The Rise of US $50 Billion e-Baazar

The Rise of US $50
Billion e-Baazar
A 360-degree view of the fast-growing
Indian E-tailing market
2018 RedSeer Consulting Proprietary Information | www.redseer.com | Query@redseer.com
A RedSeer Perspective

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ABOUT RedSeer

Flipkart-Walmart deal has been a landmark
moment in the history of e-tailing. Since
its humble beginnings in 2000, e-tailing
has come a long way. The growth story of
the industry in the last 10 years has been
nothing less than remarkable. While the
growth had slowed down between 2014-
2016 due to multiple factors like DIPP
regulations and demonetization, 2017 has
seen a turnaround for the industry.
E-tailing has not been just a growth story
but also a story of innovation. Indian
conditions presented challenges which
were not seen before in other countries
but successful players in the space have
constantly re-invented themselves.
Among other things, e-tailers have created
supply chain and payments solutions that
have also impacted other industries.
Now, as the two large players dominate
the ecosystem, the industry is at an
important juncture. It is important to
understand how the industry has evolved
so far and where it is heading. With deep
expertise in this space, RedSeer has been
able to provide an in-depth perspective on
the industry in this report.
PREFACE
Anil Kumar
Founder & CEO

At Trifecta Capital, our continuing passion
is to enable the Indian start-up ecosystem
in creating large and enduring companies
through value-added capital. We hope to
achievethisbybeingthepreferredprovider
of Venture Debt for Emerging India as well
as leveraging our industry knowledge and
our network of relationships.
Generating independent insights and
sharing these with the eco-system is
another way for us to contribute to the
new economy. We’re excited to present
to you along with RedSeer, our Data
Partners for this Summit, The State of the
Indian e-tailing Industry, which continues
to evolve rapidly and is poised to grow
to US$ 50 billion over the next 2-3 years.
Unlike the past, this growth is likely to be
largely driven by the new smartphone
shopper coming from the non-metros.
While the Indian Internet landscape is
abound with plenty of opportunity across
a variety of business models, this report
is mainly focussed on e-commerce and is
timely in that it comes on the heels of the
largest e-commerce deal in the world –
the Flipkart-Walmart deal. We believe that
the investment commitments of Amazon,
Flipkart/Walmart, Paytm/Alibaba/Softbank
will expand the market manifold and
further create a multitude of opportunity
for defensible and differentiated vertical
e-commerce plays across Grocery,
Furniture, Pharmacy, Fashion and other
verticals outside the large horizontal
players. We also feel that an omni-channel
strategy combining the access and reach
through online but the touch and feel of
offline will become more pervasive in
e-commerce business models. RedSeer
has conducted 36,000 customer surveys,
5000+ seller surveys and several industry
expert interactions to generate some
very interesting findings. We would like
to thank them for partnering with us in
bringing these deep insights to you.
We hope you find this report valuable!
FOREWORD
Partners, Trifecta Capital
Rahul Khanna Nilesh Kothari Aakash Goel

Preface
India’s digital population
First steps towards a long marathon
$50 Bn bonanza
The optimistic seller
Deeper, faster, efficient
What’s trending!!
ReedSeer team
1
3- 18
19- 34
35- 60
61- 72
73- 86
87- 96
97- 98

2
What’s trending!!
$50 Bn bonanza
First step towards a long marathon

3 Source: CSO, RBI, DIPP
India still going strong on
macroeconomics
India macroeconomics
GDP growth is intact
Funds are getting cheaper
Market Insights
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
8.5%
7.5%
8.0%
7.5%
6.8%
6.3%
2012-13 2013-14 2014-15 2015-16 2016-17
5.5%
6.5%
7.2%
7.9%
7.1%
Repo rate (%)
GDP (USD Tn)
Growth (%)
3

4
The stock market is bullish
World has confidence in India
India continues to shine as one of the
beacons of growth in the world economy.
Performance on key fundamentals
remains robust, with strong GDP growth
and sustained FDI inflows driving the
economy and driving up the optimism in
the stock markets.
Lifted by the this strong macroeconomic
performance, India continues to generate
growing private wealth for its citizens,
which enables a sustained consumption
boom amongst them- which will further
lead to a virtuous cycle of GDP and
consumption growth.
35
22
24
31
40
36
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
15.5
19.4
21.1
27.5 26.1 26.6
29.9
2011 2012 2013 2014 2015 2016 2017
Source: CSO, RBI, DIPP
Sensex CY closing value (‘000)
FDI (USD Mn)

5
Solid GDP growth is being driven by
growing private consumption
Private Consumption
As a % of Total GDP
2013
India China
69%
36.8% 37.5% 38%
39.3%
68.5% 69.2%
71%
2014 2015 2016
Indian GDP is driven by private consumption compared to China,
where GDP is driven by Government spending.
Private consumption as a % of GDP is driving higher GDP per capita
Y-o-Y trends are considered for calendar year
Note:
Source: World bank, CEIC

6
Key driver of India’s GDP growth is the
growing share of private consumption.
Share of consumption in GDP remains
significantly higher than in China, where
government spending is a strong driver of
GDP growth.
While in China the government has for
years been trying to rebalance the GDP
away from investment and focused more
on a sustainable, consumption driven
growth, India already finds itself in midst
of a consumption driven boom that is
likely to further accelerate in coming years.
This means a number of opportunities lies
in store for consumer focused industries
including retail.
Source: World bank, CEIC

7
Demographic dividend will continue to
drive consumption spending in future
Working age population (15-59 Yrs)
As a % of total population
Working age population as a %age of total population is expected
to increase in the next 10 years driving higher consumption. Young
population is also more online-savvy driving growth in e-tailing.
1990
1995
2000
2005
2010
2015
2020F
2025F
56%
58%
60%
61%
62%
63%
64%
65%
Source: World Bank Report

8
India’s working age population is
expected to register a strong increase
over the next decade, spurred by robust
macro performance and growing job
opportunities across sectors. This will drive
the creation of a new consumer class that
is expected to further push consumption
performance.
This newly minted consumer class is
likely to consume in a way fundamentally
different to prior generations. Being the
most digitally savvy consumer generation
ever, for this consumer class, digital
channels are expected to account for
a higher-than-ever share of the buying
journey, right from discovery to purchase.
Together these two trends of 1) increasing
consumption and 2) growing comfort with
digital channels are likely to have a very
strong growth impact on India’s digital
economy in general and on e-tailing sector
in specific and drive high double digit
growth for foreseeable future in these
sectors.
Source: World Bank Report

9
leading to increased data consumption
Reducing costs for data and hardware are
and creating a digitally savvy population
Cost of data and data Consumption
Cost of Data (In USD); 2014-2017
Reducing cost of data….
….leading to higher data consumption
1. Industry average calculated using average cost of 1 GB of data from Bharti Airtel, Idea Cellular and
exclude the impact of Reliance Jio(in terms of data cost & consumption)
2. Alliance for affordable Internet data suggests that 2% of monthly income for 1 GB of data is within
affordable range
Data Cost (per month)
2% per capita GDP Threshold for widespread affordability
4.4
1.9
3%
1.4%
2014 Q1 2017 Q1
Annual cost of 1Gb/month
Data Cost as % of GDP per capita
50
95
190
1280
2014 Q1 2017 Q1
Overall India Data Consumption
(Mn GB) Q-O-Q Data Consumption
Source: Internet Trends 2017 - KPCB
Note:

10
Data Consumption has increased with the onset of 4G in the market and competitive
pricing due to the arrival of Reliance Jio has led to reduction in cost of data which has
been the major growth driver for internet usage in India.
Key takeaway
Source: Internet Trends 2017 - KPCB
Over the last few years, India has seen
two mega trends that has radically altered
the nature of consumption. Firstly, data
costs have seen a sharp fall, driven by
aggressive pricing of Reliance Jio, which
also led competitors to cut down the
pricing drastically. As a result of these
events, almost overnight a hitherto
unaffordable service had become very
much affordable for a large mass of India’s
population.
Secondly, growing availability of
affordable and high quality smartphones,
often made even more affordable with
no-cost EMIs and buyback schemes, has
seen smartphone adoption soaring in the
country.
Together, these two trends have led to a
sharp spike in data consumption levels in
the country and driven India’s total data
consumption to the highest in the world.
This is creating a population of digitally
savvy users who are as comfortable
streaming video online as they are with
online purchase of high end furniture.

