Introduction to the IndianE-CommerceIndustry

India, the world’s 2nd most populous country and the world’s largest democracy

Has been ruled by the Congress party for almost 55 of the past 65 years since Independence.

Indian Macro Analysis PestlePolitical

If the protests and government inaction continue, this can have a serious negative impact on the country’s medium-term growth prospects.

While giving stability to the nation, the Congress rule has also brought about its fair set of challenges, most recent of which is the so-called policy inaction and the rising corruption in all forms of the government.

Economic India is the World’s 10th largest economy and has transformed

from an agriculture Driven economy in the 1950’s and 60’s to one driven by technology and services.

The Indian Economy has undergone major changes over the past two decades which has also had an impact over the GDP growth as well as per capita incomes.

GDP growth has increased from 3-4% in the 1950-80’s to between over the past 10 years.

Indian Macro Analysis Pestle

1961

1963

2009

2011

2013

0

2

4

6

8

10 Growth

Growth

Source: World Bank & e-Tailing India Estimates

Report on the Indian E-Commerce Industry

Top 10 Economies (2011)

Indian economy has evolved over the years and is now amongst the Top 10 economies in the world in terms of nominal GDP and the 3rd largest contributor to global growth in terms of incremental GDP (PPP) for the past decade, right after China and the USA.

Source: IMF

List of Economics by Incremental GDP (PPP) from 2000 to 2010

Source: IMF

Social

India is the second most populous country in the world housing over 17% of the world's population in just over 2% of its area. While in numbers, it means that India has a high population density (382/sq.km), qualitatively it has also brought about its unique set of challenges as well as opportunities

Population of India, at 1210.2 million, is almost equal to the combined population of USA, Indonesia, Brazil, Pakistan, Bangladesh and Japan put together -the population of these six countries totals 1214.3 million!

Source: e-Tailing India Research & Census 2011

Population of India has increased by more than 181 million during the decade 2001-2011. The absolute addition is slightly lower than the population of Brazil, the fifth most populous country in the world!

Social

While Hindus form a majority, Muslims are also present in large numbers (2nd largest population of Muslims in the world after Indonesia, ahead of Pakistan, Bangladesh, Egypt and the rest), and form a 2nd majority, followed by Christians, Sikhs, Buddhists and other religions.

India's social structure is amongst the most diverse in the world with all major religions represented favorably and living together and in relative peace.

Source: e-Tailing India Research & Census 2011

When looking at India's social structure, no generalisations can be made as the country has a very high income disparitycutting across social classes, with more than 65% Indians living in villages and depend on agriculture for their livelihood.

Percentage of population by broad age-groups: India 2001-2026(P)

Source: Census Commissioner of India

India E-CommerceOverview

One of the major fallouts of a young and educated population is the widespread use of social media.

Facebook, LinkedIn and Twitter have become the 3 most used social media platforms the world over.

Of the three, Facebook has had the most impact and also has the most potential to influence buyers and be useful for the online retail community, given that it relies

on photos and instant updates which could potentially include and influence the buyers preferences, profiles, community etc.

Source: Social Bakers(www.socialbakers.com)

Top 10 Facebook Brands by Number of FansThe table below shows the impact of social media in building a brand. Amazon continues to be right at the top with close to 15 million fans worldwide. This is in addition to the close to 3 million fans of Amazon in the UK, as well as millionselsewhere.

Source: Social Bakers(www.socialbakers.com)

Internet Penetration in India (2002 to 2012)

Rising internet penetration has resulted in more and more people going online over the past couple of years. Due to advances in technology, falling call rates and data charges, and better reach into Tier-II and III cities, internet penetration in the country has grown by a multiple of 8 over the last decade.

Source: Internet World Stat & e-Tailing India Research

While internet penetration has risen and mobile portability has increased, payment options have not kept pace. The exhibit below shows the number of credit and debit cards in circulation in the economy since 2005.

Circulation of credit and debit cards

Source: RBI

% Split of Unique Visitors by Age on Retail Sites

The rapidly growing online population in India is young with close to 75% of the audience between 15-34 years of age. The Retail category has 61.4% representation from males and is in sync with the overall online population. The category is also one of the key drivers of growth of internet.

Audience on Retail category has grown 48% from October 2011 to October 2012.

Source: comScore Media Metrix India, Oct 2012, Age 15+ home and work users

Percentage of Retail e-Commerce Dollars Spent via Mobile or Tablet Device

Smart phones and tablets have also just begun to represent a meaningful percentage of total e-commerce activity in the past two years. According to com Score e-commerce research, 10% of online retail dollars spent in Q3 2012 was on mobile devices.

Source: comScore Custom Mobile Research

India - % Change Unique Visitors YoY(Oct '11- Oct '12)

APAC - % Change Unique Visitors YoY(Oct '11- Oct '12)

APAC and India

At the APAC level, the growth of unique visitors in the retail category in India has been 2.5 times that of APAC region. Within some of the top sub-categories, Apparel and Health Care are growing big in audience size over the months.

Global Market Comparison: Market Size, Key Players, Traffic, Ticket Size

Source: comScore

Falling Deal Activity

The Indian economy also felt the squeeze in terms of falling levels of FDI as well as overall deal activity as compared to previous years. Fund raising also became a challenge with total funds raised falling from over $5 Billion in Q3 of 2011, to

less than $0.5 Billion for the same period this year. The exhibit below shows the level of deal activity for the Indian

economy as whole over the past 5 years.

Source: e-Tailing India Research

The Indian e-Tailing industry went through its first phase of consolidation as well as felt a squeeze on margins for the first time since its initial growth phase began back in 2007. For the first time since 2007, investors and CEO's started looking at profitability and bottom-line numbers rather than just a growth in topline revenues. CEO's started course corrections midwayand efficiency and bottom lines became the new buzzword.

2012 An Industry at Crossroads

Source: e-Tailing India Research

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