India's luxury car market likely to double by 2020

(Getty Images)

JOE KING | Mon, 1 Feb 2016-09:21am , Mumbai , dna

India is predicted to become the third-largest global economy by 2030. Some studies are counting India among the Big Three -- China, US and India.

If we take into account a fairly respectable GDP growth rate and a strong outlook for the future, an increase in the number of high net worth individuals, youth-led affluent market and the government's push to curb monetary leaks, India is all set to soar.

Add to this potent mix, the growing understanding of luxury and a desire to reward achievements with luxury buys and the market has immense potential. In fact, the young customer base is a very big strength, and with India's large population this segment is slated to grow. Young professionals and executives, first generation entrepreneurs who look forward to treating themselves with a nice luxury car are increasingly associating with us.

This bodes well for the luxury automobile market. The market has grown eight-fold in the last seven years. Units increased from a meagre 4,000 in 2007 to a mindblowing 35,000 in 2015. It is projected that the market will at least double by 2020. Typically, the premium segment displays better dynamics than volume segment in many BRIC markets including India.

Currently, luxury enthusiasts in smaller cities are the ones who are converting into customers really quickly as there is an increasing aspiration for luxury, are well informed and aware of the brands and their value, as much as their counterparts living in a metro. In the next 10-15 years, penetration of luxury car industry in Tier-3 cities will also increase.

The luxury automobile industry is constantly in an innovation mode and the growth of this segment is largely driven by the new and innovative technology the cars have to offer. Piloted driving, electrification and digitalisation are some of the trends that I see at the forefront of automotive technology future. This and other technologies, which are currently under development, give me confidence that the future will truly belong to increasingly advanced technologies that will make driving safer and simpler. The technological advancement will couple with new frontiers on design to offer cars which offer the best of style, aesthetics and functionality.

The advancement in technology will not be limited to only cars, the cities and infrastructure of future will also be digitised. Audi has been working on the future of mobility. Since 2010 the Audi Urban Future Initiative has been a platform for an international and interdisciplinary dialogue about the future of mobility in cities. Even in India, with the concept of smart cities being propagated, the day is not far away when cars would begin interacting with the systems. Down the road, Indian luxury car market will also become more mature and adopt green fuel cars.

In the total volume, India may not be a large market but it's a profitable market and it's growing well. And there is certainly the understanding that the luxury car market will continue to grow here. Whether it happens this year, or next year, or in five years, the fact is that it will grow.

The writer is head of Audi India

India’s e-commerce revenue may touch $38 bn in 2016: Assocham

While the buying trends during 2015 witnessed a significant upward movement due to aggressive online discounts, rising fuel prices and wider and abundant choice will hit the e-commerce industry in 2016.

India’s e-commerce market is likely to touch $38 billion mark in 2016, a massive jump over the $23 billion revenues clocked by the industry in 2015, according to an Assocham study.

“Increasing internet and mobile penetration, growing acceptability of online payments and favourable demographics have provided…the unique opportunity to companies to connect with their customers,” said the study.

While the buying trends during 2015 witnessed a significant upward movement due to aggressive online discounts, rising fuel prices and wider and abundant choice will hit the e-commerce industry in 2016, it pointed out.

On the other hand, mobile commerce (m-commerce) is growing rapidly as a stable and secure supplement to the e-commerce industry. Shopping online through smartphones is proving to be a game changer, and industry leaders believe that m-commerce could contribute up to 70 per cent of their total revenues.

The paper reveals that Mumbai ranks first in online shopping followed by Delhi, Ahmedabad, Bengaluru and Kolkata. The study also noted that one out of three customers currently makes transactions through mobiles in Tier-1 and Tier-2 cities. “In 2015, 78 per cent of shopping queries were made
through mobile devices, compared to 46 per cent in 2013,” Assocham Secretary General D S Rawat said.

In 2015, the highest growth rate was seen in the apparel segment, almost 69.5 per cent over last year, followed by electronic items, up 62 per cent, baby care products, up 53 per cent, beauty and personal care products at 52 per cent and home furnishings at 49 per cent.

Rapid growth of digital commerce in India is mainly due to increased use of smartphones. Mobiles and mobile accessories have taken up the maximum share of the digital commerce market in India, noted the study.

