Ptak prizeindia2014 SCNext_limesoda_NMIMS
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Transcript of Ptak prizeindia2014 SCNext_limesoda_NMIMS
There are some growth requirements that have to be fulfilled for e-commerce to truly take off they are as follows: The basic infrastructure must be in place, including logistics. Customers and businesses must have access to the Internet. Sites must have multiple language functions. The cost of Internet access must decrease. E-commerce must be safe in terms of privacy and monetary transactions. The speed of the technology must be satisfactory. International standards must develop.
At present e-commerce is pursued to a fairly high degree between companies, but is still not very developedbetween companies and private persons. The business-to-consumer (B2C) relation is expected to grow rapidlythough, and when this happens it will result in several changes for actors in the logistics area. When delivering toprivate persons instead of companies, the demand for fast and accurate deliveries will increase. This is becauseone or more of the physical nodes will disappear when the Customer Order point (COP) will be moved upwardsthe supply chain. Direct home deliveries will request shorter lead times, and more complex distribution systemswill be necessary to make this possible.
E-commerce will impact all elements in the supply chain, which rely on data flow to improve efficiency. Still,physical transportation is needed for most products, implying the usefulness of deriving e-commerce demands onlogistics by analysing the logistics customers. Demands on a smooth integration of these flows will increase inthe future, from being a competitive advantage to a necessity.
In the distribution chain we will see a number of new possibilities. There wont be one way to distribute ecommercegoods. In fact, even for one company, there will a number of ways. The distribution alternatives willbe different for different customers as well as for different categories of products. Which alternative thecompany (or actually the customer) will choose will be regarding to time limits and how much the customerwants to pay for the service. This means that a company will use more than one sales channel for, a customer, ifthe customer buys different products with different demands regarding e.g. time as well as for different articles.
Executive Summary
Most preferred way of ordering bycustomers as at least 70% shoppers buythrough cash on delivery
Reconciliation a major part to give cashflow continuous
Cash on Delivery
Complicated VAT regulations add todelays.
As majority warehouses are in/nearmetro cities VAT regulations delaydelivery time
VAT regulation
Complicated VAT regulation frameworkcoupled with poor infrastructure forcesE-commerce companies to opt for Airshipping
Road Network
6-10 shipments per 100 delivered arereturned
Area of concern as ignoring this willresult in customer dissatisfaction.
Reverse Logistics
6-10 shipments per 100 delivered arereturned
Area of concern as ignoring this will resultin customer dissatisfaction.
Reverse LogisticsBOTTLENECKS IN LOGISTICS
4
4
4.1
4.5
4.5
Fast Easy Checkout
Delivery Time
Ease of Returning Products
Competitive Price,…
Delivery Cost
Top factors that influence consume purchase decision
(On a scale of 1 to 5)
Last Mile Delivery- Key Challenges
Delivery at home during the day is more and more difficult. Because people are working more and longer, and the number of single households is rising, the number of parcels that can be successfully delivered on the first try is decreasing
It is the most expensive part of the supply chain mainly due to: High degree of failed deliveries (“not-at-
home”) High degree of returns High degree of (half) empty vehicles Mostly done by small vans, which results in
high cost & carbon footprint per kg
.constraints such as (real-time) congestion, vehicle type, driving time regulations, delivery time windows etc. require functionality not found in ERP or TMS systems. To support such complex decision making, powerful optimizers that can assign orders to routes (or routes to resources) are required Innovative solutions-Automated pick-up/drop-off points: to overcome the problem of failed deliveries, some logistics providers have developed a network of pick-up/drop-off points, either standalone automated or combined with convenience shops Consolidated deliveries : to reduce the number of empty vehicles making deliveries in dense urban areas start ‘urban/smart city logistics’ initiatives. a consolidation center outside the city center, and only allow fully loaded (shared) vehicles to do the last mile delivery.
