The advertising body had asked Amazon to withdraw or modify its claim that it is the largest online retail store
The Delhi High Court on Monday directed the Centre not
to immediately enforce the Advertising Standards Council of India’s
direction that e-commerce website Amazon must withdraw or modify its
claim that it is the largest online retail store.
The ASCI’s December 18 order will be held back on a petition moved by Amazon.
The
online retailer has contended that the ASCI does not have the authority
or jurisdiction to issue such a direction, as its advertisement had
appeared only in the print media. The ASCI had directed Amazon to modify
its advertisement or withdraw it from all media, including print and
Internet, by January 2, 2015.
Justice Vibhu Bakhru sought replies from the Centre and ASCI by January 5.
The Centre submitted that Amazon had not supplied the requisite material sought by ASCI before passing its direction.
Consumer
internet companies raised over $4bn this year amid an unprecedented
global appetite for India's digital pie. Over 1,250 new ventures
sprouted, with the number of mobile-first startups growing fastest.
Here's how it unfolded and what lies ahead...
The
Indian entrepreneurship eco system got its biggest fillip in 2014 as the
year saw an unprecedented number of new businesses spring up, aided by
an exuberant investor sentiment around startups. As more Indians took to
their smartphones to access the internet, in many cases for the first
time, numerous consumer technology ventures were built to cater to this
growing population. But what vastly differentiated 2014 from the
previous years was the never-seen-before amount of capital that was
funnelled into these digital companies across all stages.
It
wasn't only the bigger online commerce players which received gobs of
money , thanks to the trickle-down effect even the early-stage startups
were flush with funds. The entrepreneurial zeal was palpable across food
technology , online travel, grocery delivery , offline-toonline
services, all of which were the preferred sectors for starting up as a
total of 1,259 new ventures sprouted through the year. Sample this: in
the food tech space, for instance, out of 145 companies that operate in
the country , 66 were created in 2014; almost half of the 83 local and
home services ventures that exist today were built this year, according
to data provided by Tracxn, which curates information about Indian
startups and private companies.
Online spending to increase by 67% in 2015
2014 will go down as the Year of e-commerce, firing the aspiration of
the Indian youth and middle class while the coming year will be even
more promising both for the consumer as also the entrepreneurs, with
average annual spending on online purchases projected to increase by 67
per cent to Rs 10,000 from Rs 6,000 per person, according to an
ASSOCHAM-PwC study.
In 2014, about 40 million consumers purchased something online and
number is expected to grow to 65 million by 2015 with better
infrastructure in terms of logistics, broadband and Internet-ready
devices will be fuelling the demand in e-Commerce.
The sector attracted the attention of investors, who included top
global firms and leading industry leaders like Mr Azim Premji and Ratan
Tata. The brands like Flipkart and Snapdeal are enjoying edge over the
global players like Amazon, adds the study.
Online apparel sales continue to capture a greater share of India
retail ecommerce sales, as the category, along with the computer and
consumer electronics sector, help fuel overall market growth.
E-commerce industry, valued at $17 billion, growing at an compound
annual growth rate of about 35 percent each year and will cross $100
billion in the next five years, noted the ASSOCHAM-PwC study.
The smartphone and tablet shoppers will be strong growth drivers, said Mr D.S. Rawat, secretary general of ASSOCHAM while releasing the study. Mobile already accounts for 11% of ecommerce sales, and its share will jump to 25% by 2017.
Computer and consumer electronics, as well as apparel and accessories,
account for the bulk of India retail ecommerce sales, will contribute
42% of total retail ecommerce sales in 2015 from the current level of
39%, further highlighted the ASSOCHAM-PwC study.
With nearly one-third of internet users already making purchases
online, the ecommerce growth will rely more on increased spending from
existing buyers than first-time online buyers. The paper said, online
shoppers and buyers starting with a base age of 18 are become more
involved with ecommerce in their early teens.
The steady growth in the number of web shoppers also is helping to
boost e-commerce sales. Many consumers will prefer the web to
bricks-and-mortar retailers in large part because of online deals, about
52% of shoppers said they made purchases online rather than in stores
because online retailers offered better deals, adds the paper.
Other factors contributing to the growth of e-commerce include
aggressive merchandising and discounting from flash sale and daily deal,
more online loyalty programs and increasing popularity of smartphones
and tablet computers among consumers which leads them to spend more on
online shopping.
Online shoppers are also now finding it easier to shop than ever before
due to improvements in mobile and tablet shopping capabilities,
according to the ASSOCHAM earlier survey.
In 2015, Mobile commerce will become more important as most of the companies are shifting to m-commerce,'' adds Mr. Rawat.
India's travel and tourism are second fastest growing travel and
tourism industry in the world. 75% of total travel related business has
migrated to e-commerce. The main businesses are online air ticket
booking, train ticket, bus ticket, hotel booking, tour packages and
movie booking. Among this online air ticket booking contribute the major
part, adds paper.
Industry estimates that the total spend on warehousing and sortation
centers could be as high as 3 to 6% of top-line revenues, which
represents an cumulative spend of over 450 to 900 million USD of spend
in warehousing till 2017-2020. The industry is expected to spend an
additional 500 to 1000 million USD in the same period on logistics
functions, leading to a cumulative spend of 950 to 1900 million USD till
2017-2020, further highlighted the joint study.
It is also estimated that currently over 25,000 people are employed in
e-retailing warehousing and logistics. Even with efficiency improvements
in individual performance and productivity (IPPs) in the delivery
networks, it is estimated that there will be an additional employment of
close to 1,00,000 people in these two functions alone by 2017-2020,
representing an increase in employment.
The Centre has asked online retail giant Amazon to get an industry
association from its country to back its representation on allowing
foreign direct investment (FDI) in the sector.
“American e-commerce companies should fight it out among themselves on
what they actually want in the e-commerce space in India. We made it
clear to Amazon in a recent meeting with US companies that we will not
be entertaining individual demands,” a Department of Industrial Policy
& Promotion (DIPP) official told BusinessLine.
The issue was discussed at the first inter-ministerial committee to
fast-track investment proposals from the US in India on December 17.
The DIPP instructions to Seattle-headquartered Amazon will give the BJP
Government some breathing space to deliberate on what its policy should
be on allowing FDI in e-commerce for business-to-consumers transactions,
the official added.
Inventory-based model
While Amazon has long been lobbying for being allowed to operate in
India in the inventory-based model—where it can sell its own products
directly to consumers—there are others not too keen to see changes in
the existing policy.
For instance, eBay, another major US etailer, seems to be quite
satisfied with the present rules in India. At present, 100 per cent FDI
is allowed only in market-based operations of e-commerce companies,
where an online platform is offered to other vendors to sell their
products in return for a commission.
eBay, which has considerable business in India through the market-based
model, has often stated that it does not intend to start business on an
inventory-based model.
Company CEO Latif Nathani told the media last month following his
interaction with the Commerce and Industry Minister that they did not
discuss the FDI policy at all, as his company will not be affected by
the policy.
India’s e-commerce industry was worth $11 billion in 2013, of which $2
billion was through sale of physical goods, and the rest through
services. The average annual spending of Indians on online purchases is
expected to rise 67 per cent to ₹10,000 next year from ₹6,000, says an
Assocham-PwC study.
India’s fledgling online retail business announced its arrival in 2014.
In October, there was Flipkart’s “Big Billion Day”
sale followed by Google’s three-day online shopping festival. In all,
there has been a dramatic rise in number of unique visitors and
merchants, and rapid growth in product categories on offer that included
holiday packages, motorcycles, and even homes.
