-­‐  Mehul  Agrawal  Co-­‐founder  and  Managing  Director  

Relevance of online platform for Furniture

Industry

AGENDA

E-commerce - Why e-tailing?

Furniture e-tailing – Why Furniture as a category will do great online?

Understanding Customers - Who are they and what’s in it for them?

Implications – What do brands/vendors need to do?

Before we start – What do you think of online?

Online is for discount mongers – cheap cheap cheap! •  60%+ sales without discounts •  Repeat purchases are significant – shows genuine interest Online is for urban population – hi-tech youngsters! •  40% sales outside top 10 cities; expected to rise to 60% Only low value products sell online •  Maximum basket size – 2.5 Lacs; 70-80% revenues from orders above Rs. 3,000

Online has excessive returns – loss making proposition •  <5% returns when managed properly, and doubles the conversions online

E-­‐commerce  –  Why  e-­‐tailing?  

Indian retail market is largely unorganized E-tailing is providing impetus to growth of organized segment

However,  overall  share  of  e-­‐commerce  in  India  will  s5ll  be  miniscule  (~1%)  compared  to  US  (~9%)  and  China  (7-­‐8%)  

3%  5%  

12%  

20%  

2005   2010   2015   2020  0%  

10%  

20%  

30%  Organized  as  a  %  of  Total  Retail  

13-­‐15%  

25-­‐30%  

60%+  

Overall  Retail   Organized  Segment   e-­‐Commerce  

CAGR  OF  RETAIL  

CAGR  

>90%  market  sCll  unorganized  today  E-­‐commerce  is  expected  to  grow  5  Cmes  

faster  than  overall  retail  

Source:  Broker  Research  

29  

36   46   60   80  

137  

190  

273  

376  

3%  

3%  

4%  

5%  

7%   10%   15

%   22

%  

30%  

0  

100  

200  

300  

400  

2007   2008   2009   2010   2011   2012   2013   2014   2015  0%  

25%  

50%  

Unique  Users  (million)   Penetra5on  (%)  

Increasing penetration of internet is fueling e-tailing growth

4   5  

7   8  

11   13  

21  

28  

45  

2007   2008   2009   2010   2011   2012   2013   2014   2015  0  

25  

50  

Users  transac5ng  online  (million)  

Exponen5al  growth  of  users  that  will  be  transac5ng  online  

By  2015,  30%  of  Indian  populaCon  will  be  using  internet  

10%  of  Internet  users  are  already  transacCng  online  

Source:  Avendus  Es<mates  

Consumers are also spending more time online to aid their purchase decisions

71%  

64%  

29%  

24%  

15%  

9%  

6%  

3%  

19%  

10%  

0%   20%   40%   60%   80%  

Family  

Friends  

Online  product  reviews  

Product  web  sites  

Search  engines  

Discussion  forums  

Social  media  sites  

Influen5al  bloggers  

TV  

News  sources  

SOURCES  OF  RECOMMENDATIONS  FOR  PURCHASE  

30   45  

2011   2015  0  

25  50  75  100  125  150  

DAILY  AVERAGE  TIME  SPENT  ONLINE  

Minutes  spent  online  (India)   USA  

9%   13%   18%  

33%  

19%  

8%  

<5   5-­‐10   10-­‐15   15-­‐20   20-­‐30   >30  0%  

15%  

30%  

45%  

%  of  P

urchase  Sessions   LENGTH  OF  A  PURCHASE  SESSION  (MINUTES)  

Online  sources  are  aiding  purchase  decision  of  Indian  consumers…  

…who  conCnue  to  spend  more  Cme  online,  sCll  behind  global  peers  though  

Source:  Avendus  Es<mates   Source:  B2C  e-­‐Commerce  report  

Diversified access ensures that next growth wave comes from smaller cities and towns

80%  

60%  

40%  

2007   2012   2016  0%  

25%  

50%  

75%  

100%  

%  of  total  customers  

Online  players  are  gaining  increasing  business  from  smaller  ciCes  and  towns…  

…as  the  pla_orm  provides  an  instant  vast  reach  compared  to  offline  organized  players  

Source:  Avendus  Es<mates  

IllustraCve  depicCon  of  reach  of  organized  players  

Broadband  reach  and  3G  penetraCon  are  key  drivers  

%  of  revenues  coming  from  top  10  ciCes  

Bottomline: Indian e-commerce will witness a huge growth ~$70 bn by 2020

0.3   0.4   0.6  1.6  

9  

2009   2010   2011   2012   2016   2020  0  

5  

10  

15  

20  

INDIAN  E-­‐COMMERCE  MARKET  SIZE  ($  BN)  

Total  Market  Size  

55-­‐60%  CAGR  expected  5ll  2020  

Source:  Industry  reports,  Analyst  es<mates  

70  

Online  Home  &  Furniture  Retail  –  Why?    

