INDUSTRY ANALYSIS REPORT – E-COMMERCE SECTOR

Submitted in partial fulfilment of PGDM 2018-20 in

SVKM’s NMIMS
School of Business Management, Hyderabad

Submitted By: Faculty Mentor:

Sainyam Chaudhry Dr. Kavita Kulkarni
80303180031
 PREFACE

Electronic Commerce, or e-commerce, as we shall refer to it is a hot topic. The internet has
taken the world by surprise and rapidly become primary commerce and communication
medium for virtually every industry, large, medium or small.
E-commerce is considered as one of the emerging business strategies. However, e-commerce
did not just happen in 1998. Various car companies and supermarkets have been going e-
commerce for many years; their e-commerce technology is called electronic data interchange
(EDI). Airline tickets have been sold using e-commerce systems; that technology is called an
electronic market.
The impact of internet on business is far-reaching. It is more that transforming current
business operations to a new medium. The process requires re-defining business processes,
models, changing corporate cultures, reinventing business transaction processes, and
establishing reliable customer who is better informed. Global competition law, and consumer
preferences leading to greater satisfaction are among the issues being affected by e-
commerce. The major goal of this research is to understand how the e-commerce application
turned out to get a greater profitability and growth.

Hyderabad Sainyam Chaudhry

1st June 2019

Page-2
 ACKNOWLEDGEMENT

I wish to express my deepest sense of gratitude for immeasurably valuable guidance and
support I have received from our Guiding Faculty, Dr. Kavita Kulkarni and everyone else
who supported me throughout the Industrial Analysis Project. I am thankful for their friendly
advice and constructive feedback about the project.

I am indebted to all my colleagues for motivating and providing an enjoyable environment,

conducive to learn and grow.

Thank You.
Sainyam Chaudhry
 EXECUTIVE SUMMARY

In the last few years, growth rates have seen a downfall in mature markets and retailers had to
look beyond their borders to find sustainable opportunities that allow them to meet growth
targets. Retailers have recently turned to a new growth by entering global markets through e-
commerce. In today’s competitive global marketplace, e-commerce provides a lower risk,
faster avenue to enter, test, and penetrate international markets. When properly executed, this
consumer-focused approach will go a long way to differentiate brands and build customer
loyalty for long run.
With consumers becoming increasingly technologically savvy, they demand the ability to
seamlessly interact with retailers and shop through multiple channels. Thus, a digital channel
can both complement an existing presence and allow a retailer to quickly test and expand its
footprints into new markets, enabling retailers to better control inventory, target customers,
and drive sales through online marketing.
 Table of Contents

Particulars Page No.

Chapter 1 : Introduction 6
Chapter 2 : Industry and Competition 15
2.1 Market Size and Characteristics 15
2.2 Market Trends 16
2.3 Market Structure 18
2.4 Characteristics of Competitors 21
Chapter 3 : Industry Analysis- Metrics 23
Chapter 4 : Findings- Projections and Insights 27
Bibliography 32
Chapter 1 - Introduction
Evolution of E-Commerce Industry:-

2000: Online advertising

 Google launched the first online advertising tool named Google AdWords as a way to
help retailers to utilize the pay-per-click (PPC) context
 StubHub, a very popular online marketplace for event tickets, launches
 Walmart launches its website, allowing customers to shop online

2001: E-commerce payment system

 Skrill (formerly known as Moneybookers.com), launches a prominent online payment

platform
 Brick and mortar retailer: Costco launches its own business-to-business online
shopping system
 Online marketplace: Newegg, a very prominent online marketplace for technology is
launched.

2002: Acquisition

 eBay.com acquires PayPal for $1.5 billion in stocks

 Online marketplace: Bossgoo, a prominent business-to-business (B2B) online
marketplace is launched.
 Brick and mortar retailer: Safeway Inc. launches an online delivery service, allowing
customers to shop online

2003: Online advertising

 Google launches AdSense, allowing users to promote their goods on the web based on
the product's relevance to the viewer of the advertisement
 Valve Corporation launches Steam, the most popular Digital rights management
(DRM) and gaming platform in the world

2004:

 DHgate.com, Chinas first online b2b transaction platform, is established, forcing

otherb2b sites to move away from the yellow pages model

2005: Invention

 Amazon launches its Amazon Prime service, which allows users to expedite shipping
on any purchases for a flat annual fee

2006: Online storefront service

 Shopify, a prominent storefront service is launched

 Tradera is acquired by eBay.com for approximately $50 million
2007:

 StubHub is acquired by eBay.com

 Business.com acquired by R.H. Donnelley for $345 million
 Media streaming service: Hulu, a popular subscription video on demand service is
launched. Hulu is composed of various media organizations
 Online advertising: Facebook launches its Facebook Beacon service to display more
relevant information to users by collecting data on their web browsing outside of
Facebook
 Online marketplace: Flipkart, a popular Indian online marketplace is launched
 Online food ordering service: AmazonFresh, a very prominent online food ordering
service is launched in Seattle. It has since spread to dozens of cities across the US