This year also saw valuations of some of the larger players touch a billion dollar mark, with Flipkart valued at over $10 billion after a new round of fund raising in December.
All
this frenzy of activity in the e-tail (electronic retail) space
expectedly caught the Indian government confused—while the brick and
mortar organized retailers were left frothing at the mouth.
Some may even wonder if there is an e-tail bubble in the making.
And
as we enter 2015, it is likely that the central and the state
governments will continue to remain mired in examining the non-issue of
foreign direct investment in retail sector. Instead, the more urgent
need is to develop a contemporary policy framework that makes India’s
consumer products distribution infrastructure more efficient.
The
romance of investors with e-tail (and e-commerce) sector is likely to
get even more intense, and its penetration even more ubiquitous.
Some
may even wonder if there is an e-tail bubble in the making. But other
than questioning the valuations of some of the players, the fundamentals
of the e-tail sector in India are very sound.
Yet,
for all its recent celebration and hype, online retail will only
account for a small share of India’s overall consumer spending next
year—and even a decade later.
What is India consuming?
India’s current consumer spending on merchandise—and hence the size of India’s retail market—is about $525 billion.
If
India sees a real GDP growth of 7% CAGR (Compound annual growth rate)
in the next 10 years, and the consumer price inflation remains around 6%
CAGR in the same period, India’s merchandise retail spending will touch
about $1,100 billion by 2020. By 2025, this could grow to $2,100
billion.
For
getting a better understanding of how India’s e-tail sector may evolve,
it is important to understand what India is currently consuming and how
that consumption is split between rural and urban.
Almost
two-third of India’s retail spending (not total consumer spending that
also includes services such as housing, healthcare, transportation,
education etc.) is on food, followed by almost 9% on apparel, then
jewelry, and only about 5% on consumer electronics, including mobile
handsets.
That’s the consumption pattern currently—and it’s unlikely to change dramatically over the next decade.
Of India’s retail spending, rural markets (spread across 660,000+ villages) currently account for almost 52%.
And even by 2025, rural spending would still account for 43% of spending.
Growth everywhere
India
will see very strong growth in all channels of retail: the traditional
independents, the modern corporatized chains, and e-tailing not only in
the coming 10 years but indeed, even much beyond that.
Those
who fear for the demise of traditional retail from corporatized retail
(whether Indian or foreign owned) and now from e-tail, should stop
fretting. Indians, who are currently consuming $479 billion worth of
merchandise from the independent mom and pop stores, will consume four
times that amount from the same stores by 2025.
The
corporatized retailers do not have much to fear either. Instead, they
are likely to increase their own collective revenues (only from physical
stores) from about $46 billion today to over $100 (excluding e-tail)
billion by 2020. By 2025, that number could hit $345 billion.
The online pie
Notwithstanding
its immense appeal in metro cities and large urban centers—and
notwithstanding its immense appeal for categories including mobile
phones and consumer durables—e-tail will have a fairly small share of
the overall retail spending in India.
The reasons are not too difficult to fathom.
Firstly,
total consumer spending is dominated by food—and of that, more than 50%
is accounted for by perishables that include dairy, vegetables, meat,
and fruit.
Secondly,
almost 50% of the total consumer spending is still spread across the
entire rural India where it is yet not likely that e-tail will make a
big impact (while e-commerce would comprising of services such as
financial, entertainment, information and education etc.).
Within the dozen largest Indian cities for certain categories, e-tail will become an even more significant player.
And
the most important impact categories for e-tail—consumer electronics,
durables and appliances, apparel and footwear, and furniture—account for
just about 18% of the total consumer spending on merchandise.
This
spending, however, is spread well across urban and rural India through
several hundred thousand independent stores as well as the brick and
mortar corporatized retail department stores, hypermarkets, and
specialty stores.
So,
within the dozen largest Indian cities for certain categories, e-tail
will become an even more significant player. But, from the overall
consumer spending perspective, the share of e-tail channel by 2020 is
expected to be around 3% on a net sales value (and perhaps 4% by gross
merchandise value) and no more than 10% by 2025.
What next
Finally, will the sector see any significant consolidation in 2015?
It
is more likely that a few giants like Reliance, Tata Group and the
Aditya Birla Group could enter the sector through the organic route,
while large organized brick & mortar retailers such as the Future
Group, Shoppers Stop and Lifestyle will intensify their multi-channel
play.
Moreover,
2015 should also see launch of several hundred new e-tail startups
focusing on single product categories and niche segments. Consolidation
in this space may happen only in 2017, or even later.
Till then, India’s e-tail sectors promises continuation of “acchey din”
for select category of service providers such as logistics and
packaging companies, for tens of thousands of job seekers—and for
million of consumers.
Raymond created its
protagonist - The Complete Man - two decades ago. Today, he lives on,
partly through his new digital alpha male avatar. The 89-year old brand
launched RaymondNext.com three months ago. It's an online portal to
dress up contemporary men and women, reflecting their style quotients at
work and play.
Raymond is not the only one. A handful of brick
and mortar retail businesses of the A V Birla group, Reliance
Industries, Tatas, Arvind and Future group
have joined the e-commerce bandwagon to drive sales. Relaince Retail, a
subsidiary of Reliance Industries, which started its online play with
grocery e-tailing Reliance Fresh Direct in Mumbai, is now planning to
sell electronics like mobiles and laptops online.
A V Birla
group on the other hand has set up a separate team to establish online
presence. Madura Fashion & Lifestyle, which owns brands such as
Louis Philippe and Allen Solly,
already sells through Trendin.com, the A V Birla group's online store.
In the electronics space, while regional chains such as Viveks and Vijay
Sales have adopted the e-route, Tata group's Croma also sells through
its online stores, besides partnering with e-commerce players like
Snapdeal.
"We are surprised at the pace of digital adoption," said Vijay Basrur,
head of e-commerce in Raymond. Customers are fast embracing the online
channel. "We are building our back-end to deliver to customers directly.
The portal will have a portfolio of Raymond products including Park
Avenue, Parx and ColorPlus. Currently, online contributes 3%-5% to our
overall sales. It will go up to 7% in the next two years," Basrur added.
Raymond also has partnerships with e-tailers like Flipkart, Myntra and
Jabong.
Forrester estimates that Indian online retail spending
will reach $16 billion by 2018, from $3 billion at present, and the
number of online buyers will touch 128 million in the same period.
Recently, Reebok
India has designed a structure where its retail partners and the
company can join hands to ensure that the buyer gets a product of its
choice online. Bata India is looking at a similar route.
Despite his opposition to the discount strategy adopted by e-commerce
players, Kishore Biyani-led Future Group is investing Rs 100 crore of
his own to roll out an omni-channel retail strategy to give customers a
seamless experience across both the physical and digital worlds. "It is
about building technology-enabled platforms that allow customers to
order from anywhere (homes, from within stores, while they are
traveling), on any platform (shops, mobile, laptops) and get the
merchandise anywhere (at the store, at their doorstep or at collection
points)," said Biyani. Future Group has a team of data scientists that
is working closely with its operational teams to grow its omni-channel
platform.
The retailer has partnered with customer science
company Dunnhumby to analyse the consumer data generated from the
group's retail network so that it can better engage with its customers.
"We do around 700 transactions every minute. The JV is focused on
leveraging our customer loyalty database," Biyani said. The group has
also tied up with Infinite Analytics, a big data and social data
analytics company, co-founded by two MIT graduates. Infinite's flagship
product SocialGenomix uses natural language processing (NLP), machine
learning, and predictive analytics to understand user behaviour online.