Last Mile Delivery- Improvements
Tracking and tracing to have full Visibility Tracking & tracing technology is steadily being introduced into the ‘last mile’, which keeps all the various parties involved automatically updated about the progress of the delivery
Improved routing through the use of optimization techniques : to optimize the large number of stops within a route, while meeting multiple
Intensity of Revelry - Medium
Bargaining Power of Buyer- high
Bargaining Power of Supplier- high
Large number of buyers and highly price sensitive Low level of uniqueness among the products
makes it difficult for sellers to negotiate withbuyers
Buyers have tons of information about theproduct, which is readily available on thewebsites facilitating comparison among products
To attract buyers new modes of purchasemethods e.g. COD (cash on delivery ), EMI, Offerson specific credit card purchases
Buyers take time to trust the company No threat of backward integration
Few suppliers and a lot of buyers For suppliers ecommerce is another platform to
sell their products therefore companies havesome amount of bargaining power.
Suppliers have equal power to negotiate with thebuyers (companies)
There remains a possibility for suppliers toforward integrate and start selling the productson their own websites hence increasing theirmargins
A lot of players that sell similar productscombined with the low brand loyalty andlow switching costs
Most of the competitors have similarmarket share and to increase market shareis tough
competition with offline retail stores Increased competition due to entry of
global players Incentives to fight is low as the market is
big enough for everyone to grow
Threat of New Entrants - HIGH
Products are undifferentiated Low initial capital investment required to
setup the business Distribution channels are easy to access Low consumer switching cost Industry condition: Very high potential but
in the stage of development. Lot of scope forgrowth
Entry of many small players to explore newniche areas
others get to learn from existing companiesmistakes
Easy access to suppliers due to large numberof suppliers
Easy access to distribution channels
Threat of Substitutes - Medium
Substitute products are cheaper and productquality is equal or higher
The product performance of substituteproducts are same or better
Low switching cost makes the industry moreprice sensitive
Trust of customers on traditional retailstores
Emerging technologies making purchaseeasier e.g. M commerce
Porter’s 5 forces model
Bargaining power of suppliers
HIGH
Bargaining power of
buyers
HIGH
Threat of substitutes
MEDIUM
Threat of new entries
HIGH
Competition
HIGH
PORTER’S FIVE FORCES MODEL:
INDIA A PROMISING MARKET
Becoming bigger by the day
15 24 38 58 91139
224
334
504
0
100
200
300
400
500
600
Online Retail Market Size
SOURCE: CRISIL RESEARCH
RS Billion
Grown at the compounded annual growthrate of ~56%
9 fold growth Primarily driven by books, electronics and
apparel
India’s Online Retail Industry
Rs. 31 trillion
Rs. 2.4 trillion8% of overall retail
Rs. 264 Billion1 % of overall Retail
Size of online retail very small compared toorganised and overall retail
Tremendous potential to increase
Increased Spending Power
Last decade high GDP growth resulted inenhanced income levels
Positioned as fastest growing consumermarket
Fundamental Enabler : Internet
Exponential increase in internet usage Internet penetration is one of the lowest
worldwide Increasing PC and Broadband penetration with
declining prices of PCs Increase in the use of tablets and smartphones Adoption of 3G coupled with declining prices of
smartphones
16
7.2 21
5.6
25
2.3
28
3.8
31
3.8
34
6.3
2013 2014 2 0 1 5 2016 2017 2018
NO OF INTERNET USERS IN INDIA (MILLIONS)
No of Users
SOURCE : Statista 2014
• Step toward increasing technology adoption in country
National telecom policy
2011:
High speed and high quality broadband availability to all village panchayats through optical fibre by 2014
Target of 175 millions broadband connections by 2017
Target of 600 million broadband connection by 2020
Target of minimum 2 Mbps download speed
Plans to make 100 mbps connections on demand
Go
als
SOURCE : TRAI
Increasing penetration of devices
Affordable for majority of people to buy PCs Now available at lower prices
0
5
10
15
20
0
50
100
150
200
250
2006 2011 2012 2013 2014 2015P
No. of PCs(millions) with penetration (%)
Stock of PCs Penetration
SOURCE : Economic Unit Intelligence Website
Large growth in the sale of smart phones Declining prices of tablets
0
50
100
2011 2012 2015P
Smartphones sale in India (million)
