Devaluation of e commerce / Fate of E commerce

att: Good Morning friends, topic for group discussion for us today is fate of e-commerce industry. Ecommerce, with its new wing, m-commerce, in last few years, has seen a dramatic growth. I believe
there are many reasons for this development.

Amita: Absolutely, major instruments that have led to this growth are- internet penetration in India,
growth of IT and availability of cheaper smart phones.

Rahul: Yeah, adding to the point, India is one of the top retailing markets in the world and among
the fastest growing. Coupled with that is its online penetration, which is nearly 60% now.

Amita: Also, the major factor is the change in mentality of young generation, who leave their hefty
jobs for their startups, this is coupled with their risk taking abilities.

Divya: I agree with these facts, however, one of the top market in e-comm industry is of India .
Internet base here is growing a whopping rate of 40% per year, and ranks third after China and United
States only. Still, despite of this huge potential of this platform, this sector continues to perform below
expectations. All the major companies are under losses. This is a big question, which needs to be
answered.

Tejesvi: That is so true. More so, break-even for most of e-comm startup players in India is at least
five years away. Even the market leaders like, Flipkart, Myntra, Jabong, Snapdeal etc. have not made
any mark.

Saket: Problem starts with the demand of online customers today. They look for sweet deals that
include freebies, such as no shipping costs, COD options, and newer and newer inventory. This turns
out to be a vicious cycle, and so companies report very high rate of rejection along with the enormous
logistic costs

Rahul: Still, companies like Flipkart, which is sought to become Indias Amazon, has received a huge
funding, which nets up to $160 million. This is a big deal for the company.

Matt: Yeah, the eye is on the people living in second and third tier cities. They will start shopping
online, again thanks to the penetration of internet in such cities. Facilities like cash on delivery, 30
days return policies have led to a big revolution in this industry.

Amita: Coming out of conventional business, e-comm players are constantly trying for innovations.
Flipkart has switched towards a marketplace model. It is now allowing third parties to use its platform
to sell products directly, getting some cut in the profits. They have made some efforts in launching
their digital wallet, PayZippy as well.

Saket: Given all that, online retailers, still makes money only when transaction actually happen.
Currently, people only browse these websites, these web apps, gets the information related to prices,
styles etc., read reviews. As a result transaction sizes are very low.

Tejesvi: Exactly, consumers in India have no loyalty, they play only on price.

Divya: Given everything being available on just one screen, in e commerce, it is easy to shift store to
store and see prices on all stores simultaneously. It takes just a few clicks of your mouse or a few taps
on your smart phone screens.

Saket: And hence, e-commerce players can never have good margins and earn profits, otherwise
another player will undercut them and take all the business.

Matt: You are actually right, a recent report that I read a few days back suggested that there is space
for only one player in multi variety online retail in India

Tejesvi: Given this point, there may be other niche players, but other end to end players will be forced
out. So, the fate of either flipkart or Amazon looks dim for the future.

Amita: I understand whatever we talked so far, however, to say that future of these major players look
dim is a bit harsh, and a bit early to comment upon.

Rahul: Yeah, a lot of funding is going into these firms, a lot of innovation is coming up like, COD,
app offers, etc. They all are eyeing a huge profit in near future.

Divya: However, we are missing out on the fact that there are organized and unorganized players in
the retail sector who have physical stores in very many places. They have customer loyalty with them.
And so, in the retail sector worth of $500 billion, the contribution of online segment is mere 0.5%.

Conclusion
E-commerce, along with m-commerce is a new sector, which has seen tremendous growth and
opportunities in the market. Given that people prefer shopping sitting at home, this market looks to
grow. However, the issue is with the feasibility of the players. There have been significant
innovations, significant additions in whatever time that e-commerce players have had so far. There
have been huge investments and funding towards the development of these players, however, this
industry still has not shown any hint of profit so far. It is estimated that in a few years they would
show some turnout. Given all the facts, it is best to leave this on the fate and wait for the future about
what would happen to such huge players. For now, as it is a bliss for the customers.

Facts related to the topic

Pizza Hut was one of the first major brands to experiment with online commerce, starting in 1994.
Ecommerce is predicted to represent 10% of all US retail by 2017.
India is home to the fastest growing ecommerce market, and France is experiencing the slowest
growth.
80% of the online population has used the internet to make a purchase, and 50% of the online
population has purchased online more than once.
Apparel and Accessories is the fastest growing ecommerce sector of the 9 major categories.
Although it launched in 1995, Amazon wasnt able to turn a profit until 2003.
26% of all products added to cart are abandoned and never purchased.
44% of smartphone users admitted to show-rooming They browsed products in brick-and-mortar
stores, picked what they liked, then purchased online.
During the third quarter of 2012, $4,423 was transacted via Paypal, per second.
India is almost 10 years behind China in the e-commerce space. Chinas inflection point was reached
in 2005 when its size was similar to Indias current market size.
Forget the Flipkarts, Snapdeals and Amazons. Travel is where the real money in Indias e-commerce
is. Online travel accounts for nearly 71% of e-commerce business in India. This business has grown at
a compounded annual growth rate (CAGR) of 32% over 2009-13.
Alibaba is an outlier when it comes to margins and making money in the e-commerce ecosystem.
The Chinese company makes an operating profit of 40% compared to industry standard (US and
China) of 8-10%.
For every Rs 100 spent on e-tailing, Rs 35 is spent on supporting services like warehousing,
payment gateways, and logistics, among others. Delivery costs a platform owner 8-10% implying
significant burn.
Demand in India exists across 4,000-5,000 towns and cities, but there is no significant presence of
physical retail in almost 95% of these.