Furniture  Jewellery  

Home  Furnishing  Kitchen  Health  Products  

Apparels  Fashion  Shoes  Cosme5cs  

Books  Electronics  Computers  Appliances  

Nascent  Categories  

Mature  Categories  

Furniture Retail is on its course of being the next big category for e-commerce

Source:  Global  Webindex  

Early signs indicate a promising yet untapped opportunity

362%

 

119%

 

100%

 

98%  

90%  

76%  

75%  

13%  

3%  

3%  

2%  

2%  

10%  

15%  

0%  

100%  

200%  

300%  

400%  

0%  

5%  

10%  

15%  

20%  GROWTH  ACROSS  CATEGORIES  IN  E-­‐COMMERCE  

YoY  Growth  %   Reach  %  

Source:  Report  –  State  of  e-­‐Commerce  in  India  

Internationally, furniture has already emerged as next big trend in online shopping  

•  Home  products  are  50%+  sales  

•  Turnover:  $150M  (2012E)  

•  Turnover:  $200M  (2012E)    

•  100%  YoY  growth;  75%  repeat  rate  

•  1B+  online  visitors  (Alexa  Rank:  294;  Zappos:  737)  

•  25%  growth  in  online  sales  

•  Turnover:  $600M  (2012)   •  Turnover:  $150M  (2012E)  

Home  goods  market  in  U.S.  is  $500bn  and  6%  of  it  is  online    

Source:  Press  release,  news  ar<cles  

Case in point –

11  Million  members  across  26  countries  

33%  

33%  sales  via  Mobile  device  

Purchase  Repeat  

66%  Repeat  purchases  by  members  

50%  sales  are  home  products  

In  18  Mon

ths  

15000  products  online  15%  exclusive    

90%  not  available  on  other  major  websites  

66%  

Source:  Press  release,  news  ar<cles  

Online search volumes are also rising rapidly Expected to follow trajectory of established categories

2007   2008   2009   2010   2011   2012   2013  0  

25  

50  

75  

100  ONLINE  SEARCH  FOR  ITEMS  IN  GOOGLE  

Shoes   Furniture   Wall  Clocks   Bed  Sheets  

2006   2007   2008   2009   2010   2011   2012   2013  0  

25  

50  

75  

100  Furniture  

2007   2008   2009   2010   2011   2012   2013  0  

25  

50  

75  

100  Bed  Sheets  

Source:  Google  Trends  

Even for e-tailers, Home and Furniture provide a great business case

Higher  Margins  and  Lot  of  Private  label  

50%  lower  returns  than  industry  standards  for  other  

categories  

Purchase  Repeat  

2-­‐3x  basket  size  –  both  number  of  items  &  Ccket  size  

Nascent  but  already  seeing  repeats  at  15-­‐25%  

Flurry  of  e-­‐commerce  ventures  dealing  in  Home  &  Furniture  over  last  year…  

…as  it  provides  a  great  business  opportunity  compared  to  other  categories  

And there are significant advantages over the traditional physical model too

Network reach Operational hours Range of products

Product launches Product pricing Basket size Floor negotiations

Retail Investment Sales force Warehousing cost

After sales Delivery timelines Product assembly

Scale  &  Presence  

Sales  

Investmen

ts  

Service  levels  

Physical   Online   Physical   Online  

E-­‐com  catching  up  through  local  presence  

Lastly, you can do so much more online…

Assortment + Depth •  Why make a choice? Go wide and go deep Be closer to customers •  Get instant and accurate feedback on what customers want and what they perceive

Leverage market intelligence •  Data/Analytics/Behaviour/Patterns everything is at disposal

Run pilots/exclusivity campaigns •  ‘Will it work’? Push customers online by maintaining exclusive ranges

Trigger impulse buying?

Understanding  Customers  –  Who  are  they  and  what’s  in  it  for  them?  