11
Growth in smartphone users
and online shoppers…
…online shoppers on the rise
will lead to doubling of number of
Rapid growth in digitally savvy users
online shoppers in India
Digital Impact and Retail vs E-tailing
No. of Shoppers, In Mn
1. Conversion rate 1$ = ₹60
2. Y-o-Y trends are considered for calendar year
2015 2016 2017 2020F
225
290
330
600
650
480
430
400
Total Internet users (Mn)
Total Online Shoppers (Mn)
Total Smartphone Users (Mn)
2015
60
75
90
185
2016 2017 2020F
Source: Industry Report, RedSeer IP
Note:

12
Growing digital savviness made possible
by the spurt in smartphone usage and
internet access would drive India’s digital
economy rapidly going forward.
We expect India’s online shopping
population to more than double over the
next 3 years to reach 185 Mn by 2020.
Driven largely by this user base growth
and increased online spending of existing
users, we expect the online retail market
to reach USD 50 Bn by 2020 (from USD
19 Bn in 2017), accounting for ~4.5% of
all retail purchases in India. This is a near
doubling of the penetration from the 2.4%
figure currently observed.
This development is likely to have
profound implications and throw up
massive opportunities for both e-tailers as
well as offline players. However, reaching
the above milestones will not be easy for
e-tailers and will require solving multiple
adoption challenges on the consumer
side.
Source: Industry Report, RedSeer IP 12

13
access to internet out of which
480Mn people in India have
90Mn are online shoppers
Internet Usage Evolution Funnel- India
Numbers of users, in Mn; CY 2017
Stage 0
Stage 1
Stage 2
Stage 3
Stage 4
Access to internet
#of users (Mn) %of online population
Online
Maturity
WhatsApp, Facebook and
other social media
Google, Wikipedia,
E-mail etc.
Banking and basic paid services
like recharge
E-tailing Annual Online
Shoppers
480M
250M
~52%
~45%
~30-35%
~20%
200M
165M
90M
E-tailing industry’s monthly consumer base is ~25 million
Source: TRAI, RedSeer IP
Note:

14
A major obstacle to rapid e-tailing growth
in India is the fact that online shoppers
are a mere 20% of the total internet user
base in India, which is a considerably
lower number compared to counterpart
countries at a similar stage.
Historical reasons for a slow adoption of
online shopping have been many-
While growing comfort with online
transactions is likely to follow the
smartphone and cheap data boom,
e-tailers would need to rethink their
strategy and value proposition to appeal
better to the non-online users. Only then
can 90+Mn new users be successfully
onboarded online by 2020 and the market
can be on the right track to hit USD 50 Bn
GMV by 2020.
Long delivery times
Value proposition of online shopping
being not strong enough
Low internet speeds or lack of good
quality smartphones to enable online
purchase
Lack of trust on online payment systems
Lack of trust on online bought products/
platforms
Source: TRAI, RedSeer IP 14

15
Tier-II+ cities will drive the growth of
e-tailing in the next few years
Annual Unique Online Shoppers
No. of Online Shoppers, in Mn
10%
27%
22%
42%
CAGR
2017-20
Overall
E-tailing industry witnessed a high
growth in Tier-2 cities in 2017
which is likely to continue as major
online players will shift their focus
to tier-2 cities
CY16
75
90
118
150
185
CY17 CY18 CY19 CY20F
Metro
27
37
56
80
106
31
48
27
45
22
40
17
36
14
33
Tier I Tier II
Metro cities are approaching a maturity
phase with~70%of the eligiblepopulation
shopping online
Source: RedSeer IP
Note:
15

16
The major growth engine for online
purchases going forward is likely to be
the Tier 2+ city consumer. This is the
population that was least digitally savvy
till date, measured in terms of % total
population which was shopping online. In
comparison, the metro consumer is the
most digitally savvy, with ~70% of eligible
population already shopping online.
However, e-tailers have made
concentrated efforts to drive Tier2+ online
shopper growth recently. Their strategy
has revolved primarily along the below
levers-
This approach has seen some success, with
Tier 2+ shoppers likely to grow 50% y-o-y
to reach 56 Mn by 2018. We expect that
e-tailers will continue to leverage further
innovations (e.g. O2O channel expansion)
to bring onboard further Tier2+ shoppers
and increase the Tier 2+ shoppers count
to 106 Mn by 2020.
Growing selection of relevant products
including private labels and affordability
schemes targeted at value conscious
customers (which dominate these
cities)
Stronger supply chain networks catering
to Tier 2+ cities
Increased cashbacks to remove barriers
to digital payments adoption
Targeted and localized/relevant
advertising campaigns
Use of assisted shopping to reduce
barriers to first time usage
Source: RedSeer IP 16

18
What’s trending!!
$50 Bn bonanza

19
Infancy Phase
$0.3 b $4.5 b $30 b $50 b
Business Model
Validation Phase
Acceleration Phase
CAGR 72%
CAGR 49%
2000
E-tailing
market
in
India
2009 2014 2018 2020
Domination of Inventory based
models
Sales of books, CDs dominate
Competition is mostly domestic
Moderate discounting
Low focus on customer loyalty
Domination of marketplaces
Domination of electronics
categories
Entry of global players
High levels of discounting
Steadily growing M&A activity
Focus on categories like fashion,
wellness, furniture, babycare etc.
Growth of niche/vertical players
Reducing discounts, bottom-line focus
Rapidly growing M&A activity
Conversion rate 1$ = 60 ₹
the year 2000, the Indian e-tailing market
Starting from humble beginnings in
has entered the ‘acceleration phase’
Evolution of the Indian E-tailing Market
Overview, market sizes in USD Bn
Source: Primary Research; RedSeer IP
Note:

20
E-tailing had humble beginnings in early
2000s when shopping on the internet was
virtually unthinkable. Since it was pre-
smartphone era, the access to internet
was a major barrier even for middle and
upper class. Early players had to innovate
a lot in logistics and payments space to
overcome initial challenges.
Post-2009, while the barrier for ‘access to
internet’ was falling, it also coincided with
smartphones getting popular. This was the
era of fastest growth. A lot of e-commerce
companies started and got initial funding
in the time period but while some of them
flourished, others were shut down in the
same period.
Post 2014, the industry has entered the
‘acceleration phase’ where top-4 players
are battling for the leadership position.
Some consolidation has also happened in
the industry. GMV quality has significantly
improved from the early years and
players are committed to move towards
profitability.
Source: Primary Research; RedSeer IP 20

21
E-tailing industry has a lot of
headroom to grow
Online Buying Frequency
Online Penetration (In %) and Online Spend (In USD)
India
China
USA
205
1800
2000
15%
55%
6%
India
China
USA
20%
55%
79%
32%
27%
8%
Metro
Tier-I
Tier-II
Less People Buying
People Buying Less
Online shopper penetration (As a % of Total Internet User)
Annual online spend per online shopper (In $)
City-tier wise online shopper penetration
Annual online spend as a % of Private consumption per capita– FY17
Source: Industry Report

22
E-tailing has evolved differently in different
countries. While in US, consumers started
shopping online through desktop and
then graduated to mobile; in China and
India, the consumers have “leapfrogged”
directly to mobile. Due to this, a large
population shopping online in China and
India is mobile-native.
The penetration in US has reached 79%
while in China, it has grown to 55% in a
relatively shorter period of time. Indian
e-tailing, which has gained momentum in
thelast10years,hasreachedapenetration
of 20%. A large part of this is driven by
metro population, where penetration has
reached 32%.
Comparison with developed countries
clearly demonstrates that Indian e-tailing
has a lot of room to grow in the coming
years as the middle income expands and
online penetration increases. The growth
will be driven by not just increasing
number of shoppers but also per capita
online spend which is ~10% of US in the
current scenario.
Online shopper penetration is the lowest in comparison to other countries which signifies
that a small share of internet users is buying online, however the penetration in metro and
tier-1 cities is growing at a faster pace than tier-II cities.
Source: Industry Report
Key Takeaway
Annual spend per shopper on online shopping is still very low and constitutes of ~15% of
the private consumption per capita which is ~55% in China.
22

23
55% 65% 70% 80%
30% 20%
35%
45%
online shoppers continue to be added,
As a large number of mobile-native
will continue to grow
the share of mobile, compared to desktop,
Mobile vs Desktop Usage
As a % of Total visits
Mobile site/ App Desktop
Increasing smartphone penetration has led to Indian Internet story unfolding on
mobile instead of desktop; first-time internet users are largely smartphone only.
Source: RedSeer IP
Note:

24
In the last 10 years, consumers are
increasingly adopting smart phones over
feature phones. In 2017, there were 295
million smartphone users and expected to
reach 500 mn by 2020.
Majority of the users who will be added
in the next 3 years are mobile-native.
They will access internet for the first time
directly on smartphone, bypassing the
desktop altogether.
While desktop will still remain 20% by
2020, it is largely driven by people who
access e-tailing websites in their office,
whereas a large part of online shopping is
now happening on-the-go.

