Market Structure of

E-Commerce in India
Made By
Akshit Arora(15P126)
Kanwar Preet Singh(15P146)
Nitish Gupta(15P156)
Sanhita Baruah(15P166)
Sambhav Jain(15P167)
Vatsal Shah(15P176)

INTRODUCTION
Electronic commerce is the process of buying, selling, or exchange of products,
service, and information by various agents via computer networks and other
electronic mediums
Retail
Flipkart
Amazon
Snapdeal

Online Travel
Yatra
Makemytrip
Expedia

Financial Services
Bankbazaar
Policybazaar
Bajajfinserv

Digital Downloads
Apple itunes
Hungama
Gaana

Other Online Services

Monster
Ola Cabs
Foodpanda

E-commerce business models

Inventory driven model
E-commerce websites primarily source the inventory sold through their website
Lots of cash burned by the players to hold inventory
In India, only a company incorporated in India can operate through this model

Customer
Guarantee

E Retailer

Shipping

Warehouse

E-commerce business models

Marketplace driven model
E-commerce websites bring buyer and seller in direct contact
Does away with warehousing as well as inventory holding
As per FDI rules, e-retailers have to follow this approach to sell

Customer

No Guarantee

E Retailer
(Website)

Shipping

Seller

Seller
Warehouse

E-commerce business models

Hybrid model
In this, the retailer holds his own inventory as well as enables the sale of third-party
products
Acting as a mediator, the website takes a part of the transaction as fee
Conflict of interest exists while pushing products to consumers
Customer

E Retailer
(Website)

Guarantee

Own
Shipping

No Guarantee

Other
Retailer
Shipping

Own
Warehouse

Other
Retailer
Warehouse

Externalities

Positive Externalities

Better rate and variety for the customers

More footfall for the advertisers

Can help achieve economies of scale

Negative Externalities

Constant Tracking of customers

Excessive advertisements for the customers

Economies of Scale
Targets:
Reduced long run average cost
Sourcing and selling adequate quantity
Avoiding diseconomies of scale due to
overestimated demand

Advantages:
Cost savings for the customer
Undercutting competitors without damaging
profit margins
Heightened barriers to market entry

Waterbed effect

In two sided market, when prices of only one side of the market is pushed down it
results in a re-balancing of prices on the other-side.

Illustration: Google charges high prices to advertisers and does not charge cost to
customers. If Google starts charging advertisers the actual costs incurred it would
inevitably force customers to pay for the search, and possibly reduce the cost for
the advertisers.

One side of market

Other side of market

E-commerce: The New

Realities of Dynamic Pricing

It is apricing strategyin which businesses set highly flexible prices for products
or services based on current market demands.

Dynamic
Pricing

Time Based
Pricing

Peak Load
Pricing

Dynamic
Merchandizing

Clearance
Pricing

Segmentation
and Rationing

Time Based Pricing

Exploits the different prices customers are willing to pay at different times

Peak Load Pricing

When supply is inflexible, which allows suppliers to systematically increase prices

with predictable increases in demand.

Eg- Airlines

Clearance Pricing

When Demand is uncertain and products lose value in the eyes of the customer
with timethey simply go out of fashion.

Eg- Apparel Retailer

Dynamic Merchandising
Exploits the Internet-enabled capacity to change prices rapidly and frequently to offer
customers different products, promotions, delivery options and pricing as supply and
inventory change.
Eg- Amazon.com

Segmentation and Rationing

Exploit the difference in the willingness of customers to pay through different
channels, at different times and with different levels of effort.