Sale
SOURCE : Trak, Gadgetizor
Frequency of internet usage increasing in parallel to increase in internet user base
Average time spent online will increase to 21 hours by 2015
18%
10%
32%
18%
14%
4%
3% 1%
Frequency of internet usage
several times a day about once a day
all 7 days 4-6 times per week
2-3 times per week once a week
2-3 times a month less than once a month
Increasing proportion of broadband subscription
Continuous reduction in the cost of internet access
Internet user base spreading to non metros Mobile internet user base is growing
Internet usage pattern Payment landscape undergoing change
58%21%
12%7%
2%
Acceptance of online payments by Indian consumers
direct debit visa
master card Cash on delivery
all others
Pattern of online behaviour rapidly converging with that of users in developed countries
The number of debit cards is on the rise due to the increasing access of people to banking services
Urbanisation and lifestyle changes
Growing income and hectic lifestyle Increase in number of time starved
consumers exponentially Increasing emphasis on convenience is a
deciding factor for purchase Online grocery stores and apparels stores is
the innovative category to start business Target audience typically small families
residing in urban areas, where both themembers earn, are tech-savvy and belong tothe top 20 percentile income group
51
40
75
INCOME SHA RE EXPENDITURE S HA RE
SURPLUS INCOME SHA RE
INCOME QUINTILE ANALYSIS
percentage
SOURCE : KPMG
Expanding Consumer Basket
Youth constitutes a considerable proportionof the online users with India’s youthcomprising a significantly larger share thanthe global internet users.
26 36
2639
20
16146133
GLOBA L IND IA
AGE PROFILE OF ONLINE CONSUMERS
15-24 Years 25-34 years35-44 years 45-54 years55+ years
Convenience is a key determinant of onlineshopping —which is evident from thedominant share of mobile phones acrossconsumer segments.
The gender split of users is skewed towardsmen, as women constitute only 39 percent ofthe internet user base in India.
4 9
87
India’s online population— modes of access (%)
Narrowband broadband mobile
Consumer from newer region
Growing aspirations and incomes in smaller cities, coupled with lack of availability of products is the key factor driving e-tailing in smaller cities.
Additionally, increasing internet penetration in smaller cities has acted as key enabler for the growth of e-commerce in these areas.
the majority of the online buyers were from metropolitan or tier one cities . Now, companies are seeing increasing sales from tier two and tier three cities, as well.
only 31% of the total Indian population lives in urban India whereas 69% of the population lives in rural India
FDI
FDI up to 100% in e-commerce activities but appliesonly to companies engaged in B2B e-commerce,and not to those in retail trading.
Women influenced sale:
, working women segment grew by 43 per cent in2013 and constitutes nearly 10 per cent of activeinternet users in India
Projection of about 35 per cent of online sales in2016 will be influenced by women
8
4
3
16
5
1017
37
Online Penetration of Urban and Rural customers (%)
8 tier one cities (population greater than 5 million)
32 tier two cities (population between 1 to 5 million)
39 tier three cities (population between 0.5 to 1 million)
4300 tier four cities (population less than 0.5 million)
219000 villages population between 100 and 499
145000 villages population between 500 and 999
130000 villages population between 1000 and 1999
99000 villages population more than 2000
Annual disposable income per household to grow by two-and-a-half times by 2015
Discretionary spending expected to form a major portion of expenditure in India
Proliferation expected in the sales of PCs, tablets and smartphones
More Indians increasing time spent online
Probability of growth in internet user base, mirroring that of the voice user base
Volume and average value of transactions higher for credit cards than debit cards
Increase in the number of payment options
The time-starved consumers are ready to pay a premium for better services and value convenience.
Increasing openness to purchasenew categories presents anopportunity for retailers andcompanies to increase theirconsumer base, provided theysucceed in achieving the rightvalue proposition.
Women influenced sales will grow5 times in next 3 years
Exponential growth in MobileShopping
In the next 3 years, potentially 40million shoppers between ages of19 – 24 years, will start spendingmoney online
This presents a very goodopportunity for us to start ourown e-commerce business in2015.
