Industry analysis of eCommerce

Introduction
E-commerce or Electronic commerce is a business model that enables individuals or firms to
buy or sell goods and services via the internet network. E-commerce has helped businesses
and individuals establish a more comprehensive market presence through an efficient
distribution channel for their products and services.
Handling inventory management and sourcing products helps to understand the revenue model
of the business. Types of E-Commerce revenue models are:
1. Drop Shipping: Dropshipping enables consumers to set up a storefront. Dropshippers
market and sell items fulfilled by a third party supplier. They act as middle-man. Drop
shipping frees the business from managing inventory, warehousing stock, or dealing with
packaging.
2. Wholesaling and warehousing: They require to manage inventory and stock, keeping
track of customers orders and shipping information.
3. Private labeling and manufacturing: In private labeling, companies that manufacturers
the product sends plans and prototypes to the manufacturer who produces the product
to meet the customer specifications that could be directly shipped to the customer, to a
third party such as Amazon or the company selling the final product.
4. White labeling: Like private labeling, it allows the consumer to select a product that is
already effectively sold by another company but offers white-label options to customize
the product, such as design the packaging and label. It is most common in the beauty
and wellness industry but more difficult in other niches.
5. Subscription: Some companies rely on this model, which delivers the product to the
customers at regular or scheduled intervals. They have a relatively reliable income flow
and can quickly incentivize consumers to purchase an additional subscription.

Advantages of E-commerce
● It Provides sellers with global reach removing the barrier of geography.
● Electronic commerce will substantially lower the transaction cost. It eliminates many
fixed costs of maintaining brick and mortar shops. The low transaction cost allows
companies to enjoy a much higher margin of profit.
● Convenience: A customer can shop 24x7
● Increased selection
Disadvantages of E-commerce
● Lack of instant gratification
● Inability to touch the products
 Major Players
Amazon: Amazon, founded in 1994 as a marketplace for books. Amazon is now the highest
revenue-generating eCommerce company and arguably the world’s largest online
conglomerate.
Alibaba: Jack Ma found Alibaba in 1999, an eCommerce giant in China. Jack Ma started
Alibaba to make it the most significant online wholesale marketplace. It caters to both
consumers and retailers.
Flipkart: Flipkart is an Indian eCommerce established in 2007 also focused on book sales
before expanding into other product categories.
eBay: eBay, founded in 1995, is one of the top eCommerce companies in the world. The
company was among the first successful survivor of the dot-com-bubble that revolutionized
online shopping.
JD.com: JD has built out an unparalleled logistics network with over 500 warehouses and 7,000
delivery stations. Unlike Amazon, though, JD.com operates the entire logistics operation itself,
not handing off packages to third parties for last-mile delivery. That enables JD.com to ship 90%
of orders to customers by the next day.
Rakuten: Rakuten is a Japanese eCommerce company launched in 1997. They operate
Japan’s largest online bank, in addition to online shopping and credit card payments.
IndiaMart: Founded in 1999, IndiaMart is an online B2B marketplace for Indian companies. A
competitor of Alibaba, IndiaMart, allows manufacturers, suppliers, and exporters to directly
propose their products through the platform to get contacted by its visitors.

Product Types and services

● Business to business(B2B):
In which both the participants are businesses that result in high volume, high-value
relationships. Sometimes the buyer is the end-user, but often buyer resells to the consumer.
They have a longer sales cycle but high order volume and more repeat purchases.
Ex-Alibaba, Amazon Business, IndiaMart
● Business to consumer(B2C): Here, the buyers are end-users. The decision-making
process is much shorter than in B2B, especially for items with a lower value. Due to a
shorter sales cycle, they spend less marketing dollars to make a sale. In contrast, they
have a low order volume and fewer recurring purchases.
Examples- Amazon, Flipkart, Nykaa, UrbanClap
● Consumer to consumer(C2C): A C2C business connects consumers to exchange goods
and services. They benefit from dynamic growth by motivated buyers and sellers but
face a crucial challenge in quality control and technology maintenance.
Examples: eBay, Craigslist, Meesho, Amazon
● Consumer to business(C2B): In this model, a site allows customers to post the work they
want to be completed and have companies to bid for the opportunity. Affiliate marketing
services would also be considered C2B. Reverse auctions, service provision sites are
some of its examples. Examples: Etsy, Google Adsense
● Public Administration eCommerce: This model involves government/public
administration conducting transactions with businesses or consumers.
● B2G, or B2A, is businesses where the sole clients are governments or type of public
administration. One example is Synergetics Inc. in Ft. Collins, Colorado.
● The Consumer-to-Administration model comprises all electronic transactions conducted
between individuals and public administration.
Examples: Education, taxes, healthcare