25
Each $15 burnt results in $72 of GMV
with players differing in efficiency
E-tailing Unit Economics
Cash Burn vs GMV earned, In USD
Item Value (in USD) Assumptions
Checkout GMV 100
8.5
5.5
-15
Revenue form Sales
Net Revenue
Cash burn estimates
Shipped GMV (after cancellations)
Assuming $100 checkout GMV
10% pre shipment cancelations
17% returns
12% margin
4% of fulfilled GMV
Negative contribution margin
13% of shipped GMV
3% of fulfilled GMV
9% of fulfilled GMV
90
72
-3
-12
-2.25
-6.2
Fulfilled GMV (after returns)
Discounting
Net supply chain expenses
Advertising expenses
Administration and other expenses
Source: RedSeer analysis
25

26
Considering the total Gross GMV to be 100
USD it is seen around the industry that
around 10% cancellation take place before
the order is shipped and around 17% is
the total returns that are happening on
the shipped order.
12% is the gross revenue which is
generated from the sale of products while
the net revenue is around 5-6 USD.
Supply chain is 13% off the shipped gmv
while advertisement, admin expenses
contribute 12% of the total fulfilled GMV
Average cashburn is 15% of the total value
which is largely due to the competitive
environment among the players.
Source: RedSeer analysis 26

27
at ~50% as the focus of the
COD is expected to remain stagnant
industry shifts to Tier-II+ cities
Share of COD as payment mode
As a % of Total Sales
Note:
Card on delivery is included in COD payments
COD SHARE
Increase in digital
payment adoption
Constant COD Share
Increase in Tier-II+
share of shoppers
Pre-Demonetisation Demonetisation Post Demonetisation Present CY20F
58%
47%
54%
51%
49%
Share of COD (%)
Source: RedSeer IP

28
Cash On Delivery (COD) is an Indian
phenomenon where customers pay
through cash/ card at the time of delivery
of goods from the e-tailer instead of
paying at the time of purchase. COD
has been arguably an important driver
of e-commerce growth due to the cash-
heavy nature of Indian economy and
low penetration of digital and plastic
substitutes.
During the demonetisation, COD fell
sharply as households faced shortage
of cash due to lack of availability of high
value notes. While it was predicted that
the COD share will continue falling down
as people were adopting digital means,
yet post demonetisation period, the COD
share rose back to previous levels.
While many believe that due to continued
increasing adoption of digital payment
substitutes, COD share will fall down,
we have to be cognizant of the fact that
adoption of digital payment systems
is still a phenomenon more common
in metros and tier-1 cities. As the new
e-tailing customers are added from tier-
2+ cities, they will continue to prefer the
COD medium as the “trust” on e-tailers
continue to be low in tier-2+ cities.
Source: RedSeer IP

29
20%+ returns is a constant feature
of e-tailing in India
Industry GMV – CY17
Total Industry GMV, in USD Bn
18.6 USD Bn
16.7 USD Bn
13.3 USD Bn
Gross GMV
Shipped GMV
Fulfilled GMV
10%
22%
32%
GVM cancelled
or returned
1. Conversion of 1$ = ₹60
2. Post shipments cancellations and customer returns are included in returns
Source: RedSeer IP
Note:

30
Based on extensive consumer research
conducted by RedSeer, “trust” on e-tailers
remains a key issue among the consumers.
The ability to return the products,
especially the ‘no questions asked’ policy
adopted by some e-tailers has been able
to convert some of the non-shoppers into
e-tailing shoppers.
Out of Gross GMV, orders contributing to
10% of GMV is canceled before shipping.
These are typically impulse purchases or
the consumer finds a better option on
other e-tailer or offline.
Orders contributing to 22% of shipped
GMV are returned; these are either RTO,
where delivery is attempted but either
the consumer refuses to accept the
delivery or is unavailable, or RVP (Reverse
Pickups) where product is accepted by the
customer on delivery and then returned
due to quality or fitting issues.

31
Product
Variety
Industry
Average Product
Availability
Product
Quality
Pricing &
Discount
App& Web
Experience
Delivery
Time
Customer
Support
Reverse Pickup
Speed
Ease of
Return
Refund (Days)
Purching Experience Delivery and Post Deelivery Experience
L H
delivery and post delivery experience (esp.
While purchasing experience is satisfactory,
customer support) needs improvement
Customer Experience – CY17
Rating on a scale of 1-10
A total of 36,000 customer were surveyed over a course of one year
While customers are satisfied with
product quality and App experience…
..returns, customer support and
refund days remain a pain point for
the customers
Source: RedSeer IP
Note:

32
Key Takeaway
As delivery and post delivery experience is infrastructure driven, e-tailers are
continuously investing in expanding their supply chain capabilities and reach.
As the offerings on various e-tailing
platforms have standardized, e-tailers
are differentiating themselves from
competition by improving the purchase
and post-purchase experience.
Purchasing experience on e-tailing
platforms has significantly improved in the
last few years owing to average industry
NPS of 22% especially through better
app experience (more intuitive interface,
better search, accurate description etc.),
product assortment (more brands coming
online etc.) and reviews.
But, the e-tailers have been unable to
match the customer expectations on post-
delivery front even though significant
investments have been made by e-tailers
to control and improve the experience.
For example: Returns processes have
continuously improved over the last few
years and refunds are processed much
quicker.

34
The Optimistic Seller
Deeper, Faster, Efficient
What’s Trending!!
$50 Bn Bonanza
India’s Digital Population

35
The market will be
$ 50 Billion by 2020
Indian E-tailing Industry – Gross GMV
Gross GMV, In USD Bn
CY20F
CY17
CY16
CY15
CY14
4.5
13 14.5
18.6
50
188%
12%
28%
CAGR- 40%
Amazon’s entry in the market with major funding’s happening across the
players & acquisition of a leading fashion player together contributed to
huge growth
Government regulation on marketplace model, demonetization, slow
customer acquisition & drying funding’s hampered growth of the
industry
Increasing active online shoppers with higher internet penetration &
fund raising were some of the reason owing to the recovery phase
Mobile will keep dominating the industry with ~50% share in overall
GMV, however, FMCG, home and cosmetics are likely to emerge as
significant categories alongside mobile and electronics
2014
2015
2016
2017
1. Paytm O2O and Automotive GMV are included; Grocery is also included
2. Conversion of $1= ₹60
Source: RedSeer IP
Note:

36
The Indian e-tailing industry has seen
good momentum from 2014. Though
there was a slump in 2016 with the growth
being just 12%, the industry recovered
well in 2017. The growth of H1-2017 was
around 15-20% but the industry picked up
well in H2-2017, primarily due to multiple
sale events.
A key reason for this recovery is the
shift in the focus of the e-tailers to Tier-
2+ cities. We saw good amount of new
users being added from the Tier2+ cities
in 2017 which was a very positive sign for
the industry. And thus we feel this growth
would continue and the industry would
touch $50 bn mark by 2020.

37
Flipkart has been gaining
market share year on year
Market Share- Key Players
42%
19%
39%
13
42%
31%
27%
14.5
45%
32%
23%
18.6
46%
30%
24%
20
Others
CY15 CY16 CY17 CY18*
Jabong not included
in FK market share
Annualized run rate
based on Q1, CY18
1. Paytm O2O and Automotive GMV are included; Grocery is also included
The industry has seen two major players
acquiring the market share over the
years, In 2015 the industry was scattered
with many players like Snapdeal &
Shopclues which constituted the larger
share in the market while amazon’s onset
in to the market left other players to lose
their market share, Flipkart on the other
hand continued to grow while acquiring
Myntra & its subsidiaries.
Source: RedSeer IP
Note:

38
The industry focused towards adding new
shoppers from Tier2+ cities in 2017 and
thus we saw an increase of 27% in the
number of shoppers in the year. Telecom
operators like Jio did a great job in bringing
more and more people online which was
the key reason for the addition of these
new shoppers.
The increased online penetration and the
good experience provided by the e-tailers
No. of shoppers are expected to increase
with the shift of focus towards Tier-II+
cities which will drive the growth in future
Increased online penetration of smaller
categories with higher frequency of
purchase will be the major factors in
driving the growth
Average order value is expected to remain
stagnant due to the increase in first time
buyers leading to lower order values
E-tailing industry will witness a y-o-y
growth with smaller categories like FMCG
growing at a rapid pace
made people more comfortable with
shopping online and hence we saw an
increase in the frequency of buying.
The average order value remained
stagnant primarily due to the increase
in the first time buyers who shopped for
majorly low value items. We feel going
forward the average order value would
continue to be stable as we expect more
and more new users to join the platforms.
Growth Drivers
Number of
Shoppers
27%
8%
0-1%
40%
Frequency
of buying
Average
Order Value
Industry
Growth Rate
CAGR 2017-20, % Key Insights
Conversion of $1= ₹60
along with online shoppers across the
Increase in frequency of buying
categories will drive the industry growth
Industry Growth Driver in CY17-20
Growth rates, In %
Source: RedSeer IP
Note:

39
Mobile will remain the key
GMV contributor for next 3 years…
Indian E-tailing Industry – Category Share (Y-o-Y)
As a % of Gross GMV
12 14.5 18.6 50
6% 6%
6%
6%
6%
5% 5% 5%
4% 4%
4% 8%
23%
21%
17%
18%
18%
22%
20%
16%
38% 44% 50% 48%
Mobile Electronic Devices/
Non- Devices
FMCG
Fashion Home
Others Overall Gross GMV, USD Bn
1. Automotive share is included in others category
2. Conversion of $1 = ₹60
3. Grocery share is included in the overall figure
Source: RedSeer IP
Note:

40
Key Takeaways
Market share for mobile category has continuously seen an increase, half of the
E-tailing business is being driven by the category as of 2017.
Among smaller categories- share of Home and FMCG category increased in 2017.
The industry witnessed growth across all
the categories but mobiles continued to
dominate. Mobiles, majorly due to the
effect of exclusives, contributed nearly
50% to the overall GMV of the industry
followed by fashion and electronics.
Smaller categories like FMCG and Home
have witnessed good growth primarily
due to the base effect.
We feel that there would not be much
change in the category mix of the industry
going forward as mobiles would continue
to dominate and drive the growth for the
industry.

41
biggest category with online penetration
Mobiles is expected to remain the
reaching 50% in 2020
Mobiles Category – GMV Growth
Gross GMV (In USD Bn), Online penetration (In %)
CY20F
CY17
CY16
CY15
4.7
5.9
8.9
23
26%
51%
CAGR- 37%
Mobile market Y-O-Y GMV (USD-Bn)
Online penetration of Mobile Category (By Value)
CY20F
CY17
CY16
CY15
23% 26%
33%
50%
Source: RedSeer IP, Counterpoint Research Market monitor CY 17
Note:

42
The Indian consumers are getting more
and more accustomed to buying mobiles
online. Mobiles worth $9 bn were sold
online in 2017, which is one-third of the
total value of mobile sold in India. We feel
that consumers would continue to adopt
online as a medium of buying mobiles
going forward and the share of online
mobiles would touch 50% by 2020.
Brands like Xiomi, Motorola and Lenovo
which were very small a couple of years
back have become giants in the last two
years primarily with exclusive tie-up
with their e-tailers. The power of online
sales has become such that players like
Oppo, Vivo which were focussing only on
offline have now started adopting online
channels.
Leading online brands
Fastest Growing Brands
Source: RedSeer IP, Counterpoint Research Market monitor CY 17 42

43
quicker replacement cycles are the
Growth in average selling price along with
major factors in the growth of the category
Share of Price bracket – Overall Mobile Market, CY 17
As a % of total units
~86% of the market is concentrated in the
price bracket of < $250
4%
10%
25%
45%
15%
1%
86%
<$50
$50-$100
$100-$165
$165-$250
$250-$500
>$500
Smartphone Markets by price brackets
Source: IDC, RedSeer IP
2. Replacement cycle is calculated from survey conducted of 300 consumers
Note:

44
More than 2 years
1 year to 2 years
6 months to 1 year
Less than 6 months
Previous Phnoe Current Phone
~20
Months
~17
Months
8%
29%
31%
32%
21%
34%
33%
13%
Replacement Cycle
The Indian consumers today have high
disposable income and mobile phones is
one of the key things they chose to spend
their money on. We thus see a tendency
of the users to upgrade the price brackets
when changing phones. Not only has the
price bracket moved up, the replacement
cycles have come down indicating that a
user today always wants a new and good
phone with them.
The brands have thus started to rapidly
upgrade the phone by adding news
features improving the quality of the
camera etc. to attract the high disposable
consumers.
The combination of these two trends;
increasing price brackets and falling of
replacement cycles, will continue to drive
the growth of mobile category for the
e-tailers.
Source: IDC, RedSeer IP
Key Takeaway
Replacement cycles are decreasing because of the following-
Supply-side effect: Upgradation of smartphones by manufacturers regularly & availability
of cheap smartphone
Demand-side effect: Increase in disposable income of people

45
not created major impact in the
New vertical players have
growth of fashion category
Fashion Category – GMV Growth
2.8 3.1 3.7 8.7
11%
19%
CAGR - 33%
4.5% 4.3% 4.4% 6.2%
Fashion Market Y-o-Y GMV (USD Bn)
Online penetration by overall retail sale (in value)
Source: RedSeer IP
Note:

46
Horizantals Verticals
Horizontals vs Verticals (In %)
CY15 CY16 CY17
65% 55% 57%
43%
45%
35%
Fashion e-tailing has always been looked
upon as the next big thing for e-tailers-
owing to a combination of its easy to ship
nature, high sales margins vs electronics
and low ticket sizes vs electronics that
promotes user trials.
Till date, fashion failed to live up to its lofty
potential, with the category growing in
slower than expected to reach USD 3.7 Bn
by 2017. Slow adoption of new shoppers,
high return rates etc have together led to
this category only realizing a small part of
its large potential.
However, fashion e-tailers are well placed
to accelerate growth in this category
over the next few years, owing to the
below factors-
Weexpectthatabovetrendsinconjunction
with continued innovation by fashion
e-tailers should see a steady growth in
fashion category (33% CAGR) to reach
~USD 9 Bn by 2020.
Growing number of internet savvy Tier
2+ customers- who could try out fashion
purchase as their first online shopping
transaction
Growing trend towards using
omnichannel models as a way to reduce
barriers to online shopping
Wider range of categories being
included in online fashion- for e.g.
cosmetics/beauty is a key category of
focus for e-tailers, which should further
drive up adoption
Source: RedSeer IP

47
in Metros, however contribution
Online fashion has stronger penetration
from smaller cities is also significant
Fashion Category – Tier-wise split
Tier-wise Split, in %, 2017
40-45%
30-35%
~25%
~1.1
~0.9
~1.4
~3.4
9.5% 2.5%
8%
Metros Tier-1 Tier-2+ Overall
Online Fashion- Tier wise split (USD Bn)
Online Penetration GMV
Source: Primary research, RedSeer IP
xx% xx
Note:

48
Key Trends
All the leading horizontal players receive more than 25% of their sales from tier-2+ cities
leading to higher share of online fashion from tier-2+ as compared to overall online retail
Online fashion shopping has significantly increased the brand awareness among Non-
Metro cities where, earlier many brands had limited presence through offline channels
Fueled by an increase in disposable income and increased awareness, online fashion
shopping has grown and more Non-Metro youth are shifting to online shopping
Fashion is one of the most important online
categories sold in Tier 2+ cities- as is clear
from the fact that 25% of online fashion is
sold in Tier 2+ cities, a higher % than any
other category sold online.
Strong demand for online fashion in these
cities is spurred by a high aspirations for
branded and quality products which is
not matched by enough penetration of
organized retail and branded products in
these cities- a clear market gap for online
retailers to close. Thus as Tier 2+ city
shoppers increase to 185 Mn by 2020, we
expect fashion category to grow in tandem.
However, this rapid growth is not a
given. E-tailers need to solve a plethora
of bottlenecks to rapid fashion growth
including solving for size issues, fake
products, need for touch and feel etc. While
innovations like omnichannel, easy returns
etc are solving some of these issues,
e-tailers would need to further innovate
from bottom-up, taking into account the
peculiarities of shopping behaviour in
these Tier cities (e.g. high level of value
consciousness), to drive growth.
48

49
followed by footwear; Accessories with
Apparels are top contributing category
watches as the prime contributor
account for 20-25% of the market
Fashion Category – Sub category split
Sub category split, in %
Apparel Footwear Accessories,
personal care
and others
Total
1.6-1.7
1-1.2
0.7-0.9 ~3.4
45-50%
30-35%
20-25%
Online Fashion – Category wise split, USD Bn
Note:

50
Key Insights
Footwear has higher adoption online where it represents 30-35% of the category
compared to 5-6% offline
Ethnic wear is expected to show good growth with next phase of customer growth
expected to come in primarily from tier-2+ cities
Share of private labels has been increasing especially in apparels due to-
- Increased push by players by brand building and promotion
- Higher customer adoption due to better value for money offerings
Apparel is driving the Fashion category
with almost half of the share. Rest of the
GMV in this category is contributed by
Footwear and categories. Footwear has
a higher online penetration compared to
apparel due to higher standardization.
The fit issues and returns are also lower.
In the accessories, cosmetics is seeing
a large growth especially with vertical
players like Nykaa in this space. They
are educating the customer about the
brands and products, and giving access to
premium brands to aspirational customers
in tier-2+ cities.