2008: Online storefront service

 Magento. a popular online storefront service is launched

 Acquisition: Google acquires DoubleClick for $3.1 billion in cash
 PayPal Credit (formerly known as Bill Me Later), is acquired by eBay.com
 Online marketplace: GOG.com, a prominent online gaming marketplace that offers
DRM-free games is launched

2009: Online storefront service

 BigCommerce, another popular online storefront service, launches

 Amazon acquires Zappos.com for $1.2 billion
 E-commerce payment system: Bitcoin, a very prominent cryptocurrency launches,
and changes how consumers can pay for online purchases or even in restaurants

2010: Online marketplace

 Groupon, a prominent online marketplace is launched

 Media streaming service: HBO Go, a popular subscription video on demand service
that offers streaming of exclusively HBO content, launches

2011: Acquisition

 Magento is acquired by eBay.com

 E-commerce payment system: Google Wallet, a prominent online payment system
similar to PayPal is launched
 Online advertising: Facebook Beacon is shut down due to privacy concerns

2012: Online food ordering service

 Instacart, a popular and growing online food ordering and delivery is launched

2013: Online advertising

 Facebook begins letting users sponsor posts, which helps give their posts or products
more publicity among their friends, followers, and those to whom the post is relevant
  Online food ordering service: Google Express (formerly known as Google Shopping
Express), a service similar to AmazonFresh and Instacart launches in several cities
across the US, starting with San Francisco
 China becomes the largest e-commerce market in the world

2014: E-commerce payment system

 Apple Pay, a prominent payment system in the form of a mobile app that mimics a
credit or debit card is launched
 Online marketplace: Jet.com, an online marketplace is launched

2015: E-commerce payment system

 Google launches Android Pay, a prominent payment system similar to Apple Pay
 Pinterest enters the e-commerce scene by adding Buyable Pins, a feature that allows
users to sell their pins to other users

2016:

 Walmart announces it will be acquiring Jet.com for $3 billion

 Alibaba announces it will be acquiring a controlling stake in Lazada Group for around
US$1 billion

2017:

 On march Amazon.com acquired Souq.com the biggest e-commerce website in

Middle East ( Egypt, KSA and UAE)
 Instagram introduces shoppable tags- enabling people to sell directly from the social
media platform
 Cyber Monday sales exceed $6.5B

2018 and onwards:

 Flipkart is acquired by Walmart

 Indian e-commerce market reached US$ 38.5 billion in 2018-19

The e-commerce has transformed the way business is done in India. The Indian e-commerce
market is expected to grow to US$ 200 billion by 2026 from US$ 38.5 billion as of 2017.
Much growth of the industry has been triggered by increasing internet and smartphone
penetration. The ongoing digital transformation in the country is expected to increase India’s
total internet user base to 829 million by 2021 from 560.01 million as of September 2018.
India’s internet economy is expected to double from US$125 billion as of April 2017 to US$
250 billion by 2020, majorly backed by ecommerce. India’s E-commerce revenue is expected
to jump from US$ 39 billion in 2017 to US$ 120 billion in 2020, growing at an annual rate of
51 per cent, the highest in the world.
Some of the major developments in the Indian e-commerce sector are as follows:

 Flipkart, after getting acquired by Walmart for US$ 16 billion, is expected to launch
more offline retail stores in India to promote private labels in segments such as
fashion and electronics. In September 2018, Flipkart acquired Israel based analytics
start-up Upstream Commerce that will help the firm to price and position its products
in an efficient way.
 Paytm has launched its bank - Paytm Payment Bank. Paytm bank is India's first bank
with zero charges on online transactions, no minimum balance requirement and free
virtual debit card.
 As of June 2018, Google is also planning to enter into the E-commerce space by
November 2018. India is expected to be its first market.
 E-commerce industry in India witnessed 21 private equity and venture capital deals
worth US$ 2.1 billion in 2017 and 40 deals worth US$ 1,129 million in the first half
of 2018.
 Google and Tata Trust have collaborated for the project ‘Internet Saathi’ to improve
internet penetration among rural women in India
 According to EY, E-commerce and consumer internet companies in India received
more than US$ 7 billion in private equity and venture capital in 2018.
Overview of Key Players in the Industry
1. Amazon.in

Amazon is an American based eCommerce company having its headquarter in

Washington. On 5th July 1994, Jeff Bezos founded the company. Globally, it is the
largest internet retailer according to the revenue and market capitalization. Amazon.in
caters a wide range of product categories including apparel, electronics items, software,
videos, books etc. All customers on Amazon.in and the Amazon mobile shopping app
have an easy and convenient access to over 160 million products across hundreds of
categories.
2. Flipkart.com