Similarly, Arvind , one of the country's oldest textile and apparel brand houses,
has launched Creyate, a custom clothing brand for men and women that
allows customers to do everything from the comfort of their homes. They
can design their own garments and book home visits by Arvind's style
stewards, who will take measurements and provide consultancy. "
"Creyate intends to offer an alternative to ready-to-wear as well as
traditional custom clothing. It targets to cross Rs 100 crore by next
year. Our digitized concept retail stores are a well thought-out
extension that facilitates customers' yearning to create their own style
statements, by literally letting you wear your personality on your
sleeve," said Kulin Lalbhai, executive director in Arvind which has a
portfolio of brands include Flying Machine, Colt, Ruggers and Excalibur.
Creyate is launching stores in 15 cities within the next year in
addition to the existing stores in Bengaluru, Ahmedabad and Delhi.
Arvind Internet plans to launch a multi-brand apparel and accessories site by mid next year.
Jabong.com, a fashion and
lifestyle e-commerce portal has taken fashion to another level with many
industry first customer experiences and offerings in the last three
years since its inception. Jabong.com has recently launched a unique
initiative ‘Jabong Boutiques’ that will act as a platform for small and
medium entrepreneurs to connect with a wider customer base spread across
the country serving over 10,000 pin codes.
As the name suggests, ‘Jabong Boutiques’ will be a platform where many
small scale designers and boutiques will find a common ground to sell
their products not just in their vicinity but at a much wider scale. The
objective is to empower designers and players that have the
capabilities of crafting haute couture and fashionable ready to wear
ethnic and western apparels that are edgy but not runwayesque. Jabong
offers them the benefit of increasing their customer base and a chance
to be amongst the likes of bigger brands that are available on Jabong
already
With Jabong boutiques, the company aims at endowing “Make in India” an
international marketing campaigning slogan coined by the Prime Minister
of India, Narendra Modi to attract businesses from around the world to
invest and manufacture in India.
Shortlisting only crème-de-la-crème boutiques with unique designs,
Jabong hopes to promote Indian craftsmanship in a global market.
To give a wholesome/ complete deal, this concept will also encapsulate
the option to get customized ‘Made to Measure’ garments. With this
proposition to create customized and personalized garments, the entire
gamut of offline shopping experience will be brought online.
Talking about this unique initiative, Rinku Sobti, a designer who is
catering to the discerning needs of the contemporary Indian women by
offering them her pret range, says, “I am very happy to be onboard with
Jabong Boutique team. As a designer I felt happy the merchandise team
paid a visit to my store and discussed the designs extensively. I have
tremendous support from the team as the communication channels with them
are open 24x7. The sales have been excellent especially during Diwali.
It was a real bonanza time for us”.
Further talking about her range, she unveils, "“My designs are inspired
by the beauteous style of using knotting, twisting and roping coupled
with my trademark filigree of 3- Dimensional embroidery techniques.The
collection embraces element of contemporary silhouettes and styling for
the city women.The collection comprises of maxis, gowns, jackets,
jumpsuits and dresses. The color palette is bright, full of vitality and
liveliness. It has been a delight to transform fabric into knots,
eventually translating into a luxurious ensemble.”
Nidhi Munim, another designer, onboard with Jabong Boutique team,
creates Luxury swimwear with exquisite quality and finesse, says, "The
collaboration between Nidhi Munim and Jabong Boutique combines the
flare, design and detail of the Indian Maestro in Swimwear with the
reach, innovativeness, and commitment of Jabong.com."
A growing number of
brick-and-mortar retailers and mall operators are adopting a
"click-and-collect" strategy — where consumers buy products online but
take deliveries from physical stores — in a bid to join the online
shopping frenzy and, at the same time, ensure higher footfall in offline
shops.
Top shoe retailer Bata, ethnic wear brand Fabindia, Flying Machine jeans, furniture seller Evok
and mall operators Infiniti Mall and Virtuous Retail are among
retailers that offer or plan 'clickand-collect' service — a concept
introduced by retailers such as Walmart, Tesco and Target that has taken
off in a big way in the US and Europe this year.
The move
comes at a time when a burgeoning number of Indian consumers are
shifting a good part of their shopping to e-commerce players such as Flipkart, Amazon and Snapdeal.
Infiniti Mall in Mumbai, for example, is working on an e-commerce
concept where its tenants are encouraged to give about 10% discount to
online shoppers, but the consumers must visit the stores to take
delivery. Virtuous Retail, which operates malls in six cities across the
country, too, is working on a similar model.
Bata plans to
start its 'click-andpick' service in 2015. "A customer can choose a pair
of shoes that they like and pick it up later from the (nearby) store.
This way sometimes the customers end up buying other things also,"
Thomas G Bata, chairman of Bata Shoe,
told ETearlier this month. "So, we are building a profile of 10 million
customers. We are trying to integrate digital with our retail stores."
Furniture and home products retailer, Evok will also give vouchers to
online buyers offering discounts on products when they visit its shops
for delivery. "Decoration and furnishing is typically an impulse type of
purchasing and when customers come to my stores they have the
opportunity to buy those products," said Ajay Seth, chief operating
officer at Evok.
Nitin Chhabra, chief executive of
Bengaluru-based e-commerce consultancy Ace Turtle that's helping Evok
and Flying Machine with their omni-channel plans, said traditional
retailers such as Walmart, Target and Best Buy are clocking more than
20% in sales through the 'click-andcollect' concept.
Alok
Dubey, chief executive of US Polo and Flying Machine brands, said the
company will put all its 200-odd stores on its clickand-collect offering
over the next 12-18 months. He said the company will deliver-to-home
from the closest outlets in the first stage of its omni-channel plans.
Leading e-retailer Flipkart Saturday said it has tied up with Export Promotion Council for Handicrafts (EPCH) and Karnataka Small Scale Industries Association (Kassia) to promote sale of handicrafts and products of small sellers and local entrepreneurs from across the state.
"As Karnataka is home to a large number of local entrepreneurs, we see a
lot of potential for its sellers to explore our online marketplace
model and grow their customer base," Flipkart vice-president Ankit
Nagori said in a statement.
The city-based e-commerce
player held an interactive workshop here for about 120 sellers of
handicrafts, home decor, furnishings, footwear, fashion jewellery and
electronics on "how to grow your business online".
"With access
to the largest customer base (26 million users) in the country, we will
enable local sellers and entrepreneurs to reach out to a wider range of
customers nationally," Nagori said on the occasion.
EPCH
executive director Rakesh Kumar said the association with Flipkart would
help local artisans and entrepreneurs to grow their business by
reaching out to a large customer base across the country.
Flipkart has also tied up with the Federation of Indian Micro and Small
and Medium Enterprises and the National Centre for Design and Product
Development to boost manufacturing and promote products of artisans and
entrepreneurs.
"We provide marketing support to online sellers by
listing their products, sharing data on market trends to help in
customer acquisition, cataloguing and packaging services to maintain and
enhance quality," Nagori added.
Flipkart offers 20 million products across 70 categories, including books, media, consumer electronics and lifestyle items.
With about 20,000 people, the e-retailer gets eight million hits a day
and delivers five million shipments per month across the country.
The Indian e-commerce industry
is likely to clock a compounded annual growth rate (CAGR) of 35 per
cent and cross the $100-billion mark in value over the next five years, a
study conducted by Associated Chambers of Commerce and Industry of
India (Assocham) along with Price water house Coopers (PwC) has said.