51
Infancy Phase
~0.05 Bn $1 Bn $4-5 Bn
Initial Growth Phase Acceleration Phase
CAGR 170%
CAGR 65%
2011
E-FMCG
market
in
India
2014 2017 2020
Entry of vertical players at small
scale in chosen metro cities
Low consumer adoption and
limited selection
Breakout years for sector-
receives majority of $ 500 million
funding
Entry of horizontals and
expansion to non-metros for
verticals
Stabilization of business models
Strong take-up in both metros and
smaller cities driven by growing
selection, offers and innovative business
models
to be the next battleground for growth
FMCG is a USD ~1 Bn market (2017) is going
and is expected to reach USD 4-5 Bn by 2020
FMCG category – Growth Phase
Gross GMV, USD Bn
Source: Primary Research; Online Reports; RedSeer IP
Note:

52
FMCG products are the most bought
product category in India- accounting for
more than 80% of all retail purchases and
60% of all retail consumption. Considering
the huge size of this pie and the potential
for high repeat purchases, e-tailers have
now turned attention to FMCG as the new
battleground to drive e-tailing growth.
While this category has existed online
in some form since 2011 onwards, the
category has really come into focus the
last couple of years. This phase from 2014-
2017 can be called the ‘experimentation
phase’ for this categories- as e-tailers tried
expanding into various business models
and geographies to see what works. In
this period, the difficult financials of this
category led to many closures inspire of
heavy investments, as e-tailers struggled
to discover what works and what doesn’t.
What we see 2017 onwards is a relative
stabilization of a few business models as
e-tailers gradually have found the balance
between growth and unit economics.
Few business models have turned out
to be more popular than others for e.g.
warehouse fulfilled models and e-tailers
are now expanding across city tiers with
these models. Horizontals are also now
deepening their interest in their category
to find a competitive edge away from low
margin electronics categories.
Source: Primary Research; Online Reports; RedSeer IP 52

53
0.67
0.6
1
4-5
10%
67%
CAGR - 65%
FMCG Market Y-o-Y GMV $ Bn
one of the fastest growing
FMCG is expected to be
category reaching 4-5 Bn in 2020
Since FMCG will be the next focussed category for all
the players combined with large verticals entering the
market and improvement in infrastructure, Online
Grocery is expected to become $4-5 Bn market

54
Goingforward,weexpecthighinvestments
in grocery category from both horizontals
and verticals on key areas- including
supply chain network build-up , offering a
wide selection including private labels and
aggressive marketing to bring onboard
customers.
Additionally, further business model
innovation, e.g. expansion of express
delivery offerings, is likely to continue
to bring more wallet share online.
Subscription based models and
omnichannel based delivery models that
offer fresh produce from kirana stores
would also be further explored as e-tailers
seek to target various customers across
city tiers.
We expect that these investments and
continued product innovation should
drive growth of this category to USD 4 Bn
by 2020.

55
is seing high traction from horizontals
BPC, while a smaller opportunity,
and verticals and is poised to
grow rapidly in the coming years
Cosmetics Category - Trends
0.22
0.25
0.32
1.3
14%
28%
CAGR - 60%
1. Conversion rate 1$ = 60 INR
2. BPC – Body & Personal Care
Major e-tailers and smaller verticals alike
are focused on the growth of cosmetics
category along with many offline players
switching to omnichannel model to
expand their customer base
Source: RedSeer IP
Note:

56
Online [2%]
Brand outlets (EBOs/MBOs) [10%]
LSFs [6%]
Salons [2%]
Direct Selling [5%]
Unorganised [75%]
Channel split
51% 49%
Verticals Horizontals
Online Split
Cosmetics is, in many ways, an ideal
category for e-tailers- it is a brand
heavy category with limited long tail
and marketing pressure, sells at high
prices and margins and need to manage
returns is much lesser compared to other
categories.
However, this category has been
underrepresented till date in the online
market- owing to weak selection, limited
marketing efforts, challenges with product
genuineness, inability to compete with the
shopping experience of offline channels.
Bigger fashion players have focused
more on apparel and footwear thus
far rather and pushing cosmetics while
grocery players have focused on low ticket
size personal care segments. Together,
this has limited the online scope of this
category till date.
Source: RedSeer IP

57
Infancy Phase
~0.03 Bn ~$1.3 Bn
~$0.3 Bn
Initial Growth Phase Acceleration Phase
CAGR ~97%
CAGR ~70%
2011
E-cosmetics
market
in
India
2014 2017 2020
Entry of horizontals in the online
cosmetics market
Entry of vertical players at small
scale in chosen metro cities
Low consumer adoption and
limited selection
Existing modern retailers and
manufacturers started their
online businesses
Tweaking and experimentation
with business models
Strong uptake in both metros and
smaller cities driven by selection, offers
& innovative business models
Value added offerings and private label
growth for better margins
online retail market and grow rapidly to
Cosmetics is expected to tap into the
cross USD 1 Bn mark by 2020
Cosmetics Category – GMV Trends
Growth Phase, In USD Bn
1. Conversion rate 1$ = 60 ₹
2. BPC – Body & Personal Care
Source: RedSeer IP
Note:

58
After being underrepresented in the
online retail landscape till very recently,
cosmetics category stands at a tipping
point. We are bullish on the growth of this
category and expect this to be one of the
fastest growing segments in e-tailing over
next few years.
A combination of supply and demand side
factors are likely to drive growth for this
categorygoingforward.Onthesupplyside,
smaller cosmetics verticals are gaining
greater adoption using a combination of
wide and exclusive selection, innovation in
product/channel including having strong
content and offline stores and savvy use
of influencers etc. Larger verticals are also
about to expand heavily in this category
after focusing on consolidating apparel
and footwear till date. They are likely
to invest in supply chains and product
side innovation along with aggressive
marketing to further propel online
cosmetics adoption in India.
On the demand side, the Indian shopper
is turning increasingly aspirational and
often finds desired products unavailable
in nearby offline stores. These are
shoppers who are already comfortable
with shopping online for other categories,
and are increasing likely to buy cosmetics
online as well as the online shopping
experience improves and wider selection
is available.
Together, these trends are leading to
rapid growth in cosmetics market and we
expect it to reach USD 1 Bn in size by 2020,
growing at 60% CAGR over next three
years.

60
What’s trending!!
$50 Bn bonanza

61
Sellers are optimistic on
future outlook of e-tailing
Seller Optimism on Business Growth in %
Q. How likely do you expect that the business will grow
from the following e-tailers?
73%
61%
44%
Large Horizontals Large Verticals Small Horizontals
”Insights from the platforms for listing the
products has helped increase the business
on the platform”
“Business has increased drastically during
the festive Sale period on the platforms
- Online seller, Large Horizontals
“Fashion has seen the highest growth as a
result of better advertisement & product
listing”
“Seller support has improved across all
the platform”
- Online seller, Large Verticals
1. Optimistic Sellers - Sellers who expect the business to grow ‘likely’ ,‘most likely’ in future in the respective
platform
2. Data captured from survey of 2600 sellers on E-tailing platforms
Source: RedSeer IP
Note:

62
Sellers are important stakeholders as
the growth of marketplace affects their
growth. RedSeer conducts quarterly
surveys to assess the sentiment of sellers
on various parameters.
Sellers, according to 2600 surveys
conducted in 2017, are most bullish on
the growth of large horizontals, Flipkart
and Amazon. While the e-tailing has seen
slow growth in 2016, 2017 has been a
year of growth for the e-tailers. Also, post
DIPP regulations governing e-commerce
companies, there is a feeling among
sellers that marketplace models will see
growth.
Source: RedSeer IP

63
Inventory model will retain
60-70% of the market share
Inventory vs Marketplace
As a % of Gross GMV
50% 53%
47% 42%
58% 70%
30%
50%
Inventory Marketplace
Inventory Model includes both platform owned goods as well as seller’s product stored at platforms
warehouse
The E-tailing industry continues to be largely inventory led and as the industry
moves towards consolidation and new categories like FMCG and cosmetics emerge
as the new front for growth, players are focusing more on improving their inventory
capabilities to provide better services.
Source: RedSeer IP
Note:

64
Despite sellers being bullish on
e-commerce, the inventory-led model
is continuously contributing a higher
percentage of overall e-tailing. The trend
is towards increased share of inventory-
led model as e-commerce companies
look towards controlling the customer
experience in a better way.
As DIPP regulations do not allow more
than 25% of sales through one seller,
the inventory-led model is driven by
companies who are wholly or partially
owned by e-tailers. Categories like FMCG
have seen limited success through
marketplace model and hence driven
largely through inventory model.