Flipkart is Bengaluru based largest Indian eCommerce company. Sachin Bansal and
Binny Bansal jointly founded the company in October 2007. Actually, Flipkart Online
Services Pvt. Ltd. owns the brand Flipkart. Mainly, the site is popular for books, movies,
music, games, consoles, gaming accessories, mobiles, mobile accessories, cameras etc.
Also, it sells computers, computer accessories, network components, software,
peripherals, home and kitchen appliances, TV and video products, apparel, personal and
healthcare products.
3. paytm.com

Paytm has the headquarter in Delhi NCR. an Indian entrepreneur Vijay Shekhar Sharma
founded Paytm Apart from eCommerce, the company operates the Paytm payment
gateway and the Paytm Wallet services. Paytm sells a wide range of products including
apparel, electronics, sports items, books, movies, stationery etc.
4. india.alibaba.com

Actually, China-based Alibaba Group Holding Limited owns the India.alibaba.com.

Alibaba provides B2B, B2C, and C2C sales services through the web portal. Also,
Alibaba is the world’s largest and most valuable retailer since April 2016. Currently, the
company operates in over 200 countries. Currently, Alibaba is the fastest growing online
retail company in India.

5. Netflix

Netflix's initial business model included DVD sales and rental by mail, but Hastings
discarded the sales about a year after the company's founding to focus on the DVD rental
business. Netflix expanded its business in 2007 with the introduction of streaming media
while retaining the DVD and Blu-ray rental service. The company expanded
internationally in 2010 with streaming available in Canada, followed by Latin America
and the Caribbean. Netflix entered the content-production industry in 2012,
debuting its first series Lilyhammer. Netflix is the fastest growing in the streaming
industry.
Forms of E-Commerce
Ecommerce can take on a variety of forms involving different transactional relationships
between businesses and consumers, as well as different objects being exchanged as part
of these transactions.
 Retail: The sale of a product by a business directly to a customer without any
intermediary.

 Wholesale: The sale of products in bulk, often to a retailer that then sells them
directly to consumers.

 Dropshipping: The sale of a product, which is manufactured and shipped to the

consumer by a third party.

 Crowdfunding: The collection of money from consumers in advance of a product

being available in order to raise the start-up capital necessary to bring it to
market.

 Subscription: The automatic recurring purchase of a product or service on a

regular basis until the subscriber chooses to cancel.

 Physical products: Any tangible good that requires inventory to be replenished

and orders to be physically shipped to customers as sales are made.

 Digital products: Downloadable digital goods, templates, and courses, or media

that must be purchased for consumption or licensed for use.

 Services: A skill or set of skills provided in exchange for compensation. The

service provider’s time can be purchased for a fee.

Trends in the E-Commerce Sector

From past few years internet users have increased in India which evidently tells us about
the growth of e-commerce sector which is heavily dependent on the internet and tech
savviness of the customers and sellers. Revenue in the e-commerce market in India has
risen to US$20,059m in 2017.Revenue will demonstrate a further annual growth rate
(CAGR 2017-2022) of 21.1 % resulting in a market volume of US$52,301m 2022 from
US$26,507.4m 2018. The user penetration in India was at 13.2 % in 2017 and is expected
to hit 23.9 % five years from now. India has the second largest internet user base of 500
million as of June 2018, which is roughly 40% of the entire population and is growing at
an unprecedented rate, adding approximately 6 million new users every month. The
industry consensus is that growth is at its inflection point.
 Internet penetration in India grew from just 4 per cent in 2007 to 35.03 percent in
2017, registering a CAGR of 24.23 percent between 2007 and 2017.

 In December 2017, internet penetration in India’s urban areas was at 64.84 percent and
20.26 percent in the rural areas.

 Urban India with an estimated population of 444 million as per 2011 census has 295
million using the internet as of December 2017 and Rural India, with an estimated
population of 906 million as per 2011 census, has 186 million internet users in
December 2017.
Growth of E-Commerce
 Propelled by rising smartphone penetration, the launch of 4G networks and increasing
consumer wealth, the Indian E-commerce market is expected to grow to US$ 200
billion by 2027 from US$ 38.5 billion in 2017.

 E-commerce is increasingly attracting customers from Tier 2 and 3 cities, where

people have limited access to brands but have high aspirations.

 Average online retail spending in India was US$ 224 per user in 2017.