According to the study, the Indian e-commerce industry is valued at $17
billion now.
Continuing on the strong growth momentum of 2014, the e-commerce
industry is estimated to see a 67 per cent increase in the average
annual spending on online purchases per individual in 2015, to Rs 10,000
from Rs 6,000 in 2014, the study said.
Additionally, with improvement in infrastructure such as logistics,
broadband and internet-ready devices, there is likely to be a
significant increase in the number of consumers making purchases online,
the study said. It estimates around 65 million consumers in India to
buy online in 2015, as against around 40 million in 2014.
“With nearly one-third of internet users already making purchases
online, the e-commerce growth will rely more on increased spending from
existing buyers than first-time online buyers,” the study titled
'Evolution of e-commerce in India - Creating the bricks behind the
clicks' said.
While there have been concerns over steep discounting by e-tailers, the
study said, these flash sales and daily deals have played a major role
in contributing to the growth of e-commerce. The increasing adoption of
smartphones and tablet consumers has also aided to the e-commerce
growth.
“The steady growth in the number of web shoppers also is helping to
boost e-commerce sales,” the report said. “Many consumers will prefer
the web to bricks-and-mortar retailers in large part because of online
deals, about 52 per cent of shoppers said they made purchases online
rather than in stores because online retailers offered better deals.”
Among popular shopping categories, the study showed that apparel sales
capture the biggest share of Indian e-commerce retail, along with
computer and consumer electronics. The two categories are likely to
continue fueling the market in the future as well.In 2015, computer and
consumer electronics and apparel and accessories are together estimated
to account for 42 per cent of total retail e-commerce sales, as against
39 per cent now, it said.
Travel and tourism are also fast growing segments with as much as 75 per
cent of the total industry having migrated to online commerce. Among
other things, a major portion of services such as air, train, bus, movie
ticket bookings, hotel reservation and tour packages have moved to the
internet.
The report added that between 2017 and 2020, the e-commerce industry
could spend around 2-6 per cent of the revenue on warehousing and
sortation centers, which would translate to $450-900 million.
“The industry is expected to spend an additional $500-1,000 million in
the same period on logistics functions, leading to a cumulative spend of
$950-1,900 million till 2017-2020,” the study said.
On the employment front, the report estimated the e-commerce industry to
employ an additional 100,000 people in warehousing and logistics, over
the around 25,000 persons working in the segment currently.
The average annual spending of Indians on online purchases is expected
to rise 67% to Rs 10,000 next year, according to a study. Currently,
online shoppers spend around Rs 6,000 a year on average, said the
Assocham-PwC study.
About 40 million consumers purchased
something online this year and the number is expected to grow to 65
million by 2015 with better infrastructure in terms of logistics,
broadband and internet-ready devices. The overall e-commerce industry,
valued at $17 billion, has been growing at a compounded annual growth
rate of about 35% each year, the study said, adding that it is expected
to cross the $100 billion mark in five years.
In 2014, the
sector attracted the attention of investors, including top global firms
and leading Indian industry leaders like Azim Premji and Ratan Tata,
said the study, adding that brands like Flipkart and Snapdeal are
enjoying edge over global players like Amazon in the country. Online
apparel sales continue to capture a greater share of India retail
ecommerce as a category along with the computer and consumer electronics
sector, fuelling the overall market growth.
"The smartphone and tablet shoppers will be strong growth drivers.
Mobile phones already account for 11% of e-commerce sales, and their
share will jump to 25% by 2017," Assocham secretary general DS Rawat
said. Computer and consumer electronics, along with apparel and
accessories, account for the bulk of India's retail ecommerce sales.
These will contribute 42% of the total retail e-commerce sales in 2015
from the current level of 39%, said the study.
India's travel
and tourism are second fastest growing travel and tourism industry in
the world. Nearly 75% of total travel related business has migrated to
e-commerce. With nearly one-third of internet users already making
purchases online, the ecommerce growth will rely more on increased
spending from existing buyers than first-time online buyers, it said.
Other factors contributing to the growth of e-commerce include
aggressive merchandising and discounting from flash sales and daily
deals, more online loyalty programmes and increasing popularity of
smartphones and tablet computers among consumers, the study added. The
industry is expected to spend an additional $500 million to $1 billion
on logistics functions, leading to a cumulative spend of $950 million to
$1.9 billion till 2017-20, it said.
Currently, over 25,000
people are employed in e-retailing warehousing and logistics. It is
estimated that there will be an additional employment of close to
1,00,000 people in these two functions alone by 2017-20, the study said.
As online and offline retailers are on the warpath, the Odisha government is ready to press the Government of India to impose tax on goods sold through the e-commerce platform at the consumption point to counter onslaught from the e-retailers.
The state government has suggested that the tax needs to be collected by the consuming state where the goods are dispatched.
“We will raise the demand for a tax on goods sold through the online
platform at the pre-Budget consultation meeting of state finance
ministers with the Union finance ministry on Friday. The tax can be
introduced through suitable amendment in the Central Sales Tax (CST)
Act,” said a government official.
The official pointed out that with the growing popularity of
e-retailers, the turnover of such firms is rising handsomely but it has
led to an inequitable situation, denting offline retail trade and
precipitating revenue loss for the state government.
“The state government has been losing revenue of Rs 150-200 crore
annually for goods purchased through the online channel,” said Arun
Kumar Dey, president, Information Technology Association of Odisha
(ITAO).
ITAO has been opposing the sale of goods by the online platforms tooth
and nail. Recently, it had banned the purchase of IT related products
from the national distributors in protest against the online shopping
sites which are allegedly selling goods cheaper than the landing cost of
the products.
At present, there are no regulations for collecting tax on online buying
of goods. The government must levy at least 10 per cent entry tax as
proposed by the Bihar government for increasing its revenue basket, he
added.
ITAO has already requested the state government to look into the alleged
unethical practices adopted by the online traders. It has been
demanding regulations for providing level playing field for both the
online and brick and motor players.
Nationwide, the offline retailers have been crying foul over their
online counterparts, blaming them for adopting predatory practices and
pulling customers through tempting discounts. E-commerce firms are also
facing charges of delivering counterfeit and defective products.
Leading players in e-commerce space like Amazon, Flipkart and Snapdeal are luring prospective buyers through hefty discounts and other freebies, leaving offline vendors in a quandary.
Though the annual sales turnover of the offline retail sector is
estimated to be $25 billion (Rs 150,000 crore), significantly higher
than $3 billion of the emerging e-tail sector, many retail formats are
already feeling the heat.
More and more people are joining the online shopping bandwagon hoping to
get better deals, resulting in slowing sales of electronic goods,
apparel, consumer durables and other utilities from the offline retail
stores.
The Confederation of All India Traders had urged the Union commerce
ministry to regulate e-retail business and trade practices of its
companies, as they were offering tempting discounts.
The government
has decided to step in and regulate e-commerce business in the
country, especially with a view to protect consumer interest. Sources
said the department of consumer affairs has been tasked with putting in
place a framework that goes beyond consumer protection and ensures that
there are sufficient safeguards for orderly functioning of the rapidly
growing sector. These are in addition to regulations that the department
was planning under the Consumer Protection Act.
While
brick-and-mortar shops are registered with local authorities, the
regulations for e-commerce are weak. Similarly, officials said, there is
no clear forum for the consumer to approach for grievance redressal.
Officials pointed to threats from white goods companies of withdrawing
warranty, arguing that e-tailers are under-cutting them. "How can you
allow this kind of a regime? The e-tailers as well as manufacturers are
liable," said a source.