Latest Developments
● eCommerce after COVID: As of mid-April, revenue growth has been increased by 68%
on a Y-o-Y basis, and there has been a 129% Y-o-Y growth in US and Canadian
eCommerce orders. Due to the stay at home orders, conversion rates increased to
almost 8.8%, affecting a vast majority of the population.
● Programmatic and contextual advertising: Programmatic advertising uses datasets to
decide the target audience. These are shown to the target audience based on their
consumption. The audience is being continuously retargeted to generate maximum ROI.
● Augmented Reality for eCommerce and online stores: AR combined with 3D
visualization helps consumers make accurate decisions. AR also offers a high level of
customization to pick the product and check on them. AR virtual assistant is also an
example that can give suggestions about the product and help checkout.
● Personalization on eCommerce platforms is driven by artificial intelligence and machine
learning that track on-site and customer data points in real-time and then deliver a
unique personalized experience to each customer. Data collecting points for
personalization are traffic, on-site interactions, E-mail, personal data, purchases, search
and pricing, and post-purchase.
● Headless and API driven eCommerce: The strategy many retailers use to accomplish
a content-led online store is headless eCommerce. The decoupling of the front-end and
back-end presentation layer manages all eCommerce functionality to offer a flexible,
seamless digital experience.
● Digitally native vertical brands number in the tens of thousands: The brands have
built grassroots communities, conquered social media advertising, and changed digital
native advertising. The digitally native vertical brands are highly effective marketing and
community building machine. These brands are causing larger competitors to respond
through head-to-head competition or acquisition.
● Localize and Personalize Customer Experience: Another form of personalization
refers to altering the website’s content. It identifies the IP address of the consumer and
provides more contextual merchandising.
● Research online purchase offline: ROPO has been a noticeable consumer shopping
habit. A variety of techniques can be leveraged here, such as data of mobile payments,
CRM, and point of sale system geolocation tracking.
 ● Social Commerce will grow to new levels: The process of making purchases directly
on social media is called Social commerce. Facebook has already introduced the host
options for entrepreneurs selling on the platform.
● Sustainability is becoming more important: Millennials and Gen-Zs are becoming
more aware of the earth’s limited resources. An online survey by Nosto reveals that 50%
of the respondents wanted sustainability in the fashion industry, and 75% wanted to see
less packaging.

Government initiatives
● Government eCommerce platforms: The creation of “Government e-Marketplace”
(GeM) will host the common used goods and services for government employees. With
this platform, the government can easily make an online purchase worth Rs. 50000. The
purchases higher than Rs 50,000 will be made based on the lowest price bidding,
specifications, quality standards, and delivery period requirements. The online trading
platform has been started for farmers to help them connect to the wholesale agricultural
market network.
● Marketplace for women entrepreneurs: The Ministry of Women and Child
Development has launched an eCommerce platform for women entrepreneurs known as
Mahila e-Haat. This platform allows women to enlist and showcase their products online
without any additional cost.
● Raising the FDI limit in the eCommerce model: To increase foreign players'
participation, the government jacked up the limit of Foreign Direct Investment(FDI) for up
to 100%. Along with this, the government also cleared that any company or single
vendor's total sales contribution should not exceed 25%. This extension is allowed for
B2B and not B2C
● Flagship Initiatives: Initiatives such as Start-up India, Digital India, Skill India, and
Innovation Fund contribute to the growth of online trade. The government is also
expected to ask top online retailers like Flipkart, Amazon, and Snapdeal to focus on
listing and promoting Geographical Indication (GI) products to provide visibility to locally
produced items. Since the start of the pandemic, the Indian government has made
several efforts to promote India’s indigenous economy through its ‘Vocal for local’
initiative.

KPIs
Key Performing Indicators(KPI) is used to measure the progress on the path of retail success.
They support different goals of the company and are regularly monitored. Some of the important
KPIs are as follows:
KPIs for Sales
● Average order size: It measures how the customer typically spends on a single order.
● Gross Profit: Total Cost of Goods Sold- Total Sales
● Conversion rate: Rate at which the consumers are converting or buying.
 ● Shopping Cart Abandonment Rate: It gives information about how many users add the
product to their shopping cart but not checking out.
● COGS- It tells you how much you are spending to sell a product.
● Customer lifetime value (CLV): The CLV tells about how much a customer is worth the
business during their relationship with the brand.
● Churn rate: The churn rate provides information about how quickly customers are
leaving your brand or canceling/failing to renew a subscription with the brand.

KPIs for Marketing

● Site traffic: Site traffic denotes the total number of visits to the eCommerce site.
● Time on site: This KPI describes how much time visitors are spending on your website.
● Bounce rate: The bounce describes how many users exit your site after viewing only
one page.
● Pageviews per visit: Pageviews per visit is the average number of pages a user will
view on your site during each visit.
● Average session duration: It denotes the average amount of time a person spends on
the site during a single visit.
● Mobile site traffic: It monitors the total number of users who operate mobile devices to
access the store and make sure your site is optimized for mobile.
● Daypart monitoring: Looking at when site visitors come can tell you which are peak
traffic times.
● Average position: The average position KPI provided information about the site’s
search engine optimization (SEO) and paid search performance. This indicates where
you are on search engine results pages.