E-Commerce Industries in the Vicinity of Hyderabad

There are a lot of E-Commerce industries in the vicinity of Hyderabad. The names of a few
companies are: -
 Amazon
 Google
 Flat pebble
 Zipper
 Hello Curry
 Timeout
 Chocolate Mantra
Employment Opportunities in E-Commerce Sector for fresh MBA Graduates
A survey conducted by global market research firm Nielson has revealed that, among
India’s MBA graduates, e-commerce is now the second most targeted industry sector, after
FMCG (fast-moving consumer goods).
A quarter of MBA students from across all of India’s leading business schools, including the
prestigious IIMs (Indian Institutes of Management) and the Indian School of Business in
Hyderabad, stated that they would rather work within the expanding e-commerce sector, than
go down traditional avenues such as careers in financial services and consultancy.
Management consultancy, which was the second most popular job up until the latest survey,
was overtaken and sectors such as manufacturing and software & IT services fell outside of
the top 10 for the first time in the survey’s history.
Due to the growing market and funds available for online shopping and technology, e-
commerce is seeing growth within both the general market and in the amount of business
start- ups coming to market. VK Menon, the director of career advancement services at the
Indian School of Business (ISB), said that e-commerce companies made 81 offers to the
school’s students, making up 28% of the overall job offers within the technology sector at the
school. Leading these companies in terms of numbers of offers
were Amazon, Flipkart, InMobi and Myntra. There was also a 50% increase in the number of
startup companies looking to recruit from the Indian School of Business.
Snapdeal is one such e-commerce start-up company, backed by top companies such as eBay
and other venture capital funds, which has recruited 25 MBA graduates from India’s top
business schools this year. “Two years back, students graduating from top B-schools like the
IIMs would ask if there was job security in e-commerce,” Kunal Bahl, co-founder of
Snapdeal and Wharton graduate, says of the results. “They wanted jobs in consulting and I-
banks. But things have changed quite dramatically as these youngsters realize jobs in start-
ups offer a larger canvas for them to make an impact.”

Industry and Competition

Market Size and Characteristics

The e-commerce market is expected to reach US$ 64 billion by 2020 and US$ 200 billion by
2026 from US$ 38.5 billion as of 2017. Close to 329.1 million people are projected to buy
goods and services online in India by 2020. This means that about 70.7 percent of internet
users in India will have purchased products online by then. The majority of digital shoppers
in India are male. This growth in volume of digital buyers has a reflection on revenue as well.

 The sector has experienced phenomenal growth, breaking down old shopping habits
& inculcating new ones. Also, inspiring a new way that people transact.

 Indians, in a matter of minutes, can literally shop from a wide range of services and
goods, from travel, movies, clothes, groceries, pharmaceutical products, gadgets &
even handymen services such as plumbers, electricians, etc.

 E‐Commerce in India is now characterized by low pricing, fast shipping and a

multitude of options to choose from.
 India is home to over 5000 e‐Commerce hubs dedicated exclusively to exploiting the
burgeoning growth rate of this sector.
Trends Driving E-Commerce

 Government initiatives gaining momentum: The Government of Indiа hаs bееn proаctivе
in еmbrаcing аnd lеvеrаging е- Commеrcе digitаl plаtforms to trаnsform аnd orgаnizе
trаditionаlly offlinе mаrkеts such аs thosе of аgriculturаl producе, еtc. Bеsidеs thеsе,
flаgship initiаtivеs such аs Digitаl Indiа, Stаrt- up Indiа, Innovаtion Fund, Skill Indiа, еtc.
Аrе contributing to thе growth of е- Commеrcе industry. Еnumеrаtеd is а briеf
dеscription of thеsе initiаtivеs:

1. Digitаl Indiа: Onе of thе highly аmbitious аnd biggеst еvеr concеivеd projеcts is
Digitаl Indiа which focusеs on trаnsforming Indiа to а digitаlly еmpowеrеd аnd
knowlеdgе еconomy. Thе thrее kеy аrеаs thаt hаvе idеntifiеd аrе to Build Digitаl
Infrаstructurеаs а Corе Utility, еnаblе Govеrnmеnt Citizеn Sеrvicеs on dеmаnd
аnd Digitаl Еmpowеrmеnt of citizеns.

2. Stаrt-up Indiа: This progrаm intеnds to build а strong еco-systеm for nurturing
“innovаtion” аnd “Еxponеntiаl Stаrt-ups”. Thе Govеrnmеnt of Indiа hаs tаkеn
stеps such аs providing funding support through а “Fund of Funds” (with а corpus
of INR 10,000 Crorеs); “Stаrt-up Indiа Hub” (а singlе point contаct for thе stаrt-
up еcosystеm), tаx еxеmptions for thе initiаl 3 yеаrs, fаstеr еxits for stаrt-ups аrе
somе stеps bеsidеs mаny othеrs.

3. Mаkе in Indiа: Аimеd аt Indiа’s industriаl dеvеlopmеnt, thе kеy stеps tаkеn by thе
Govеrnmеnt of Indiа аrе: Improving thе businеss еnvironmеnt in thе country,
еnаbling mаnufаcturing, аnd аllowing FDI in kеy sеctors. Kеy pillаrs of this
progrаm worth noting аrе “rеsеаrch аnd innovаtion” аnd “а conductivе businеss
еnvironmеnt”.