51%  

0%  

10%  

30%  

26%  

14%  

9%  

5%  

7%  

49%  

0%  

11%  

26%  

23%  

14%  

9%  

6%  

10%  

Total  Customer  

Less  than  20  

20-­‐25  

25-­‐30  

30-­‐35  

35-­‐40  

40-­‐45  

45-­‐50  

More  than  50  

Female   Male  

25-35 years is the key age group for Home However, gender split remains equal

Given  only  20%  online  shoppers  are  women,  the  category  has  a  significantly  higher  penetra5on  among  women  

Source:  Industry  es<mates  

60% sales comes from top 10 cities South is the largest region with a ~40% share

29%  

7%  

25%  

37%  

2%  

%  OF  SALES  FROM  DIFFERENT  REGIONS  

North   East   West   South   North-­‐East  

35%  of  all  sales  come  from  Metros;    60%  comes  from    top  10  ciCes  

South  provides  the  largest  pla_orm  for  online  sales  contribuCng  ~40%  of  sales  

35%  

25%  

40%  

Metros   Next  6  Ci5es   Rest  of  India  

%  OF  SALES  FROM  DIFFERENT  CITIES  

%  of  total  sales  

Source:  Industry  es<mates  

2,095  

1,549  

1,634  

1,825  

2,165  

2,278  

2,323  

2,412  

2,391  

2,748  

2,988  

1,675  

2,443  

2,591  

2,940  

3,482  

3,247  

3,418  

Total  Customer  

Less  than  20  

20-­‐25  

25-­‐30  

30-­‐35  

35-­‐40  

40-­‐45  

45-­‐50  

More  than  50  

Female   Male  

Basket  Size  

Men have a significantly higher basket size than women across age groups

Source:  Industry  es<mates  

Repe

at  Rate  

%  customers  m

aking  ne

xt  purchase  

20%  

10%  

12%  

16%  

21%  

24%  

24%  

26%  

25%  

15%  

11%  

9%  

12%  

15%  

17%  

19%  

20%  

23%  

Total  Customer  

Less  than  20  

20-­‐25  

25-­‐30  

30-­‐35  

35-­‐40  

40-­‐45  

45-­‐50  

More  than  50  

Female  Male   Male  

However, women depict greater loyalty and have higher repeat rates

Source:  Industry  es<mates  

Critical to address consumer sentiments across the board to enable online purchase

Can  I  trust  the  website?    Will  I  receive  the  products  safely?  

Will  the  products  get  delivered  5mely?  

How  do  I  raise  my  queries/concerns?  What  5me  of  the  day  can  I  make  the  purchase?    What  kind  of  payment  op5ons  are  available?  

Is  the  variety  of  products  sufficient?  Are  the  products  different/unique?  

Is  the  overall  deal  aorac5ve?  

What  exactly  will  I  get?  How  can  I  experience  the  products?  How  will  the  products  get  assembled?  

 

Trust  and  Safety  

Added  convenience  

Value  proposiCon  DemysCfying  products  

1  

2   3  

4  

Can  I  trust  the  website?  Will  I  receive  the  products  

safely?  Will  I  receive  the  products  

Cmely?  

Guaranteed  Delivery  in  8-­‐13  days  

Addressing consumer sentiments: Trust and Safety

1  

What  exactly  will  I  get?  How  do  I  experience  the  product  –  Touch  &  Feel?  

How  will  the  products  get  assembled?  

Addressing consumer sentiments: Demystifying products

2  

Is  there  a  sufficient  variety  across  categories?  

Are  the  products  different  or  unique?  

Is  the  overall  deal  asracCve?  

Foldable    Wall  Shelves  

350  

200  

75  

50  

50  

50  

Living  Room  Furniture  

Bed  Room  Furniture  

Dinning  Furniture  

Outdoor  Furniture  

Bar  Furniture  

Workspace  Furniture  

0   250   500  

#  of  SKUs  

Addressing consumer sentiments: Value proposition

3  

LOVE  Wall  Shelves  

How  do  I  raise  my  queries/concerns?  

When  can  I  make  my  purchases?  

What  kind  of  payment  opCons  are  available?  

0%  

50%  

100%  

11  AM  -­‐  9  PM   9  PM  -­‐  11  AM  

%  OF  SALES  BY  HOUR  

33%  

Addressing consumer sentiments: Added convenience

4  

ImplicaCons  –  What  do  brands/vendors  need  to  do?    

•  Focus on online

•  Exclusive range

•  Invest into systems and processes

•  On time delivery

•  Be flexible – allow returns

A genuine focus is all it needs

Thank You