65
…and the thrust on increasing
the seller base has slowed down
Total Seller Base for a top e-tailer
No.of Seller on an Online Platform
10k
45k
120k
200k
12x in less than
2 years
1.6x in
1 year
Dec - 14 Dec - 15 Dec - 16 Dec - 17
Key Takeaway
Leading industry players have stopped the push towards increasing the seller
base in the past few years and are more focused on growing business from the
existing seller base.
Source: RedSeer IP
65

66
Between 2014 and 2016, there was a
big thrust on acquiring sellers for the
marketplace model by e-commerce
companies. However, the thrust to add
more sellers is increasingly coming down
with e-tailers adding new sellers only when
they can provide specialised products.
There is also a churn in sellers who
opt out of selling online due to limited
success. E-tailers are also trying to better
the customer experience by fulfilling
a higher share of orders through their
own fulfilment centers. Seller policies, in
this context, play a major role for seller
to decide whether they want to use their
own warehouse or e-tailers’ warehouse.

67
Sellers are constantly worried
about the returns
Seller Experience
Insights
Seller Engagement forum experience
Listing Insights from platform
Returns & profitability
Platform support with rebates
Inwarding & logistics support
Rewards & recognition
Sellers are able to get their queries resolved on
engagement forums & the adoption is more than
30%
Sellers are able to improve their order to SKU ratio
particularly in Fashion category
High returns volume in festive season has increased
the packaging cost for sellers
Sellers are unable to reconcile payments/rebates
against damages due to lack of timely notifications
Stringent order-pickup timelines & Smart-fulfilment
No-holiday policy are pain-points of seller
Rewards & recognition is similar across all
ecommerce platforms although stringent guidelines
lead to dissatisfaction among some sellers
Seller experience Insights
High satisfaction Moderate satisfaction Low satisfaction
1. Total Surveys N = 1041
2. The data collected is from the study conducted for OND ’17 period
Source: RedSeer IP
Note:
67

68
Increasingly, sellers are demanding better
services from the e-tailers as majority
of sellers operate only through online
platforms. E-tailers typically create seller
tiers where services like account manager
are provided to sellers in the top tier due to
which they also have a better experience
compared to long tail.
One of the biggest issues for e-tailers
is returns which also hampers their
profitability. E-tailers have introduced
services like “seller-buyer chat” where a
buyer can get in touch directly with seller
to help him understand his specific needs
so that multiple returns do not happen.
Seller are fairly satisfied with the logistics
support provided by the e-tailers as well as
engagement forums which are conducted
by e-tailers to educate sellers.

69
Offline retailers go online to realise
both direct and indirect benefits
Omnichannel benefits for Offline retailers
Insights
Increased touch points with customer
Leading to more conversions/orders
Direct Benefits
Customer Club Webshop
Mobile App Stores
Social Media Direct Mail
Online Marketing Emails
Omni-Channel
POS
Kiosks
In-store immersion
Clienteling
Coupons
Upsell, Cross-sell
Loyality Programs
Store Events
Case Management
Order Processng
Up-sell
Customer Sat
Voice Campaigns
VoC
SLAs
Self-ServiceHelp
Carts
Campaigns
Mobile
SMS
Chat
Google Adwords
Bing Ads
Social Networks
Social CRM
Social Listening
Social Marketing
Social Selling
Social Products
Social Enterprise
Custom Audiences
Social Append
Xiaomi saw online sales increase from 10-20% after adopting an omni-channel strategy
Stores E-Commerce
Call- Centers Social Media
Source: RedSeer IP

70
Indirect Benefits
LEAD
VERY IMPORTANT
IMPORTANT
not IMPORTANT
boring
dull
0
Invaluable data on customer
online behaviour
Build intelligence to target customers
Integrate business - reduce
cost, improve service
As e-commerce continues to grow, there
is a push by offline players to come online.
Large Indian corporates like Tata Group,
Reliance and Aditya Birla are building their
online strategy so they can gain market
share in this fast growing industry.
For an offline player, the benefits of an
omnichannel strategy are not limited to
increased revenue from online channel
but also gain advantages in their offline
channel like:
Increased touchpoints with customers:
With a large number of consumers
researching products online, an
omnichannel strategy provides the brand
with a chance to interact with customer
both online and offline in an integrated
manner.
Customer insights and intelligence: Due
to transactional nature of offline business,
the insights into customer buying
behaviour can be limited but online sales
provides a large amount of valuable data
into customer buying behaviour which
can be leveraged for offline sales.
Improve Service
Delivery
Reduce Cost
10%
10%
10%
11%
12%
15%
21%
Online Store Purchase
In-Store Purchase
22%
24%
26%
19%
10%
9%
33% Online Rating
and Reviews
Google
Search
25%
19%
Email
Promotion
Paper
Catalog
Pinterest
Twitter
Mobile
Advertising
Facebook
MOST
INFLUENCE
LEAST
Source: RedSeer IP

72
What’s trending!!
$50 Bn bonanza

73
will be the key factor owing to
Increase order share from tier2+ cities
higher overall shipment
Indian Etailing Industry – Shipment
No. of shipments(Mn), cost per shipment(USD)
Cost per shipment (USD)
1.1
1.3
1.5
4.4
14%
22%
CAGR- 40%
CY20F
CY17
CY16
CY15
3.0
2.8
2.4 2.3
Source: RedSeer IP, Counterpoint Research Market monitor CY 17
Conversion rate 1$ = 60 INR
Note:

74
Key Insights
Industry shipment are expected to grow at
a CAGR of 40% from 2017-2020 owing to
similar growth in e-tailing industry.
Captive shipments will be on the rise as
the players look to increase their control
over the customer experience with
minimum risks.
Costpershipmentisexpectedtoremainon
similar lines as the order share from tier2+
cities is expected to increase resulting in
higher variable costs & volumes, hence
the overall impact would result in similar
cost per shipment.
Source: RedSeer IP, Counterpoint Research Market monitor CY 17 74

75
significantly in last 3 years with increasing
E-tailing infrastructure has improved
number of warehouses and delivery centres
Infrastructure Details
Number of centres, % share of fulfilled shipments
60+
200+
90+
800+
105+
1200+
CY15 CY16 CY17
Number of Centres
% share of fulfilled shipments
Fulfillment Centres Delivery Centres
CY15 CY16 CY17
45%
52%
55%
Only captive Infrastructure for E tailing players has been considered, Fulfillment centres - Captive warehouses used
to exclusively store platform’s inventory (Products from sellers and private labels on the platform).
Source: RedSeer IP
Note:

76
Key Takeaways
Both Flipkart and Amazon have focused on developing self capability for managing the
shipments, establishing control over the quality and speed of delivery which is reflected in
the increase in number of warehouses and share of fulfilled shipments in the industry.
Processing of orders, at the back-end,
plays a significant role in the success
of an e-tailer. Efficient supply chain can
significantly improve delivery times for
products to reach the customers.
Fulfilment Centers are large warehouses
where orders are processed for shipping.
Delivery Centers are sorting stations
where orders are sorted by pin code
for final delivery. The growth of FCs and
DCs indicates the significant investments
e-tailers are making in fortifying their
back-end processes.
Broadly, there are 2 modes of fulfilment
for an order- one where seller fulfils their
order through their own warehouse, and
other where the fulfilment is done by
e-tailer. E-tailers increasingly prefer to
fulfil the orders themselves as they are
able to control the experience better.