4. Skill Indiа: To bridgе thе shortаgе of skillеd mаnpowеr, thе Govеrnmеnt of Indiа
hаs sеt а tаrgеt to trаin 40.2 Crorеs pеoplе undеr thе nеw Nаtionаl Policy for Skill
Dеvеlopmеnt by 2022. Thе initiаtivе includеs Nаtionаl Skill Dеvеlopmеnt
Mission, Nаtionаl Policy for Skill Dеvеlopmеnt аnd Еntrеprеnеurship 2015.

 Growth in Smаrtphonе Adoption Driving Mobilе Bаsеd E-Commеrcе Sаlеs:-

Smаrtphonеs аrе outpаcing fеаturе phonеs аnd аrееxpеctеd to еxhibit mаssivе growth in
thе coming yеаrs. Thе widеsprеаd аdoption of smаrtphonеs is bеing propеllеd by sеvеrаl
fаctors such аs – high compеtition lеаding to low pricеs, prеvаlеncе of intеrnеt еnаblеd
sеrvicеs аnd еаsе of аccеssibility to contеnt. Аccording to а rеport by vеnturе cаpitаl firm
KPCB, Indiа hаs thе highеst shаrе of mobilе bаsеd е-Commеrcе sаlеs globаlly аt 41%14.
Thе lеаding е- Commеrcе compаniеs stаtе thаt аlmost 70-75% of thеir onlinе trаffic
comеs from mobilе phonеs аnd thus highеr rеvеnuеs аrе coming from mobilе
аpplicаtions. For е.g. 50% for Flipkаrt whilе 70% for Quikr15.
Market Trends in Netflix
 Disney gave Netflix a clinic on how quickly a good deal can go bad.

 Netflix is producing tons of new shows, but investors should be careful about
assuming quantity equals quality.

 Long-term investors can make very aggressive assumptions about Netflix's future and
still end up disappointed.

This could be the word of the year for Netflix. The company spends money hand over fist to
acquire or create new content. At some point in the future, Netflix will reach critical mass and
in turn provide huge profits and cash flow to investors. While the shares gained ground last
year, it has been a challenging several months as the stock has been cut nearly in half from its
52-week high. Though a recent hit like Bird Box would seem to further enhance Netflix's
position as a must-have service, this is a symptom of one of the company's biggest
challenges. Between changing deals, creating shows, and burning through cash, 2019 is
shaping up to be a challenging year for the streaming giant.
One of the reasons Netflix originally gained subscribers was the company licensed television
shows and movies from other companies. One of the more notable deals occurred back in
2012, well before Netflix's primary focus was on original content. Investors cheered as the
company signed a licensing agreement with The Walt Disney Company to make Netflix the
exclusive
U.S. subscription service for Disney, Marvel, and Pixar properties.
The deal with Disney gave Netflix the virtual crown in streaming services. Many assumed
when the agreement started in 2016 that subscriber growth would explode. For a time, the
deal with Disney did assist Netflix with its growth, that is until Disney realized it might be
better off running its own streaming business.
This brings us to the first trend that may define Netflix's 2019 performance. Disney+ should
launch this year, and this new competition comes at a cost to Netflix before Disney signs up
the first subscriber. Last year was a clinic on how quickly a mutually beneficial agreement
can be eliminated. At the beginning of 2018, answers started to come in regarding what
would stay and what would go when Disney branched out on its own. Several key pieces of
the puzzle were the multiple Marvel television series that Disney made available to Netflix.
As of February, the company confirmed, "Marvel Television's five Defenders series will
continue to stream on Netflix."
Market Structure

 B2B Ecommerce

A B2B model focuses on providing products from one business to another. While
many ecommerce businesses in this niche are service providers, you’ll find software
companies, office furniture and supply companies, document hosting companies, and
numerous other ecommerce business models under this heading.

B2B ecommerce examples you may be familiar with include the ExxonMobil Corporation
and the Chevron Corporation, Boeing, and Archer Daniel Midlands. These businesses have
custom, enterprise ecommerce platforms that work directly with other businesses in a closed
environment. A B2B ecommerce business typically requires more start-up cash.

 B2C Ecommerce

The B2C sector is what most people think of when they imagine an ecommerce
business. This is the deepest ecommerce market, and many of the names you’ll see here are
known quantities offline, too. B2C sales are the traditional retail model, where a business
sells to individuals, but business is conducted online as opposed to in a physical store.
Examples of B2C businesses are everywhere. Exclusively online retailers include
Newegg.com, Overstock.com, Wish, and ModCloth, but other major B2C brick-and-mortar
businesses like Staples, Wal-Mart, Target, REI, and Gap.

 C2C Ecommerce

B2B and B2C are fairly intuitive concepts for most of us, but the idea of C2C is
different.