In addition, they said, companies are
making use of loopholes in the regulatory architecture to operate with
foreign capital, an issue that is also being looked at by the
Enforcement Directorate. There are also tax disputes involving Amazon in
Karnataka and Snapdeal in Delhi.
The move to regulate e-commerce comes at a time when trader lobby
groups, seen to be close to ruling BJP, have protested against the likes
of Flipkart, Amazon and Snapdeal as these players are growing in scale
and are now being seen as a threat to the brick-and-mortar stores.
In fact, after the BJP came to power, the department of industrial
policy and promotion (DIPP) dropped proposals to allow FDI in B-to-B
e-commerce as the government saw it as a move to allow overseas retailer
through the back door. Commerce & industry minister Nirmala
Sitharaman has repeatedly said the government will not allow foreign
players such as Walmart and Carrefour in multi-brand retail.In recent
weeks, the government has changed its argument, saying it will wait for
the local players to gain muscle before allowing overseas companies, a
model followed in China, which resulted in Alibaba's massive rise.
E-tailing in India has seen a rapid growth in the recent past. Various estimates suggest India's retail market at
$500 bn, with the share of the organised sector being 8 per cent. While
the share of organised retail is expected to increase to 13 per cent by
2018, what is causing excitement in the marketplace is the growth of
the online e-tailing sector, which has virtually grown from an
insignificant presence five years ago to account for 1 per cent of the
retail market. Recent reports suggest, Flipkart has achieved an annual run-rate of $3 billion and Snapdeal is close to achieving an annual run-rate of $2 billion.
The growth of online e-tailing while driven by a wider choice,
availability and convenience, is also being fuelled by aggressive
pricing strategies adopted by the online e-tailers. This aggressive
pricing is largely targeted towards driving consumer traffic from
offline channels to online, and further within online to the specific
e-tailer offering such discounts. While this may appear to many as being
a risky, high-cost bet, there are sub-categories within this that seem
to be a 'win-win' for both the brand and the e-tailer: Welcome to exclusive tie-ups.
Exclusive deals, of course, are those in which the product being
promoted is available only with a particular e-tailer and cannot be
bought through any other offline or online channel. Some recent examples
include Flipkart's exclusive tie-ups with Motorola for the Moto E, Moto
G and Moto X and with Xiaomi for its Mi3 and Redmi 1S handsets.
Microsoft's Xbox console games are exclusively sold by Amazon in India.
These exclusive products are heavily advertised on social and
traditional media. Some etailers even call upon the consumer to
pre-register in order to participate in 'flash sales' for some of these
products (Xiaomi, for example). The excitement builds up during the
flash sale's 'countdown' and often, the product being advertised goes
out of stock within a matter of seconds. This in itself creates more
buzz and hype in time for the next 'flash sale'.
What are the economics behind these exclusive deals and why are they a
win-win for both the brand and the e-tailer? Firstly, advertising &
promotion spends is a significantly large expense for any e-tailer as
most are in the stage of trying to shift the market from offline to
online.
In exclusive deals, the advertising spends are largely split between the
brand and the e-tailer. Secondly, a newer brand gains instant access to
the distribution and fulfilment capabilities of a large e-tailer,
resulting in enriched customer experience.
In some cases, the brand can also overcome buyer hesitance on trying out
of a new brand or product by its association with a renowned e-tailer
and its customer-friendly policies of 'Cash on Delivery', 'One-Day
Delivery' and 'Return within 30 days, no questions asked'.
Well-established brands launching a new variant, too, have gone
exclusively online, such as Britannia selling its new chocolate chip
cookie, Good Day Chunkies or Coca-Cola launching its sugar-free soft
drink Coke Zero, both solely on Amazon for a fortnight before their
offline distribution.
Thirdly, like any other offline retailer, an e-tailer (other than a
marketplace) has to maintain an optimum inventory at various warehouses
across the country and that entails both inventory and logistics costs.
However, in the case of exclusive tie-ups, these arrangements are
largely borne by the brand and therefore, it is a more efficient
allocation of capital for the e-tailer.
Lastly, product returns, when a customer decides to return the product
after testing it for a few days, are a serious challenge for e-tailers.
In some high-value categories like consumer electronics, such returns
can be as high as double-digits.
Not only does the e-tailer have to incur reverse logistics costs, it has
to bear the decrease in the value of the returned product, now that it
is a used one. In the absence of a highly evolved market for refurbished
or returned goods, the cost mark-down on these products goes against
the thin margins of the original sale, often resulting in a negative
margin for the category as a whole. Exclusive tie-up agreements between
brands and e-tailers often eliminate these issues.
While the product gains comfort from the e-tailer's brand equity and
customer fulfillment propositions in exclusive deals, the e-tailer gains
from lower ad spends and better utilisation of capital.
Going forward, one will witness more brands, especially those marking a
first-time entry into a market, tying up with leading e-tailers to
optimise their channel distribution spends.
With the online fashion space poised to grow to $2.8 billion by
2016, Myntra plans to double its leadership team by the end of this
fiscal to accelerate growth. On course to clock over Rs 2,000 crore in
gross merchandise value in FY15, Myntra sees a 100-member leadership
team across functions by April 2015 — almost twice the number in July
this year — all holding positions of associate vice-president and above.
Myntra plans to add about 1,000 professionals to its present
2,000-strong workforce by June 2015. The leadership team will be a mix
of seasoned professionals hired from other companies and in-house
employees groomed and elevated to the top ranks.
The top tier, expected to handle functional roles and execute business
responsibilities, will be apportioned across verticals like private
brands, technology, marketing and customer experience. Besides,
significant numbers will be added to the tech team, including the mobile
division. The technology team may also witness seasoned veterans from
international shores, like the US, being hired.
“We are looking to strengthen the leadership layer for every function,
be it technology, marketing or customer experience. Technology and
marketing will be the two main areas and then comes our private brands.
We will hire people with expertise in specific areas like sourcing,
design etc,” Pooja Gupta, senior vice-president and head, Human
Resources, Myntra, told FE.
Gupta said the e-tailer will undertake a slew of initiatives in the next
six to eight months around leadership development and building
managerial effectiveness, besides charting out development plans for
individual leaders. “We want to ensure that our leaders manage our very
aggressive growth in the next two years. We will invest very deeply in
that,” Gupta added.
While most homegrown e-tailers like Flipkart, Amazon and Snapdeal have
been attracting professionals by the droves, both in the top ranks as
well as freshers, industry experts are sceptical. “Filling in the top
ranks with big names not only adds to the company’s competency, but also
adds to its brand value, which, in turn, helps it rope in investments.
Besides, most of such hires are done keeping in view future growth
prospects. To my understanding, things will rationalise and such hires
will come down eventually,” said Kamal Karanth, managing director at
Kelly Services, India and Malaysia.
Myntra has on-boarded former McKinsey executives Abhishek Verma (senior
vice-president and head of private brands), Rahul Chaudhury
(vice-president, strategy) and Sidharth Gupta (vice-president, head of
strategy and corporate development) in the last couple of months to
capture the lion’s share of the market. Its parent, Flipkart, recently
hired former Calvin Klein India CEO Rishi Vasudev as VP for fashion
retail and former Tata Motors executive Parameswaran Balakrishnan as
vice-president (HR) for supply chain.
Myntra’s Gupta, however, asserted that the senior leadership team is
being curated to support its robust growth plans more than anything
else.
“It’s important not to go overboard with it. When you hire people for
leadership, they have a huge impact on the culture and people in the
company. We want to make sure that when they come in, they don’t dilute
the culture. We want to be very selective about how we approach it,”
she added.
