Team Name: ArambhTeam Members: Tushar Warang, Indira Badrinarayan College Name: Weschool Mumbai

Fashion E-tailing

Fast And Furious

NIVESHAK

Market Analysis

FY -09 FY -10 FY -11 FY -12 FY -13 FY -1415.5

23.7238.42

64.54

100.04

160.56

E-Tailing (INR b)

Books; 5.0% Jewellery; 3.8%

Cameras; 13.2%Home furnish-

ing; 3.5%Apparels;

21.6%

Consumer Durable; 8.1%

Mobile Phone; 18.1%

Laptop/Tablets; 25.6%

Others; 1.1%

E-tailing Market Segment-ation FY-14

• Online shopping of physical goods alone in India is estimated to reach USD4b in 2014, and multiply by over 11x to USD45b by 2020 – that is CAGR of 50%.

• Indian Retail is ~USD600b, of which only 0.3% was online sales in 2013. Even as a % of Organized Retail, online sales are <4%.

• Market has been accumulated by 3-4 horizontal multi-category players like Flipkart, Amazon India, Snapdeal. Still there is enough room for niche players

• The wave of online shopping will also drive other industries like logistics, warehousing, coupons and payment gateways. Among other winners, we see following players with strong edge – Snapdeal.com, Jabong.com, Mydala.com, Zovi.com

• Market place model strategy emerge as winner in the horizontal multi category.

India US China13

260295

E-commerce market compet-

ition (USD b)

1

Travel; 73.0%

E-Tailing; 13.5%

Financial Services;

5.6%Classified; 5.1%

Others; 2.8%

Segmentation of E-Commerce market in

India as on 2014

Source: IAMAISource: Industry Sources

60.34%

CAGR

Source: IAMAI

Future Growth Prospects

Drivers of Growth:• Increase in the number of internet users (5m being added every

month to the base of 213m in 2013),• Increase in the proportion of online shoppers within those users,• Growth in the per-shopper transaction value, and• Continued flow of capital by willing investors, arming firms with

ammunition to woo consumers online.• Chasing Sales exclusivity in selected brands i.e. Flipkart-Xiaomi• Offline retailing: Indian prices but European costs,

significant barriers in establish the physical shop

Jun '12 Jun '13 Jun '14 Jun '16 (Est)38 59.6 92

24699

130165

154

Internet Users In India (million)

Rural Urban

Source: Accel Estimates

Jun '12 Jun '13 Jun '14 Jun '16 (Est)05

1015202530354045

1320

26

40

Number of online Indian shoppers

(million)

Source: Industry Estimates

Jun '12 Jun '13 Jun '14 Jun '16 (Est)278

559

1032

2811

Fashion Category GMV (USD million)

Source: Industry Estimates

78.37%

CAGR

Aggressive investment spree, as war for share gain heats up:• Deep discounts for customers and big incentives for

merchants who sell on their marketplace are driving investments for all the online biggies.

• Other than these, spends are directed at: [1] capacity enhancement by building warehouses, [2] hiring in large numbers, [3] strategic acquisitions, and [4] exclusive tie-ups with select brands.

Risk AnalysisConstant Funding:• E-Commerce Business is not just about creating a website.• It is a business model which needs heavy funding on a

regular basis to just survive• Logistics , fulfilment centres, technology, marketing etc will

need heavy commitment from investment perspective• War for talented employees

Limited brand recognition:• Very little brand recognition, barring select leading names, this

implies heavy cost of customer acquisition.

Books Mobiles Apparel

-24%

-13%

-8%

Gross Margin due to aggressive pricing

Source: News Article and Sequoia Capital

All About Share Gains:• Competitive intensity is running high in the Indian e-

commerce industry. In their quest to gain market share, all the big players are investing aggressively.

• Flipkart’s acquisition of Myntra and Zovi’s acquisition of Inkfruit are just two examples of recent acquisitions in the industry.

• Also, most of the amount of money raised by Flipkart, lately Snapdeal, and that committed by Amazon is yet to be invested, indicating that we may not be anywhere near the end of round-the-clock discount seasons at online stores.

Too much money too early:• This is going to make investors go after metrics that will not be

profitable in the long run.

High Returns rate:• Return goods cycle back into inventory after weeks, and carry a high

cost of re-stocking and re-listing, and sometimes have to be written off

Porter’s five forces model:• Competitive

forces : “Red Ocean” at large

• Profitability is few years away

Government Policy:• 100% FDI not

yet allowed in multi brand retail

Competitor Analysis

Companies/Parameters Logo

Business Segment

Business Model Investors

Series of

Funding Funding Till Yet ($ mn) Alexa Rank USP

Fashionara.com

High End, Multiband

Inventory & delivery

Helion Venture Partners and Lightspeed Venture Partners

A,B 15 371

• Online Video Previews

• Look Book Mechanism

FashionAndYou.com

High End, Multiband

Inventory & delivery

Sequoia Capital, Norwest Venture Partners, Nokia Growth Partners and Intel Capital

A,B,C,D

105 251

• Delivery to 10000 pin codes

• Leading Flash Sale Company

LimeRoad.com

Affordable Retailer

Market Place Model

Sequoia Capital, Norwest Venture Partners, Nokia Growth Partners and Intel Capital