Created by the rise of the ecommerce sector and growing consumer confidence in online
sales, these sites allow customers to trade, buy, and sell items in exchange for a small
commission paid to the site. Opening a C2C site takes careful planning.

Despite the obvious success of platforms like eBay and Craigslist, numerous other auction
and classified sites (the main arenas for C2C) have opened and quickly closed due to
unsustainable models.
  C2B Ecommerce

C2B is another model most people don’t immediately think of, but that is growing in
prevalence. This type of online commerce business is when the consumer sells goods or
services to businesses, and is roughly equivalent to a sole proprietorship serving a larger
business.

Reverse auctions, service provision sites like Upwork, and several common blog monetization
strategies like affiliate marketing or Google AdSense also fall under this heading.

 Government / Public Administration Ecommerce

The models listed above are the primary ecommerce retail structures, but they aren’t
the only ones. Other types of ecommerce involve government/public administration
conducting ecommerce transactions with businesses or consumers.

 B2G (also called B2A), for businesses whose sole clients are governments or type of
public administration. One example is Synergetics Inc. in Ft. Collins, Colorado, which
provides contractors and services for government agencies.

 C2G (also called C2A): typically individuals paying the government for taxes or
tuition to universities.

Two sectors that are closed for entrepreneur owners but are growing include G2B for
government sales to private businesses, and G2C, for government sales to the general public.
Characteristics of Competitors

Perceptual map

Figure (Selection/Personalization)

Figure (Convenience/Economy)
N: Netflix, H: Hulu, R: Red-box, A: Amazon, C: Comcast
According to the perceptual map shows that the difference between 5 video streaming
business. It will point out where company are and where are their competitors.

According to the figure1 measure between selection and personalization. It can clearly to find
out Netflix has high quality selection and high personalization, only Hulu is in the same
section with Netflix, which means at this part Hulu would be the most dangerous competitor.

From the figure2 measure between convenience and economy. It points out that there are 3
companies in the high convenience and high economy section which include Netflix, Hulu
and Red-box. Amazon and Comcast both are have high economy but inconvenience.

In the light of figure3, provide numbers and description of personalization and convenience.
Through the numbers of selection can found out that Netflix has huge number of choices.
Additionally Netflix and Hulu have to cost $7.99 per month. However, from these three
figure can clearly Netflix is the most affordable choice for client.
Industry Analysis- Metrics

8 Metrics Highlight Netflix's Impressive 2018

Netflix wrapped up 2018 earlier this month when it released its fourth-quarter and full-year
results. The report closed out an impressive year, featuring significant member growth, an
expanding operating margin, and rapid revenue growth. Importantly for shareholders, a
strong performance during the year helped the stock handily beat the market.
1. Throughout 2018, Netflix's stock rose more than 39%. This meant shares significantly
outperformed the S&P 500, which declined about 6% during the same period.

2. Netflix's total 2018 revenue rose 35% year over year. Highlighting the company's
solid performance last year, this is an acceleration from the 32% year-over-year
revenue growth Netflix saw in 2017.

3. Netflix's net income skyrocketed in 2018, rising 117% year over year, to $1.2
billion. Also keep in mind that this is up enormously from net income of $187 million
in 2016.

4. Netflix's international streaming revenue jumped 53% in 2018, to $7.8 billion. This
meant international streaming revenue accounted for more than half of the company's
total streaming revenue.

5. While Netflix's international segment was the primary driver of the company's growth
in 2018, Netflix still saw robust growth domestically. Domestic streaming revenue
rose 24% year over year, to $7.6 billion. Impressively, this marked an acceleration
compared to growth seen in 2017. Domestic streaming revenue increased 21% year
over year in 2017.

6. Adding 29 million paid members during 2018, the company finished the year with a
total of 139 million paid members. Notably, net member additions were up
significantly in 2018 compared to 2017. In 2017, the company's paid members
increased by about 22 million.

7. Going into 2018, management was targeting a 10% operating margin, up from 7% in
2017. The company pulled it off, finishing the year with a 10.2% operating margin.

8. Netflix expects its operating margin to continue rising in 2018. "Our multi-year plan
is to keep significantly growing our content while increasing our revenue faster to
expand our operating margins," management said in the company's fourth-quarter
shareholder letter. Specifically, Netflix is targeting a full-year operating margin of
13%, up from 10% in 2018.
Porter 5 Forces In E-Commerce Sector

1. Thrеat of Nеw Еntrant

Threat of new entrants is very high, because there are very less barriers to entry like less
capital required to start a business and Industry is also growing at a rapid rate. So, no one
wants to miss the big opportunity.

2. Rivalry Among Existing Firms

It is strong, firms try to differentiate themselves by adding some competitions, blogs for the
customer to make him spend more time at the site.