Right towards the end of the year, when we thought 2014 is done with investments and acquisitions, Flipkart raised $700 million and Zomato expanded in Italy by acquiring Cibando.
This says a lot about the Indian start-up eco-system - for one, that the Indian entrepreneurs are restless, and secondly, the good guys, called angels and VCs, are showing a lot of confidence in these entrepreneurs.
According to an Ernst and Young report, titled 'PE Trends', the first half of 2014 saw $4.9 billion of private equity and venture capital investments across 229 deals. It is 16 percent more in deal volumes compared with the first half of 2013. Sanjay Nath, Managing Partner at Blume Ventures, said approximately $100 million was invested in just seed and angel stage deals.
E-commerce, its off-shoots and other tech-based product start-ups were the centre of attention for investors this year. "At present, around a third of VC-backed investments are in software and e-commerce," the EY report said.
Flipkart took everyone by surprise in July, when it raised $1 billion from an array of investors, one of the largest VC funding in an Indian company. It has raised around $2.45 billion until now, of which $1.91 billion was raised in 2014 alone.
Image from Flipkart
"The E-commerce boom, fuelled by large investments in horizontal marketplaces such as Flipkart and Snapdeal, also translated into sizeable investments in vertical e-commerce companies, new pure online brands and enablers like logistics and merchant tools," said Nitin Sharma, Prinicpal, Lightbox.
Eco-system growth
Sharma said the ecosystem as well as the experience and quality of entrepreneurs continued to improve and mobile really helped in customer acquisition. "The fact is that the quality of opportunities (deal flow) has significantly improved," he added.
There have been talks that this year a lot of easy money poured in, on the back of sudden e-commerce boom, garnering interest of everyone from local investors, to foreign funds and even HNIs. Nath of Blume Ventures said more VCs are interested in early stage investments "As Series B and C are becoming expensive. Foreign funds have become bullish and have increased early stage investments in India this year."
Even though this year saw increase in the number of deals, investors say India needs a lot more angel groups, VCs and entrepreneurs to scale to its full potential. "We have less than 300 start-ups funded every year, which should be in 1,000s. India needs 5,000 angel investors instead of the 500 that we have today, and of which only about 50 are really active," said Prajakt Raut, Co-Founder, The Hub.
Raut said there is a large gap in the market and that the eco-system needs more investors to cater to the small size needs of entrepreneurs. "We need more individual angel investors to invest in the Rs 25 lakh-50 lakh deals. Cost of starting up has reduced significantly, and a number of ventures can just start with such capital. Angel groups and VCs just cannot do such small deals," he added.
Online funding
To increase the number of deals sealed every year, a few serial entrepreneurs and investors have come forward to solve the problem with the help of technology. Early in January, Manish Singhal, Shanti Mohan and Sanjay Jha started an online marketplace of investors and entrepreneurs called Let's Venture. This technology-based platform helps investors and founders find each other. None of the co-founders replied to the detailed questionnaire sent by Firstbiz.
Raut agrees digital is the way to go forward if the volume of investments has to be increased. He will soon launch his own such online platform, "Applyifi" where investors and founders can meet each other online. "The current model of working offline cannot scale. There is a limit to how many startups they can engage with and invest in every year. Unless we are able to take the deal-discovery, assessment and review process online, we will not be able to increase the number of angel investors as well as increase the number of startups funded every year," Raut said.
Crowd funding, though small and has its limitations, is another alternate for entrepreneurs to raise money with the use of technology. Crowd funding is, literally, a company that is funded in small amounts, over internet, by a bunch of unknown people. SEBI has already proposed regulations for crowd funding, which says a start-up has to be less than four years old and can raise maximum Rs 10 crore a year.
New sectors
Logistics, product companies, Internet of Things (IoT), recruitment technology, etc. are a few new sectors that got invested this year. "More product companies, energy and renewables are a few sectors which are spoken about. The 100 Smart Cities program and Make in India programmes, if progressed well, are likely to create new entrepreneurs and innovators across multiple sectors," said Raut.
Sharma from Lightbox says there was increased openness from investors towards pure engagement or ad-driven models. "We saw investments in localised messaging apps, content platforms and video MCNs (multi-channel networks on YouTube for example)," he said.
Right towards the end of the year, when we thought 2014 is done with investments and acquisitions, Flipkart raised $700 million and Zomato expanded in Italy by acquiring Cibando.
This says a lot about the Indian start-up eco-system - for one, that the Indian entrepreneurs are restless, and secondly, the good guys, called angels and VCs, are showing a lot of confidence in these entrepreneurs.
According to an Ernst and Young report, titled 'PE Trends', the first half of 2014 saw $4.9 billion of private equity and venture capital investments across 229 deals. It is 16 percent more in deal volumes compared with the first half of 2013. Sanjay Nath, Managing Partner at Blume Ventures, said approximately $100 million was invested in just seed and angel stage deals.
E-commerce, its off-shoots and other tech-based product start-ups were the centre of attention for investors this year. "At present, around a third of VC-backed investments are in software and e-commerce," the EY report said.
Flipkart took everyone by surprise in July, when it raised $1 billion from an array of investors, one of the largest VC funding in an Indian company. It has raised around $2.45 billion until now, of which $1.91 billion was raised in 2014 alone.
Image from Flipkart
"The E-commerce boom, fuelled by large investments in horizontal marketplaces such as Flipkart and Snapdeal, also translated into sizeable investments in vertical e-commerce companies, new pure online brands and enablers like logistics and merchant tools," said Nitin Sharma, Prinicpal, Lightbox.
Eco-system growth
Sharma said the ecosystem as well as the experience and quality of entrepreneurs continued to improve and mobile really helped in customer acquisition. "The fact is that the quality of opportunities (deal flow) has significantly improved," he added.
There have been talks that this year a lot of easy money poured in, on the back of sudden e-commerce boom, garnering interest of everyone from local investors, to foreign funds and even HNIs. Nath of Blume Ventures said more VCs are interested in early stage investments "As Series B and C are becoming expensive. Foreign funds have become bullish and have increased early stage investments in India this year."
Even though this year saw increase in the number of deals, investors say India needs a lot more angel groups, VCs and entrepreneurs to scale to its full potential. "We have less than 300 start-ups funded every year, which should be in 1,000s. India needs 5,000 angel investors instead of the 500 that we have today, and of which only about 50 are really active," said Prajakt Raut, Co-Founder, The Hub.
Raut said there is a large gap in the market and that the eco-system needs more investors to cater to the small size needs of entrepreneurs. "We need more individual angel investors to invest in the Rs 25 lakh-50 lakh deals. Cost of starting up has reduced significantly, and a number of ventures can just start with such capital. Angel groups and VCs just cannot do such small deals," he added.
Online funding
To increase the number of deals sealed every year, a few serial entrepreneurs and investors have come forward to solve the problem with the help of technology. Early in January, Manish Singhal, Shanti Mohan and Sanjay Jha started an online marketplace of investors and entrepreneurs called Let's Venture. This technology-based platform helps investors and founders find each other. None of the co-founders replied to the detailed questionnaire sent by Firstbiz.
Raut agrees digital is the way to go forward if the volume of investments has to be increased. He will soon launch his own such online platform, "Applyifi" where investors and founders can meet each other online. "The current model of working offline cannot scale. There is a limit to how many startups they can engage with and invest in every year. Unless we are able to take the deal-discovery, assessment and review process online, we will not be able to increase the number of angel investors as well as increase the number of startups funded every year," Raut said.