KPIs for Customer service

● Customer satisfaction (CSAT) score: It is measured by customer responses to a
survey question about how satisfied were they with their experience? This is answered
with a Likert scale.
● Net promoter score (NPS): NPS provides insight into your customer relationships and
loyalty by telling you how likely consumers are to recommend the brand to someone
else.
● Hit rate: It calculates the hit rate by computing the total sales of a product by the number
of consumers who have contacted your customer service team about that product.
● Average resolution time: It is the amount of time taken for a customer support issue to
be resolved
● Active issues: The total number of issues unresolved tells about how many queries are
active.
● Backlogs: Backlogs are when issues are getting stacked up in your system.
KPIs for Manufacturing
● Cycle time: The cycle time of manufacturing KPI tells about how long it takes to
manufacture a single product from start to finish.
● Overall equipment effectiveness (OEE): The OEE KPI tells about eCommerce
businesses with insight into how well manufacturing equipment is performing.
 ● Yield: It is the number of products you have manufactured.
First-time yield (FTY) and first time through (FTT): It is a quality-based KPI. It provides
information on how wasteful your production processes are.

SWOT
Strengths
● Accessibility: eCommerce has enabled buyers to now browse, learn about, and
purchase products from their homes 24x7. Although teleshopping offers similar benefits,
the advent of the internet has seen a huge number of consumers move away from TV,
radio, and press towards computers.
● Lower Prices: Products have lower prices as compared to traditional retail channels.
This is due to eCommerce typically involves sellers interacting directly with consumers,
cutting out middlemen such as distributors. Another reason is that the eCommerce
stores have significantly lower overheads than physical stores, which accounts for rent
costs, employee salaries, and more.
Weaknesses
Heavy and perishable goods are expensive to ship.
● Because of the shipping period, there is no immediate gratification with eCommerce.
● Security and fraud concerns mean some audiences are still reluctant to use their credit
cards online.
Opportunities
● Growing Market
● Influencers: Internet users use their social media following to promote products and
services. Influencers present powerful marketing opportunities for eCommerce sellers.
Threats
● Competition: Low barriers to entry are a constant threat in eCommerce.
● Fraud: eCommerce is a huge target for fraudsters as eCommerce is fueled by digital
payments, whether it involves credit or debit cards, bank transfers, or even
cryptocurrencies.
● Monopolies: eCommerce can cater to an entire nation, which leaves a lot of potentials
for monopolies to form, which could further lead to cannibalization of local stores.

Financials
India’s internet economy is expected to go from US$ 125 billion as of April 2017 to US$ 250
billion by 2020, backed by just E-commerce. India’s E-commerce revenue is expected to hike up
from US$ 39 billion in 2017 to US$ 120 billion in 2020, increasing at an annual rate of 51%, the
highest in the world. With the launch of the 4G network and increasing consumer wealth, the
Indian E-commerce market is projected to grow to US$ 200 billion by 2026. Internet penetration
in India hiked from just 4% in 2007 to 52.08% in 2019, registering a CAGR of 24% between
2007 and 2019. The internet users in India are expected to grow from 687.62 million as of
September 2019 to 829 million by 2021.
 Investments and Development
● In August 2020, Reliance Industries (RIL) purchased 60% stake in Netmeds, an online
pharmacy, for Rs 620 crore (US$ 84.61 million). This acquisition gives RIL’s retail unit,
Reliance Retail, entry into a vertical e-commerce space.
● In January 2020, Divine Solitaires has launched its E-commerce platform.
● In February 2020, Flipkart set up a ‘Furniture Experience Center’ in Kolkata, its first
offline presence in eastern India.
● In April 2020, Reliance Industries (RIL) started home delivery of essentials in partnership
with local kirana stores in Navi Mumbai, Thane and Kalyan.
● In April 2020, Swiggy received an additional US$ 43 million funding as part of its ongoing
Series I round.
● In May 2020, PepsiCo India partnered with Dunzo for its snack food brands that include
Lay’s, Kurkure, Doritos and Quaker.
● In May 2020, chocolate maker Hershey India partnered with Swiggy and Dunzo to
launch their flagship online store in order to increase reach.
● In Union Budget 2020–21, Government has allocated Rs 8,000 crore (US$ 1.24 billion)
to BharatNet Project to provide broadband services to 150,000-gram panchayats.
● In August 2019, Amazon acquired 49% stake in a unit of Future Group.
● Reliance will invest Rs 20,0000 crore (US$ 2.86 billion) in its telecom business to
expand its broadband and E-commerce presence and to offer 5G services.
● In September 2019, PhonePe launched super-app platform 'Switch’ to provide a one
stop solution for customers integrating several other merchants apps.
● In November 2019, Nykaa opened its 55th offline store marking success in tier II and tier
III cities.

Road Ahead
The E-commerce industry has directly affected micro, small & medium enterprises (MSME) in
India by providing means of financing, technology and training. Indian E-commerce industry has
been on an exponential growth trajectory and is expected to pass the US in becoming the
second largest E-commerce market in the world by 2034. Technology empowered innovations
like digital payments, hyper-local logistics, analytics driven customer engagement and digital
advertisements will likely support the growth in the sector. The growth in E-commerce sector will
also raise employment rate, increase revenues from export and provide better products and
services to customers.