77
Gati
Bluedart
Ecom
Express
Delhivery
Ekart
ATS
Xpressbees
Vulcan
19
18.8
18.5
18
17.2
3.5
11
5.5
6.8
3.8
5.4
3.6
5
2
2
4
99%
96%
90%
57%
35%
28%
26%
10%
Both teaditional
logistic players
gati and bluedart
cover mejority of
the pin code due to
their extensive B2B
logistic network
Both Flipkart and
Amazon are focused
on redusing their
dependency on
3PL players and
expansion of their
respective captive
logistics network,
specially in tier-2
cities
increasing with more and more
Reach of logistics players are
deliverable pin codes added
Player wise Pin code reach
No. of Pin codes served across India(‘000)
Players wise pin code reach
2016 2017 Pin codes covered as a % of overall pincodes in India
Data comparison has been done for Q2’16 and Q2’17
Source: RedSeer IP, Pincode.org.in
Note:

78
Traditional 3PL companies: These are
3rd party logistics services providers
who have an extensive B2B logistics
network eg: Gati, BlueDart.
New-age 3PL companies: These are
3rd party logistics services providers
who focus mainly on e-commerce
companies for logistics eg: E-com
express, Delhivery.
Captive logistics- These are fully or
There are broadly 3 kinds of logistics
players: partly owned by an e-tailing parent
company eg- Ekart, ATS.
As customers from tier-2+ cities are
increasing,reachisbecominganimportant
factor for the success of e-tailers. Delivery
companies, both 3PL and captive, have
to make significant investments for
increasing their reach in areas where they
are not currently present.
Source: RedSeer IP, Pincode.org.in

79
Delivery speeds have improved
continuously in the last 2 years
Delivery Performance, O2D Days
No. of Days taken from order to delivery
CY15 CY16 CY17
0.5 days
Delivery time in Tier-II+
cities has improved the
most due to expansion
of supply chain
infrastructure in these
smaller cities
Overall Metro Tier 1 Tier 2
4
6
Source: RedSeer IP
79

80
Delivery speed is an important lever for
e-tailing companies to keep the customer
happy and NPS higher. High delivery times
often dis-incentivizes customer to order
from an e-tailing platform and instead buy
offline, for faster gratification.
E-tailing companies have been investing in
logistics and infrastructure capabilities to
reduce the delivery times. O2D (Order to
Delivery) is typically broken down into O2S
(Order to Shipment) and S2D (Shipment to
Delivery).
Bringing down O2S entails investment
and innovations in first mile logistics
infrastructure like availability of inventory
in warehouses close to customer, ability to
ship products as soon as order flows in and
multiple pick up times from warehouse.

81
share of captive logistics; Traditional 3PL
E-tailing players are increasing the
will continue to lose share in e-commerce
Dependency on 3PL’s
Share of 3PL shipments as a % of overall shipments
47%
14%
39% 37% 33% 32%
11%
10% 8%
52% 57% 60%
345 394 479 1374
Captive
Overall annual
shipments(Mn)
Traditional 3PL New age 3PL
1. Captive includes ATS, Ekart, Myntra Logistics & others
2. New age 3PL share includes major players like Delhivery, Ecom express, Xpressbees,
3. Traditional 3PL includes Gati, Bluedart and Others
Source: RedSeer IP
Note:

82
Key Takeaways
The dependency on 3PL partners is reducing since major platforms like Flipkart
and Amazon have infused significant sum of money on their respective logistics
arm Ekart and ATS
Majority of shipments(>75%) on both Flipkart and Amazon are managed by their
own logistics arm
Large e-tailers have developed captive
logistics arms for delivery so that they
are able to better control the customer
experience. They have also developed
sophisticated algorithms which assign
a particular shipment to in-house or a
particular 3PL partner.
There are largely two different types of
3PL partners- New Age companies (like
Delhivery), and traditional 3PL companies
(like Gati and Bluedart). While New Age
companies typically have a lower cost
structure, traditional companies have a
wider reach due to established routes in
far flung areas.
E-commerce companies have been
reducing their dependence on 3PL by
increasing the reach of their captive arms
and creating logistics capabilities in-house.

83
capabilities for end-to-end supply chain
Large horizontals are developing
for large appliances and furniture
Typical
supply
chain
Sourcing
unit/imports
Wearhouse/
fulfilment centres
Delivery
centres
Installation/other
services
Major domestic hubs are
Jodhpur, Mumbai and
Delhi, with Jodhpur
accounting for majority
(60-70%) of the overall
products
2 fulfilment centres in
Bhiwandi and Gurgaon
and 1 sourcing centre in
Jodhpur
14 distribution centres in
cities like Hyderabad,
Bangalore and Pune
Own – 25%(product
weighs<50 Kg) 3PL – 75%
Major sourcing hubs for
furniture are in Mumbai
and Jodhpur, large
appliances are sourced
from multiple sellers in
various locations
9 exclusive centres for
furniture and large
appliances, 7 of them were
launched in 2017
NA
Installation is taken care
by the respective brands
except in cities where the
brand cannot provide an
installation partner
Flipkart is sourcing 70%
of the furniture products
from manufacturers
in Jaipur, Jodhpur and
Nagpur, launch of private
labels Perfect homes and
MarQ in 2017
2 exclusive fulfilment
centres for storing furni-
ture products, and about
10 fulfilment centres are
being used for large
appliances
NA
Flipkart has partnered
with Jeeves for scheduling
installation, requesting for
exchange etc.
Parameters
Key domestic
sourcing locations
and their share
Fulfilment centres
Delivery centres
Installation/
service team
Type of Players Verticals Horizontals
Source: RedSeer IP

84
Warehousing and fulfilment centers:
The biggest sourcing hub for furniture
is Jodhpur for all e-tailers. Warehouse
requirements for large appliances and
furniture are different from that of
other products due to larger size. First
mile logistics also needs to be optimized
as the delivery trucks can carry less no
of SKUs.
Delivery centers: Vertical furniture
e-tailers like Peppersfry have delivery/
There are 3 key pieces in the large
appliance and furniture supply value
chain:
distribution centers which are close
to the customer while horizontal
e-tailers deliver do not have separate
delivery centers for furniture and large
appliances.
Installation:Verticalplayersinfurniture
are building in-house capabilities for
installation as it forms a large part of
consumer experience. While Flipkart
has acquired Jeeves for installation of
large appliances, Amazon passes on
the installation request to respective
brands.
Source: RedSeer IP

86
What’s trending!!
$50 Bn bonanza

87
likely to be the major drivers in improving
Subscription model, Private labels are
customer loyalty and increasing margins
for the online platforms
Key Trends – E-tailing
Insights
Trend (#) Key Trends Future Outlook
Set to grow
Set to grow
Set to grow
Wait and Watch
Insights
Trend 1 Subscription
model
Trend 2 Private label
Trend 3 Festive sales
Trend 4 Online-
to-offline
model
Amazon has been successful in implementing
their subscription model with a significant share
of orders(~35%) coming from prime members
Other companies are expected to come up with
similar strategies to increase customer loyalty
on their platforms
Private labels are expected to prosper in future
as platforms are able to earn higher margins on
the products successfully increasing customer
loyalty by providing quality products similar to
National/global brands
Festive sales would continue to dominate the
sales driven Indian market with high Jumps
during the festive sale period
Paytm has been growth in its business post
implementation of the O2O model, however
there are still constraints around its awareness
and adoption among customers
Source: RedSeer IP

88
Are customers
adopting Amazon
prime?
Are Prime
customers
spending more?
Are Prime
members buying
more frequently?
Are Prime
members browsing
other platforms?
Are Prime
members buying
on other platforms?
Subscriptions will have moderate success
over a large base
Subscription Model – Amazon Prime
Insights
Based on extensive consumer research
conducted by RedSeer on Amazon Prime
members, we have identified 3 large
cohorts:
Natural selection: Customers who
subscribe to Prime because they shop
frequently.
Value-seeker: Customers who buy
Amazon Prime membership as it is value-
for-money.
Deal-tied: Customers who buy Amazon
Prime membership due to deals offered
The effect of Amazon Prime on customer
loyalty has been a mixed bag so far. While
Prime members spend almost double of
Amazon in a year compared to non-Prime,
78% of customers still shop on other
platforms after subscribing to Amazon
Prime.
Data captured from survey conducted of 300 Prime users
2X- number of prime members in 2017(7.3 Mn) compared to
2016(3.7 Mn)
Prime customer spends 1.9X in a year compared to Non-
Prime customer
Average prime members shops 2.1X more frequently in a
year compared to Non-Prime members
15% Prime members have not browsed other platforms after
becoming a prime member
22% Prime members have not shopped on other platforms
after becoming a prime member
Source: ELI Survey, RedSeer IP
Note:

89
Private label will become
10% of the E-tailing GMV
Private Label – Future Outlook
Key Growth Rates
Share of private labels (As a % of Gross GMV)
CY16 CY17 CY20F
98% 96% 90%
2% 4% 10%
Private Labels
Other Brands
*Category penetration is defined as the % of sales contributed by private label in the overall GMV
of the category
Source: RedSeer IP
Note:

90
Mobile
Fashion
Large Appliances
Furniture and Home
FMCG and Grocery
<1% 5%
18%
7%
15%
18%
12%
3%
10%
12%
>10% 5-10% 1-5% <1%
Category Private label penetration* and future outlook
Category 2017 2020F
As e-tailers commit themselves to a
path of profitability, they are looking at
ways to increase their gross margins.
Globally, Private labels have proved as
a dependable model to improve gross
margins significantly.
While all the large players are looking to
introduce (or have already introduced)
private labels, the success will depend on
various factors including the customer’s
behaviour while shopping for a particular
category.
Private label is expected to grow the
maximum to fashion and FMCG category
followed by ‘Furniture and Home.”
Source: RedSeer IP

91
in bringing O2O model to India
Paytm has been moderately successful
similar to China
Paytm O2O (Online to Offline)
Business Model
Incase the
product is not
available at the
moment, the
customer can
awail the option
of some day
home delivery
Customer
can pay using
Paytm and avail
cashbacks and
discounts
Each store has its
own catalogue of
products avail-
able in the store
and the custom-
er can chose the
product to buy
from the app
The customer
can scan the QR
code at the store
using the Paytm
Mall App.
Each merchant
is given a Paytm
Mall QR code
and the com-
plete catalogue
of the store is
mapped to this
QR code
Source: RedSeer IP

92
Indian retail market was estimated to be
~670 mn$ in 2017 growing with a CAGR of
17-18%. E-tailing accounts for <3% of the
total retail market. Despite the growth in
e-tailing, industry stalwarts are convinced
that even in a mature stage, at-least 70%
of entire retail market will remain offline.
Since offline retail is expected to remain a
sizeable portion of retail market, e-tailers
are coming up with business models
to grab market share in the organized
offline retail.
One such example is O2O model launched
by PayTM where a customer can browse a
shop’ catalog on their smartphone using
QR code, and pay online. This model has
been fairly successful in China where
customers purchase even offline through
T-mall, which in turn provides retailers
with customer insights as well as help
them personalize customer’s shopping
experience and promotions/ offers.

93
like China as ~30% of Industry GMV
Indian e-tailing market is sale driven
was contributed by 10% of the
days (Sale Days) in 2017
Sale vs Non-Sale GMV Performance
Key Insights; 2017
Industry GVM
(Sale vs Non-sale)
AOV ($) Daily Transactions
(MN)
Overall GVM
Sale Days Non Sale Days
70%
30%
1.3x 3x
$35 1.1
3
$50
1. Jan, May, Jun, Aug, Sept, Oct, Dec are considered sale months
2. Total number of sale days considered are 35
Note:
Source: RedSeer IP

94
The trend of festive sales started with
BlackFridayinUS,whichstartsfromFriday
following Thanksgiving and continues till
Sunday. The sales in this period typically
cross 50Bn$ across US. E-tailers in US
follow this trend and provide deals and
discounts during this period; Black Friday
sales has crossed 5Bn$ sales for e-tailers
in the past few years.
Festive sales in India contribute to 30%
of GMV. While the largest festive sale is
in September end/ October beginning
before Diwali, there are many small sales
which happen during the year. These sales
provide the e-tailers with an opportunity
to acquire new customers through deals
and promotions.
Sale periods typically have higher AOVs
as new customers tend to buy mobiles
which have a higher average value. Festive
month sales in 2017 was 3.3 Bn$ which is
expected to increase with a 50% CAGR till
2020.
Source: RedSeer IP
Key Takeaways
Flipkart witnessed higher jump in sales (3-4X) compared to Amazon(2-3X) during all sale
events in 2017 owing to its efficient marketing and attractive prices during sale events
94

96
Methodology & Glossary
Customer Insights
Seller Insights
Integrated Research
Approach
Expert Interactions
Mystery Shopping
36000+
Customer Surveys in one year
5000+
seller survey
Proprietary research approach by our data
analytics team
3000+
Industry expert interactions
20000+
orders in 46 pincodes across India
Customer insights such as customer
perception about the platform, buying
behaviour, experience etc have been
established from extensive surveys
conducted on quarter on quarter basis
while with more than 5000+ seller
interaction gave in depth analysis of
1 USD 65 INR
GMV Gross Merchandise Value
Y-o-Y Year on Year
BPC Beauty and Personal care
O2D Order to delivery
CAGR Compound Annual Growth Rate
O2O Online to Offline
the seller preference of platforms, view
point on gaining accurate and deep
understanding from more than 3000+
experts throughout the industry and
assessing the individual platforms through
the mystery shopping exercise with more
than 20,000+ orders.
Acronym Definition
Most Comprehensive E-tailing Industry Report
Glossary

97
RedSeer Team
Executive Summary
Anil Kumar is Founder of Redseer Consulting. He has been
part of engagements in Internet, Private Equity, Retail CPG
and Healthcare among others. He specialises in growth and
investment strategies. Anil is a believer of the data-driven
approach in solving business problems. His consulting
approach leverages Data IP, sector expertise and the client’s
core hypothesis. He can be reached at anil@redseer.com
Education
He holds B.Tech from IIT-Delhi.
Executive Summary
Ujjwal is an Engagement Manager at RedSeer. He is a big
believer in the power of technology to disrupt the status quo.
He specializes in due-diligences especially in consumer internet
space. Prior to joining RedSeer, Ujjwal has co-founded and exited
a healthcare startup. He can be reached at ujjwal@redseer.com
Education
He is an IIT Delhi alumnus
Executive Summary
Mrigank has 4+ years of experience in research and strategy
creation across key consumer internet sectors in India, ranging
from e-tailing to FinTech, He is regularly quoted in the media as
a thought leader in the space and can be reached at mrigank@
redseer.com
Education
He is an IIT Roorkee alumnus
Anil Kumar
Founder & CEO
Ujjwal Chaudhry
Engagement Manager
Mrigank Gutgutia
Engagement Manager

98
Executive Summary
Krishna is a senior business analyst with extensive experience in
working with new-age companies and major players in E-tailing
industry He can be reached at Krishna@redseer.com
Education
He is an IIT Guwahati Alumnus
Executive Summary
Saurabh has worked with major E-tailing, VC and PE firms in the
E-commerce industry and has a deep understading of the E-tailing
market . He can be reached at Saurabh@redseer.com
Education
He is an RTU Alumnus
Executive Summary
Eshan has conducted extensive research for market sizing and
competitive bench marking across multiple verticals in the consumer
internet sector, he has developed a deep understanding of the supply
chain and logistics. He can be reached at eshan@redseer.com
Education
He is an BIT alumnus
Executive Summary
Abhinav has experience in market sizing, competitive benchmarking,
& due diligence in the e-tailing industry. He can be reached at
abhinav@redseer.com
Education
He is an VIT (Vellore) alumnus
Krishna Choudhury
Senior Business
Analyst
Saurabh Joshi
Business Analyst
Eshan Tyagi
Business Analyst
Abhinav Sharma
Junior Business
Analyst

100
Disclaimer
While we have made every attempt to
ensure that the information contained
in this report has been obtained from
reliable sources, Redseer consulting is not
responsible for any errors or omissions,
or for the results obtained from the use
of this information. All information in
this report is provided “as is”, with no
guarantee of completeness, accuracy,
timeliness or of the results obtained from
the use of this information, and without
warranty of any kind, express or implied,
including, but not limited to warranties
of performance, merchantability and
fitness for a particular purpose. Nothing
herein shall to any extent substitute for
the independent investigations and the
sound technical and business judgment
of the reader. In no event will Redseer
Consulting or its partners, employees or
agents, be liable to you or anyone else
for any decision made or action taken in
reliance on the information in this report
or for any consequential, special or similar
damages, even if advised of the possibility
of such damages. The information
contained in this report is intended solely
to provide general guidance on matters
of interest for the personal use of the
reader, who accepts full responsibility
for its use. The application and impact
of laws can vary widely based on the
specific facts involved. Given the changing
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and the inherent hazards of electronic
communication, there may be delays,
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