Crowd funding, though small and has its limitations, is another alternate for entrepreneurs to raise money with the use of technology. Crowd funding is, literally, a company that is funded in small amounts, over internet, by a bunch of unknown people. SEBI has already proposed regulations for crowd funding, which says a start-up has to be less than four years old and can raise maximum Rs 10 crore a year.
New sectors
Logistics, product companies, Internet of Things (IoT), recruitment technology, etc. are a few new sectors that got invested this year. "More product companies, energy and renewables are a few sectors which are spoken about. The 100 Smart Cities program and Make in India programmes, if progressed well, are likely to create new entrepreneurs and innovators across multiple sectors," said Raut.
Sharma from Lightbox says there was increased openness from investors towards pure engagement or ad-driven models. "We saw investments in localised messaging apps, content platforms and video MCNs (multi-channel networks on YouTube for example)," he said.
Flipkart, the country’s e-commerce poster boy, is trying to ensure the leaders it inducted in 2014 are woven well into its organisational fabric. Needed, as it has plans, it says, to bring in many more top-level executives, to manage its future growth.
From ensuring the recruits are ready to unlearn, to helping them understand and adjust well in Flipkart's 'start-up environment', it has put in place processes to ensure its structure does not crack amid the ongoing evolution.
Among other things, the company prescribes books for the incoming leaders, makes them shadow the founders, gives them a buddy to reach out to and walks them through all its processes. The idea is that each outsider who comes in at leadership level gets a clear idea into the functioning.
RECRUITING IN STYLE
Any top-level recruit is prescribed a list of books to read before coming on board
With no proven successful models in Indian e-commerce, the company’s radar is in search of quick learners and unlearners
Senior-level recruits are made to meet & interact with several teams to gel with co-workers
Warehouse visits must for all new recruits to understand the entire supply-chain of Flipkart
“We have hired (both) young senior leaders and experienced senior leaders and we have no qualms about that,” said Mekin Maheshwari, 34, chief people officer. “We have a senior vice-president who is 28 years old and we one who is close to 50. I think the one thing that companies like ours can change in the Indian mindset is the need to be meritocracy-driven, rather than tenure-driven.”
As a first step, Flipkart gives a list of books to every new senior-level recruit, which he or she must read before coming on board. These range in subjects such as management, thinking out-of-the-box or consumer internet, depending on the role the entrant would be taking up.
During the first few days, every top-level recruit is made to shadow co-founders Sachin Bansal (chief executive officer) and Binny Bansal (chief operations officer) for a couple of days, to closely understand their vision and working.
To further help the new leader understand its functioning and ethics, a 'buddy' is assigned. This could be an existing employee of the same level or someone senior.
The company also holds visits to its warehouses, to understand the entire supply-chain mechanism. This warehouse visit applies to most levels, not only the seniors — most are taken for a day's visit.
The top management of Flipkart has become a curious mix of young executives, with the company in its initial years and subsequently elevated to senior vice-president and vice-president, and seasoned professionals who have been brought on board from outside.
A reflection of this curious mix is that while the chief executive officer of Flipkart is all of 33 years in age, the company in 2014 hired Tata Communications' former finance chief, Sanjay Baweja, age 54, to be its new finance head.
Additionally, the company brought in several division heads from allied sectors, such as Rishi Vasudev with 15 years of experience and ex-India head for Calvin Klein. A vice-president, he reports to Mukesh Bansal, the co-founder of Myntra, which was acquired by Flipkart earlier this year. A successful entrepreneur, Mukesh Bansal is now among the decision makers at Flipkart, heading the marketing function.
"It (absorbing external leaders) is all about the attitude on both sides of the table — the employer and the employee. Both need to understand the value the other one brings and respect each other,” said C K Guruprasad, principal at executive search firm Heidrick & Struggles. Involved with senior-level hiring for several start-ups, he says it is essential for a young team to get seasoned professionals on board but it is a tightrope walk to ensure it works.
Flipkart has also inculcated an unconventional mindset for recruitment. A lot of stress is given on a candidate's ability to cope with change and unlearn several things he or she might have learnt in previous jobs.
With no proven successful models in Indian e-commerce that Flipkart could pick from, Maheshwari says the best fit for leadership roles at the company are not those who have all the answers but those ready to swiftly learn and unlearn.
“The capability to learn and unlearn is very important for leaders joining us, as we ourselves are at a point where we don't know all the answers. We will make mistakes, we will learn. So, we want people who are a fit in that DNA,” he said.
Next time while purchasing a product online, make sure you enquire about its warranty and service eligibility.
According to a survey by MySmartPrice, a price comparison platform,
among the people who claimed warranty on products bought online, a
whopping 54 per cent of them said that were denied warranty at least
once.
As per the study, 55 per cent of the respondents said
warranty claim process took more than a month to complete whereas 45 per
cent of the respondents stated that the process of claiming warranty
for a product online is usually completed within a week or two.
MySmartPrice
said that denying warranty and delay is due to the "conflict between
service centres and respective brands, or because of lack of service
centres in the complainant's location."
Commenting on the survey findings, MySmartPrice Co-Founder Sitakanta Ray
said: "While it is heartening to see several brands take an online only
approach, it is also disappointing to see some brands turning away
customers who bought their product online for service."
He
further said: "To the few who do find the product defective, it is also
important that both stores and brands work together to solve their
issues."
The study draws insights from over 20,000 consumers
who shopped through the MySmartPrice platform. It gauged shoppers
concerns related to denial of warranty; need to claim warranty, and
duration taken to claim the warranty.
Some of the reasons for denying warranty included lack of a bill from retailer or a stamp of the retailer on the warranty book.
Following pressure from retail traders’ associations,
Kerala Finance Minister KM Mani has agreed to look into taxation issues
thrown up by the growing online retailing, which the associations say is
robbing the government of hundreds of crores of rupees in government
revenue.
At the pre-budget consultations held at K.M.
Mani Centre for Budget Studies at Cochin University, the minister said
the government was studying the issue and steps would soon be taken.
The
Kerala Vyapari Vyavasayi Ekopana Samiti, worried by the fast growth of
e-tailing, had urged the government to bring online retailing under the
VAT (value added tax) regime. It has threatened that if the government
did not charge VAT from online companies, retail shops and businesses
would not pay the taxes from January. The retailers complain that since
the e-tailers sell their wares at a much reduced price, the business
volumes of the brick-and-mortar shops had shrunk. As retailers had to
pay 14.5 per cent VAT, municipal and other taxes as well as the huge
expenses of direct selling which required paying rent and wages, their
prices were higher. However, Jose Sebastian of the Gulati Institute of
Finance and Taxation, told BusinessLine that it was impossible to impose VAT on e-tailing.
‘Principle of origin’
Since
the country followed the ‘principle of origin’ for taxing commodities,
only the State where the product originated could tax and not the State
where the commodity was sent. However, once the Goods and Services Tax
regime comes into effect in 2016, this would be possible as GST follows
the ‘principle of destination’.
KVVES claims that in
this financial year ₹10,000 crore worth of e-tainling would take place
in Kerala. This would mean taking that much business away from the
brick-and-mortar shops and a loss of close to ₹1,500 crores in taxes for
the government.
The Third Party Logistics (3PL) market in the country is expected to
touch Rs 48,000 crore by 2019, mostly fuelled by outsourcing especially
in retail, pharmaceutical, according to a survey.
