumer experience
Player Details of change
Indiatimes.com
Key motivators for change
• Followed an ‘e-bay’ like aggregator model for 12 years
• Shifted on to stock and sell ‘Amazon’ like model
•Better consumer experience
through a warehousing model
•Establishing trust amongst
consumers
Flipkart.com
• Started as a bookselling website
• Added categories like electronics, baby care, toys. Also
moving into private label and digital content
•Expanding product portfolio to
make business scalable
•Expansion into high margin
categories to ensure better profit
margins
Searching for the right business model
34© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Growing ‘hybrid’ approaches
As players adapt to the changing ecosystem, lines that separate offline and online are starting to blur increasingly giving rise to new ‘hybrid’ approaches
Key Trend Details
Adding ‘click’ to brick and mortar
Presence
Examples
• Enables reach in tier 2 and 3
• Advantages over pure online players:
existing supplier relationships, category
expertise
Samsung, Nokia, Westside, Woodland, Pantaloons, Shoppers Stop, Dabur,
Geetanjali Jewellers, Tanishq
Adding ‘brick’ to click
• Online players are establishing offline
presence to increase brand awareness
and allow touch and feel of the products
Yatra.com, Makemytrip.com, Lenskart.com, Inkfruit.com,
Jewelsnext.com
35© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Contents
Digital Ecosystem
Digital Media
Key Trends
Business Models
E-commerce
Key Trends
Business Models
1
2
3
4 Concluding Remarks
Challenges and Way Forward
Challenges and Way Forward
36© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Customer loyalty, under-developed logistics and payment process are impediments to the growth of e-commerce in India
Lack of consumer loyalty
Infrastructural challenges:
Logistics and Supply Chain
• High customer acquisition costs and aggressive marketing budgets
• Competitive space with multiple players in each category
• Underdeveloped last mile logistics • Cash on Delivery increases logistic
costs
Infrastructural challenges: Payments
• Drawbacks of COD – higher rejection rates, increased working capital requirements and additional logistical processes.
• Businesses need to differentiate and offer a strong value proposition to tap the strong underlying consumer demand
• Variable cost contracts and volume discounts can bring costs down
• Managing reverse logistics is critical.
• Incentivize e-payments.• Develop innovative payment methods
such as Alipay, which allows people to make payments through an escrow account.
Challenge Outlook
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Contents
Digital Ecosystem
Digital Media
Key Trends
Business Models
E-commerce
Key Trends
Business Models
1
2
3
4 Concluding Remarks
Challenges and Way Forward
Challenges and Way Forward
38© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Concluding Remarks
...Certain factors acting as key catalysts to the change:
Business Models
Consumer Loyalty
Payment options
Device Usage
Measurement systems
Mobile connectivity
Growth through consolidation
Product differentiation
With evolution in digital ecosystem, E-commerce and Digital media in India is finally at the cusp of realizing its promise...
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