E-commerce players in India:

Comparative Analysis

Business
Model

Product
Categories
Market
Valuation
Revenue
Orders
through
Mobile
Employee
Strength

From Regular
Search and
Inventory Model Marketplace
Transaction
to Marketplace
Model
Model
Model
7
$ 15 billion

12

N/A

being local,
thinking
global
specific
market
segments

Online Travel
and
Hospitality

$ 5 billion $0.876 billion $1.38 billion

$0.55 billion

$ 4.5 billion

$ 3.5 billion

$ 94.31
million

$ 108.81
million

$ 290.37
million

75%

75%

50%

61%

35%

33000

9000

9000

4049

1712

Impact of E-Commerce
Industry
Traditiona
l Vendors

Payment/
Credit
Card
Industry

Logistics
Industry

Social
Impact

ECommerce

Marketing
Industry

Brick and Mortar

Retailers

Footfalls at retail stores have been impacted

Heavy discounts have left vendors uncompetitive

Hit on the reputation of offline retailers

Canon has stopped selling its products on some websites

On the brighter side

Local sellers have increased their customer base by associating with e-commerce

Hyperlocal startups have increased the sales

Social Impact

Everything at the doorstep

E-commerce has generated employment

More transparency for consumers

Competitive prices

Large no. of brands under one umbrella

Social Impact
Everything at
the doorstep
Employment
opportunities
Transparency
Competitive
Pricing
Large no. of
options

Marketing Industry

Need to grab users eyeballs as marketing is not optional it is a

need
Rise of digital marketing

Ecommerce spend on ads in 2015: Rs 3,430 crore ($553 million)

Digital Advertising will account for 10% of the ad-spends

Ad spend by e-commerce has grown 50% yoy

Ad Spend in INR Crore

200
150

Ad Spend in INR
Crore

100
50
0

Flipkart

Snapdeal Amazon

Olx

Logistics Industry

Logistics is the backbone of e-retail

Many logistic companies have started their dedicated e-commerce

logistic arms

With the rapid growth of ecommerce it is estimated that e-tailing

would grow at 50% CAGR

Credit Card Industry

E-com companies have gained customers trust over the period of

time. This has led to a shift from COD to pre-payment using cards

Also, save card details option has led to easy card payment

Credit card industry saw an increase of 22.59% in the outstanding

amount

Key Growth Drivers

Mobile penetration is set to reach
50% by 2020. Given the increased
mobile penetration and Smartphone
adoption, mobile is certainly one of
the major factors driving
Web content
search in Hindi
has grown a
whopping
155% in the
past year

Plastic Money
M-Commerce

Going Beyond
Metros

Localization
of Internet
Content

Development
of Infra and
logistics sector

The usage of debit cards at

point of sale terminals has
seen a growth of 86 per
cent from 2013 to 2015.

Non-metro cities offer a huge

growth potential. This large group
of city dwellers have significant
purchasing power

Growth in infra
sector and
logistics
industry has
helped
ecommerce
prosper to a
great extent.
Online retailers
say they have
extended their
reach to
12,500-15,000

Challenges
Low
Internet
Penetratio
n

Absence of
cyber laws

Lack of
Infrastruct
ure

Inefficient
Payment
Modes

No Profits
in Sight

Low Internet
Penetration

India has a very low internet penetration of just

19.2%. Rural India is still catching up with 2G

Telecom operators are finding themselves cashstrapped in making heavy investment for network
infrastructure

Uncertainties around regulation and policy is

adding to the telecos woes

Even the best content and app may not appeal to

a user if the network backbone does not support
the intended user experience

Inefficient payment
modes

Cash on delivery is the most preferred mode of

payment. Manual cash collection is laborious,
risky, and expensive

Payment gateway error rates are high (>25% of

transactions fail at the gateway). They also
charge way too much commission on each
transaction

Low credit card and debit card penetration

No Profits in Sight

Too many competitors

Immense cash burn for customer acquisition

Huge marketing expenditures

Customer retention cost is too high

High percent of return of orders

Lack of Infrastructure

Lack of proper roads adds to logistics cost

Postal addresses are not standardized

Absence of cyber laws

In India, there are no cyber laws to monitor and regulate transactions on net

Privacy and security concerns of consumers

Computer virus is also a formidable problem in the execution of e-transactions.

Transactions are confirmed by the computer virus I love you