A,B,C 50 456

• User Generated Content

• Unique Vendor List

Zovi.com

Affordable Retailer, Private Lable

Manufacture, Inventory &

delivery

SAIF Partners and Tiger Global A,B 25 201

• Home based Designer Team

• Presence in global Market

• Lucrative Private Label business increase the margin

Alexa Rank: Website Rank In India

Competitor Analysis

Factors/Company Name

Fashionara.com

FashionAndYou.com

LimeRoad.com

Zovi.com

         Cost Of Acquiring Customer

1 2 3 4

Conversion Rate 2 1 3 4Shopping Cart Abandonment

3 3 1 4

Average Order Value 1 2 4 3

Churn 1 2 4 3

Cost Per Impression 1 3 2 4

Cost Per Click 3 1 4 2

Cost Per Acquisition 2 1 3 4

Revenue Per Click 1 4 2 3

Cost Of Sales 4 1 3 2Customer Lifetime Value

1 2 4 3

         

Total Score 20 22 33 36

Ecommerce Metrics: Google Trends:

• Based on 11 Ecommerce Metrics for the best companies , Zovi.com got score highest followed by the LimeRoad.com.

• Other two companies Fashionara.com and FashionAndYou.com are lagging far behind on this metrics

• Google trends shows that Zovi.com is the highest searched name on google compared with other three companies, which is very important sign for ecommerce company.

• There is Close competition between LimeRoad.com and FashionAndYou.com

Source: GoogleTrends.com

Competitor Analysis (Contd…)

Companies/Social Media Score

Strength

Sentiment Passion Reach

Fashionara.com 1% 08:00 47% 7%

FashionAndYou.com 0 28:00 60% 6%

LimeRoad.com 0% 14:00 66% 6%

Zovi.com 1% 18:00 67% 6%

Social Media Score:

Source: Socialsource.com

where,• Strength: Brand discussed among social media• Sentiment: Ratio of positive mentions to negative

mentions• Passion: Individual talking about brand repeatedly• Reach: Unique user referencing your brand

• Based on Social Media Score, we can infer that Zovi.com has take lead on all 4 parameters.

• Zovi.com is followed by LImeRoad.com, FashionAndYou.com and Fashionara.com

Logistics & Warehousing:

• For every INR100 spent on e-commerce, it is estimated that ~INR35 is spent on supporting services like Warehousing & Logistics

• Fashionara.com uses third party logistics and they have 25000-sft central warehousing facility in Bangalore

• FashionAndYou.com uses third party logistic as well as they have their own logistic system in place

• FashionAndYou.com are able to deliver to the 10,000 pin codes

• LimeRoad.com has unique market place model with third party logistics to cover last mile delivery

• Zovi.com has own logistics in 10 cities and in rest of the part they use third party logistics.

Fashionara.com FashionAndYou.com LimeRoad.com Zovi.com

2.1

5.5

1.3

7.8

Registered User Base (mil-lion)

Source: Newspapers

Valuation Of the Zovi.com

Year Funding ($)Historical Exchange

Rate Funding (INR) Assumptuion Enterprise Value

Approx. (INR)

2012 100,00,000 1 $= 60 INR

60,00,00,000

20% for global average Ecommerce series B funding

300,00,00,000

YearAverage order

Ticket Size Average transactions

on a dayGross Merchandise

value/Month Gross Merchandise value/Year

  INR   INR INR

2012 900 1400 3,78,00,000

45,36,00,000

Gross Merchandise Value(GMV) /Year Enterprise Value Approx. Valuation in Multiple of GMV

INR INR  

45,36,00,000 300,00,00,000 6.61X

Valuation as on 2012:

Source: Last Funding by Tiger Global and SAIF Partners in 2012

Last Funding in 2012:

Valuation Of the Zovi.com Contd…

Assumptions:

• Gross Merchandise Value (GMV) in e-commerce means total sales value of the merchandise sold through the marketplace in a period.

• Most e-commerce companies refrain from sharing their revenues, owing to which the GMV run rate is often used to gauge their financial health.

• Revenues are a small proportion of GMV.

• In India Ecommerce companies are experiencing hyper growth.

• That’s why we had assume enterprise value as 6.61x GMV multiple

• In the world, Enterprise value as 2-3x of GMV Multiple

YearAverage order Ticket

Size Average transactions on a

dayGross Merchandise

value/Month  INR   INR

2015

1200 1700

6,12,00,000

Gross Merchandise value/YearValuation in Multiple

of GMVEnterprise Value

Approx.

INR

(Average of Ecommerce

companies in India) INR

73,44,00,000

6.61X 485,43,84,000

*

Valuation as on 2015:

* Valuation before further funding

Conclusion

• Among 4 options we are recommending to choose Zovi.com, LimeRoad.com, FashionAndYou.com and Fashionara.com in this order for investment purpose.

• We had given more consideration based on business model which one is operating in Niche market and whose business model is not easy to replicate, in the presence of big ecommerce giants of India i.e. Flipkart, Amazon India and Snapdeal

• Next E-Tailing fashion business will see growth through M-Commerce and Zovi.com is well positioned with android, windows and IOS App, which is clearly lagging factor for other three players

• By considering hyper growth of ecommerce sector in India we had taken GMV multiple of 6.61x to find enterprise value.

• We had valued Zovi.com as INR 485 crore.