"The Indian 3PL market is geared for a robust growth during
2014-2019. It is anticipated to grow at a CAGR of 21% to touch Rs 48,000
crore over the period 2014-2019. The 3PL market growth is fuelled by
factors like the inclined outsourcing by Indian companies and many MNCs
particularly in retail, pharmaceutical, automobile and FMCG sectors,"
according to a report by research and consultancy firm RNCOS.
The government's investment towards development of freight corridors,
ports and highways, increasing demand by pharmaceutical industry and
significant growth of e-commerce industry will be other growth drivers
for the sector, it added.
The third-party logistics has been proved to be successful in
enhancing logistics efficiency of many organisations and rapidly gained
popularity while spreading across the country, the report pointed
out. "The 3PL players are emphasising more on the technological
upgradation to engage with the customers and also points out a trend of
Fourth-party logistics (4PL) that is emerging to support the 3PL
business in the country.
The concept of 4PL is expected to catch momentum over the coming
years and it is expected to address the strategic failures of 3PL
services and proposes the opportunity to achieve incremental benefits,"
RNCOS Founder Sushmul Maheshwari said.
Majority of overall market of third-party logistics is organised and
it has been observed that it is utilised mainly in industrial and
automobile sectors followed by pharmaceutical, consumer products and
retail. As most of the revenue in the industry is contributed by big
players, share of organised segment is expected to rise in future due to
tie-ups and mergers and acquisitions which are anticipated to be more
within domestic and international third-party logistics companies, it
said.
However, there are challenges like low flexibility of third-party
logistics systems to model different clients supply chain needs,
congestion in ports due to less storage capacity, poor transport
vehicles, jammed roadways and ports causing delay in movement of goods
and lack of quality manpower that needs to be addressed, it said.
Diversified PSU Andrew Yule and
Company Limited will launch a tea portal tomorrow for e-retailing of
tea targeting the B2C segment, its CMD Kallol Datta said.
"We are launching the tea portal tomorrow for launching e-retailing of our produce for the B2C segment," Datta told PTI.
He said it was big initiative of the company as the tea division was emerging as the highest revenue grosser.
"At present, we are not in the retail segment in a big way. But we want to make a splash in that area," he said.
With 15 gardens spread across North Bengal, Darjeeling and Assam, the company was producing 12 million kgs annually.
The company was selling packet tea in select retail stores at the moment.
In another initiative, the company had got one acre of plot
inside Eco-Park in New Town area for developing a model tea estate near
the city.
"We will try to make some production at the plot, which will be only for display purposes," Datta added.
The year 2014 was perhaps the most eventful year – and a
heady one -- for the decade old Indian e-commerce industry. The sector
saw some milestone achievements, including the ₹2800-crore acquisition
of fashion portal Myntra by Flipkart, a whopping $1 billion raised by
Flipkart and a similar billion dollar investment by global giant
Amazon.com.
There was plenty of media buzz with
global investors and entrepreneurs such as Mayoshi Son, Jack Ma, Jeff
Bezos and Ratan Tata investing and betting big on the Indian online
market.
From radio to television, the online market
dominated each and every marketing medium this year surpassing even the
FMCG sector, till now the biggest ad spender.
Flip side
But
it had its pitfalls too. Flipkart fumbled on its big billion sale day
with technical glitches marring the show and was at the receiving end of
a social media backlash.
Another leading portal,
Snapdeal, faced the wrath of online consumers for delivering a brick to a
customer instead of a smartphone.
Apart from such logistical issues, the major problems for the industry were unclear regulations and laws.
Growing awareness
Market
experts, industry players and investors feel that the growth in the
sector was fantastic with awareness of online shopping growing
exponentially. They expect the government to get pro-active and
understand the needs of the technology-driven consumer sector and come
up with rules and regulations for the sector in 2015.
Swati Bhargava, founder of Cashkaro.com,said
that the coming year would see an easing of Foreign Direct Investment
rules, clearer guidelines on taxation, stringent cyber laws and the
Consumer Protection Act being extended to cover online transactions.
“These
things will bring in more credibility and help build trust among
consumers that will finally boost the growth of the sector,” she added.
Sales tax laws
There
are several issues related to sales tax laws that have cropped up in
Uttar Pradesh, Kerala, Karnataka, West Bengal and a few north-eastern
States causing uncertainty in the e-commerce ecosystem.
According
to Harish HV, partner at Grant Thornton, “These things take time and
are usually prompted by some incident or the other and as a reaction to
it (Amazon, for instance, in Karnataka) the lawmakers try to formulate
laws for that. There are several grey areas in relation to e-commerce,
particularly with respect to VAT.”
Besides, the
proposed Goods and Services Tax (GST) law is expected to be implemented
in the coming year. “GST will create a single, unified Indian market to
make the economy stronger,” says Sanjay Sethi, founder of ShopClues.com.
According
to Gartner, the $3.5-billion e-tailing industry reported a 33 per cent
growth rate and players feel that with transparent and well-defined laws
coupled with large-scale global investments and entry of bigger
players, the sector is set to double its growth in 2015.
Lack of clarity
The
Internet and Mobile Association of India (IAMAI) has already formed a
Digital Commerce Committee, with leading e-commerce companies of India
as members.
It is talking about amending the Consumer Protection Act, 1986. According to Anupam Mittal, founder of Shaadi.com,
“There is way too much left to interpretation with different people in
different agencies and government departments interpreting the law as
they deem fit. The Modi government must affect a cultural change so that
entrepreneurship is celebrated and not viewed negatively, which is a
licence raj hangover.”
Rules & regulations
The
lack of clarity or existence of these rules and regulations did not
hamper the growth of the industry in 2014, but it will surely become a
stumbling block over the next few years, feels Ashish Jhalani, founder
of e-Tailing India, which is working on extending its platform to become
the unified voice of the e-commerce sector.
According
to e-Tailing India, the online industry saw unprecedented growth to
reach almost $12 billion this year with online retail contributing close
to $3.5 billion. This is expected to surpass the $100-billion mark by
2021 with growing usage of smartphones and mobile Internet penetration.
Mobile e-commerce is going to be the next big thing, feel experts. For
Flipkart, the surge in the number of people shopping on mobile across
India has been dramatic with the majority of traffic coming from tier-II
and -III cities.
“Most of our first time customers
visited us only through the mobile medium. For instance, one out of
every two visits to our platform has been through our app,” said a
Flipkart spokesperson.
Key driver
Players feel
that technology will continue to be one of the key driving forces in
Indian e-commerce and significantly contribute towards improving the
customer experience, strengthening supply-chain network and redefining
the retail set-up for the domestic market. Increasing automation,
personalisation and effective use of intelligence at scale is how the
industry players see this space panning out in the coming year.
Funding
Players
and investors are also bullish about funding next year that will
significantly contribute towards the development of the online ecosystem
thus putting India on the global map.
Investors
will now look more closely to identify key USPs of e-commerce sites that
will enable them to beat the existing leaders.
However,
2015 will see more investment flowing to vertical players such as
Urbanladder, Bluestone and Zivame that specialise in one single
category. Investors are expected to show interest in furniture/home
furnishings, grocery, and baby care.
E-commerce enablers like logistics providers, payment enablers, are also expected to gain investors’ attention.
Consolidation
Though
the sector witnessed the largest acquisition, so far, with the Myntra
buy followed by a few small ticket deals in 2014, the coming year is not
likely to witness much of consolidation.
The key,
however, will be the ‘differentiator’ between the players. While niche
and specialty players will attract acquisition by the bigger ones,
players sharing common investors will increasingly look at mergers and
acquisitions amongst themselves.