3. Bargaining Powеr Of Buyеrs

Buyers in this industry are customers who purchase product online. This industry is flooded
with many players and buyers are having lot of option to choose. There is no loyalty to the
brand. Customer look for cheap & better products.
 4. Bargaining Powеr of Suppliеrs

If we sее mobile category, there are suppliers like Apple, Lenovo, Samsung and Motorola
everyone wants to sell their products through online retails. Selling online saves a lot of
money and people prefer to purchase online. So in this industry bargaining power of
suppliers are low.

5. Thrеats of Substitutе Products or Sеrvicеs

Substitute for this industry as of now is physical stores. Their threat is very low for this
industry because customers are going for online purchases instead of going to physical
stores as it will save time, effort, and money.

Porter’s Five Forces framework in Netflix

The rivalry among established companies is intense. The movie rental industry is very competitive as
there are a large number of firms in this industry. There are also many methods for consumers to
obtain a movie which also increases rivalry. Consumers have four options to choose from such as in-
store rental, online selection and mail delivery, Kiosk rental, or Video on Demand. Comparable
products can be found at many different locations. There are low switching costs which also lead to
fierce competition. Netflix key competitors have large levels of capital and have achieved economies
of scale. Low levels of product differentiation also increase rivalry.

Threat of New Entrants (Low)

Porter's Five Forces

Brgaining power of Supplier (High) Threat of Substitute Products (High)

Bargaining Power of Buyer (High)

 The threat of new potential entrants is moderately low. This is largely due to very high
cost or capital requirements resulting from stocking the product needed. The branding
and image of the largest firms in the industry also causes some difficulty of entering the
market. Key players in the industry include Red Box, Hulu+ and Amazon prime Video. A
new entrant would have to spend a lot of money on marketing and advertising to
become competitive.
  The threat of substitute products is high in this industry and costs must be kept low in
order to be competitive. Substitute products to the movie rental industry are wide in
number and include physically attending a movie, watching television, surfing the web or
even playing a video game. Technology has tremendously aided to increase the threat of
substitute products. More consumers are using the web to research prices, find sales
and read reviews

 The bargaining power of buyers is high. Highly price sensitive customers have a lot of
power. There are little to no switching costs and customers have an extremely large
amount of options on which products to choose. Although buyers are fragmented and
no singular buyer has the ability to influence a product or price, their diminishing brand
loyalty give them a reasonable amount of power. Price points in this industry have to be
uniform across similar products.

 The bargaining power of suppliers is moderately high. Normally suppliers are able to
impose a price increase on their products or reduce the quality of products supplied
which may decrease a company’s overall profitability. This proves to be true in the
movie rental industry as their suppliers are the studios who make the movies. In 2013
Netflix was forced to remove Nickelodeon and MTV television shows from their selection
due to an expired contract with Viacom.

Market Trends
 Disney gave Netflix a clinic on how quickly a good deal can go bad.

 Netflix is producing tons of new shows, but investors should be careful about
assuming quantity equals quality.

 Long-term investors can make very aggressive assumptions about Netflix's future and
still end up disappointed.

This could be the word of the year for Netflix. The company spends money hand over fist to
acquire or create new content. At some point in the future, Netflix will reach critical mass and
in turn provide huge profits and cash flow to investors. While the shares gained ground last
year, it has been a challenging several months as the stock has been cut nearly in half from its
52-week high. Though a recent hit like Bird Box would seem to further enhance Netflix's
position as a must-have service, this is a symptom of one of the company's biggest
challenges. Between changing deals, creating shows, and burning through cash, 2019 is
shaping up to be a challenging year for the streaming giant.
One of the reasons Netflix originally gained subscribers was the company licensed television
shows and movies from other companies. One of the more notable deals occurred back in
2012, well before Netflix's primary focus was on original content. Investors cheered as the
company signed a licensing agreement with The Walt Disney Company to make Netflix the
exclusive
U.S. subscription service for Disney, Marvel, and Pixar properties.
The deal with Disney gave Netflix the virtual crown in streaming services. Many assumed
when the agreement started in 2016 that subscriber growth would explode. For a time, the
deal
with Disney did assist Netflix with its growth, that is until Disney realized it might be better
off running its own streaming business.
This brings us to the first trend that may define Netflix's 2019 performance. Disney+ should
launch this year, and this new competition comes at a cost to Netflix before Disney signs up
the first subscriber. Last year was a clinic on how quickly a mutually beneficial agreement
can be eliminated. At the beginning of 2018, answers started to come in regarding what
would stay and what would go when Disney branched out on its own. Several key pieces of
the puzzle were the multiple Marvel television series that Disney made available to Netflix.
As of February, the company confirmed, "Marvel Television's five Defenders series will
continue to stream on Netflix."