INFERENCES
Current scenario :
Aggregate PE investments in e-commercefirms in 2014 $3,005 million
Online retail, group buying and online travelsegments were the top three segments toreceive funding from VCs in India
Early stage funding in the e‐commercesector in India has also picked up
However, most of these companies are notyet profitable and are only growing onvolumes
One of the reasons that justify this concern is that companies are looking to acquire customers by selling below the cost price. They are mainly competing on price to overcome competition — at the expense of investors’ funds
The second reason relates to accounting methods adopted by E‐Commerce companies. Some of these are amortizing discounts that they provide on sales as capital expenditure, based on the premise that this will benefit them in later years, instead of accounting for this in the year of sale.
Several VCs are investing in the E‐Commerce spacebecause they feel this is the right time to invest inthe space and do not want to miss out on itscurrent wave of popularity to have an E‐Commercecompany in their portfolios, as this would allowthem to sell their stakes at high prices
Challenges:
Lack of customer lifecycle management Low rural penetration Need for continuous innovation: business
models Competitive advantage being eroded by low
entry barrier Lack of clarity in laws governing e‐commerce
Strategies:
Micro-target an online audience – defineniche markets, online penetration with specialofferings Eg. Urban Ladder
Personalised catalogue optimise user accountswhere each person's choices will be recordedthrough dynamic programming for futureaccess. Product personalisation, sale of uniqueitems, resale and multiple payment optionswill all cater to driving e-commerce acrossconsumer segments
Mobile commerce: leverage the power ofgrowing number of mobile devices in thecountry by developing mobile-compatible sitesand applications
Technological innovations: crucial for e-commerce firms to stay in the highlycompetitive market. E.g. eBay’sannouncement of a virtual window shoppingfacility where customers can go throughproducts as if they were in a store
Focus on smaller towns: gradually shift focusfrom metro cities to tier II and smaller townsin sync with the Internet and mobilepenetration
Innovative logistics: streamline or re-inventlogistics for their e-commerce portals to thrivelike various delivery schemes e.g. amazonpatented for an anticipatory delivery model
Big data: analytics produced using big data willhelp in making customers feel special andincrease brand loyalty
Retailer’s own logistics : build own strategiesin the absence of established systems tohandle cash-on-delivery (CoD) and same-dayshipments E.g. Flipkart’s ekart
Social :Product and service feedback via socialmedia channels to have an impression on theminds of the larger customer base
Improving customer experience with variedofferings and options: adoption ofinternational practices such as digital orexperiential stores and showrooms, pop-upand fulfilment stores and drones that willfascinate the Indian market
STRTEGY
Omni Channel retail advantages
single fulfillment centers serving all the channels
lower investment costs over the long run (due to smaller footprints)
reduced operational costs (due to lower inventory-carrying expenses)
increased customer satisfaction (due to faster service).
Click and Collect: Pick Up
Orders are placed online, then picked up at the store or at an alternate location
Is currently the most common approach Minimally disruptive Does not require significant capital
investments Implemented with existing personnel and uses
existing inventory Shoppers still have to do the last mile delivery
to their homes themselves
Click and Collect: Drive Up/Drive thru
Shoppers can collect their goods conveniently in their vehicle at the standalone location
Ordering process is similar to that of Pick Up model
Reduced order collection time
Home Delivery
Most costly model Works best in highly populated & tight
geographic locations Address verification and availability of
recipient are major hurdles for this type of model
Models of delivery in Omni-channel
Offline going Online
In USA, 9 out of top 10 online retailers are brick & mortar retailers who went online.
key factors that contribute to success of brick & mortar retailers in eRetailing: Well-known brand. Established customer base. Proven merchandising expertise. Readily available inventory. Customer service experience.
Online going Offline
To tap the customers looking for touch and feel type shopping environment Online retailers must open offline building brands by providing experiences
They will be building from scratch and hence will have better placement of retail outlets by leveraging the consumer buying behavior of their huge consumer database.
Online going offline to emerge victorious
As they will have data of their consumer buying behavior which puts them ahead of offline going online
Offline retailers will leverage their brand power but online retailers can over come that as their delivery system would be integrated better to move into omnichannel retail space
The Cost of Convenience