Findings- Projections and Insights

I believe that 2020 is going to be a pivot year for the future of streaming TV. This is because
of the massive scale that Amazon and Disney can operate to challenge the first-mover
dominant status Netflix has in 2019. Combined with the likes of Apple and ESPN,
competition is about to ramp up shortly.
Disney will close “vault” for good as it moves film library to streaming service. Think about
that for a moment, that’s Disney’s entire movie list on to a streaming platform. J.P. Morgan
analyst Alexia Quadrani thinks Disney will acquire in the area of 160 million monthly
subscribers over time that will directly rival Netflix.
As Disney+ launches it will vault already existing favorites into one platform including:
 Legacy Disney titles
 Star Wars

 Marvel
 National Geographic content
And all the happy goodness of entertainment that is the Disney brand for children and
nostalgics alike. If you compare the potential then of Disney+, you have to imagine the big
three of the future is Netflix, Disney+ and Amazon.
 J.P. Morgan tells clients to expect Disney+ to eventually draw 160 million subscribers
from around the world, more than Netflix’s current 139 million.
 Disney announced the new service in November after telling shareholders it will pull
all its movies from Netflix in 2019.
Disney will still dominate Children Viewing
According to the U.S. government census, there are 34.5 million family households in the
U.S. with children under 18, and we believe 75% of these households will eventually sign up
for Disney+ due to the service’s popular appeal, exclusive content, and brand recognition. — 
J.P Morgan analysts Alexia Quadrani
The decline of Netflix will mean a new streaming wars where Chinese platforms will also
increase their global marketshare. But Amazon’s bet of entertainment is even more
impressive than anything Netflix has done up to this point, and that’s a big ask already.
Amazon’s LOTR Content will be bigger than Game of Thrones
When Amazon pursued the rights to a “Lord of the Rings” series in 2017, the company knew
it would have to overcome some major obstacles to lure the J.R.R. Tolkien estate to its video-
streaming platform.
Amazon is too smart and is spending too much NOT to get this right. Amazon just needs a
few more hits to make Amazon Prime Video legit as a mainstream viewing solution.
Netflix, with more than 100 million subscribers, pioneered the on-demand model with hits
such as “House of Cards” and “Orange is the New Black.” That’s all fair and well but the
combined entry of Disney, Apple and the maturation of the initiatives of Amazon’s, Baidu
and Alibaba will mean a new world of streaming entertainment.
The “Lord of the Rings” series will start production in the next two years. So by around 2022
we’ll know just how good Amazon content will be. By that time Disney will be a major
streaming player.
Meanwhile, Disney will push Netflix financially in a significant way.
Amazon is the next Hollywood
Amazon will also go after the NFL and MLB sports content, anything that will add
sustainable value to its ecosystem. Amazon will eventually outspend Netflix in original
content by quite a large margin.
With AWS profitability fuelling Amazon’s entertainment, it’s a sustainable push of decades,
not years.
2019 is just the beginning for Amazon Prime Video
Netflix doesn’t have enough financial profitability or backing to survive the coming
onslaught, sad as that may seem now. AWS now dominates the Cloud industry with 34
percent market share. It’s the main driver of Amazon’s profitability, earning $7.3 billion on
sales of $25.7
billion last year in 2018. From how YouTube is evolving to Hulu, there’s a lot of moving
parts in the future of streaming as well.
So far, Amazon has used video primarily as a way to build Prime subscriptions. But the
company’s investments point to blending content and commerce in ways the world hasn’t yet
seen, eventually pitting Amazon against Apple and other tech giants for control of the home.
Amazon is beating Apple and Google in the home, and this will be a huge advantage in the
future of how tech companies scale in healthcare.
As for entertainment, YouTube has beat Facebook by far for the younger consumer. Due to
business model considerations Amazon and Apple are most likely to go after original content
in the end displacing players like Disney and Netflix. By 2025 this will be fairly clear.
For ordinary citizens and consumers, the golden age of streaming is in the future not the
present. This is because as competition heats up monthly subscriptions will actually go down,
not up. That is basically like saying Netflix is doomed as a pure-play streaming and original
content platform.
 BIBILOGRAPHY

https://www.fool.com/investing/2017/11/03/how-netflix-is-breaking-into-international-
markets.aspx

http://www.annualreports.com/HostedData/AnnualReports/PDF/NASDAQ_NFLX_2017

https://ir.netflix.com/ir-overview/profile/default.aspx

https://www.netflixinvestor.com/ir-overview/profile/default.aspx

https://www.statista.com/statistics/499844/netflix-markets-penetration/

https://www.forbes.com/sites/japan/2018/07/18/japan-is-opening-its-skies-and-business-jet-
travel-is-taking-off/#1d5524e31786

https://digiday.com/media/subscriptions-growth-falters-netflix-turns-international-growth/

http://markets.businessinsider.com/news/stocks/netflix-stock-price-us-subscriber-growth-
stalling-bernstein-analyst2018-6-1027319265

www.Е-markеtеr.com