Moreover, almost 45 per cent online shoppers reportedly preferred cash on delivery over credit cards (16 per cent) and debit cards (21 per cent). Only 10 per cent opted for internet banking and a scanty 7 per cent preferred cash cards, mobile wallets, and other such modes of payment.

The 18-25 years of age group has been the fastest growing age segment online with user growth being contributed by both male and female segments. The survey highlights that 38 per cent of regular shoppers are in 18-25 age group, 52 per cent in 26-35, 8 per cent in 36-45 and 2 per cent in the age group of 45-60. Nearly 65 per cent online shoppers are male and 35 per cent female.

The products that were sold most in 2015 include mobile phones, iPad and accessories, MP3 players, digital cameras and jewellery, among others.

India’s e-commerce market is likely to touch $38 billion mark in 2016, a massive jump over the $23 billion revenues clocked by the industry in 2015, according to an Assocham study.

“Increasing internet and mobile penetration, growing acceptability of online payments and favourable demographics have provided…the unique opportunity to companies to connect with their customers,” said the study.

While the buying trends during 2015 witnessed a significant upward movement due to aggressive online discounts, rising fuel prices and wider and abundant choice will hit the e-commerce industry in 2016, it pointed out.

On the other hand, mobile commerce (m-commerce) is growing rapidly as a stable and secure supplement to the e-commerce industry. Shopping online through smartphones is proving to be a game changer, and industry leaders believe that m-commerce could contribute up to 70 per cent of their total revenues.

The paper reveals that Mumbai ranks first in online shopping followed by Delhi, Ahmedabad, Bengaluru and Kolkata. The study also noted that one out of three customers currently makes transactions through mobiles in Tier-1 and Tier-2 cities. “In 2015, 78 per cent of shopping queries were made
through mobile devices, compared to 46 per cent in 2013,” Assocham Secretary General D S Rawat said.

In 2015, the highest growth rate was seen in the apparel segment, almost 69.5 per cent over last year, followed by electronic items, up 62 per cent, baby care products, up 53 per cent, beauty and personal care products at 52 per cent and home furnishings at 49 per cent.

Rapid growth of digital commerce in India is mainly due to increased use of smartphones. Mobiles and mobile accessories have taken up the maximum share of the digital commerce market in India, noted the study.

Moreover, almost 45 per cent online shoppers reportedly preferred cash on delivery over credit cards (16 per cent) and debit cards (21 per cent). Only 10 per cent opted for internet banking and a scanty 7 per cent preferred cash cards, mobile wallets, and other such modes of payment.

The 18-25 years of age group has been the fastest growing age segment online with user growth being contributed by both male and female segments. The survey highlights that 38 per cent of regular shoppers are in 18-25 age group, 52 per cent in 26-35, 8 per cent in 36-45 and 2 per cent in the age group of 45-60. Nearly 65 per cent online shoppers are male and 35 per cent female.

The products that were sold most in 2015 include mobile phones, iPad and accessories, MP3 players, digital cameras and jewellery, among others.

A look back at 2015: the year in Southeast Asia ecommerce

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Photo credit: byronv2

After the massive capital injections of 2014, 2015 set the stage for a veritable royal rumble of ecommerce players as they competed for market dominance. So while ecommerce in Southeast Asia remains fragmented and nascent, we can definitely tip our hat to some of the major entrants and highlights.

This was the year we saw Indonesia double down on ecommerce, with national pride MatahariMall claiming to raise $500 million to take on Lazada’s rocketship and the return ofMagnus Ekbom to the the helm of Lazada Indonesia.

We saw some key players struggle to find their directions. Line, the popular messaging app, went through a year of soul-searching as it launched and then canned several initiatives like Line Flash Sale, Hot Brand, Groceries, and now also Line Hot Deal. Only Line Shop, its mobile C2C marketplace, remains, however, in a shark-infested space that also counts Shopee and Carousell as inhabitants.

Then there’s Paraplou who sadly announced the closure of operations this year and SingPost who went on an international shopping spree but lost top executives and faced a delay in closing its Alibaba investment.

At aCommerce, we said goodbye to some of our own top executives in Indonesia as they joined the Indonesia fight in the B2C bloodbath (to be discussed below).

More money flowed into the region with Carousell allegedly topping up its war chest with $50 million to take the lead in the mobile marketplace race. In the enterprise game, aCommerce took home a strategic investment from juggernaut distributor DKSH, giving us the fuel to re-enter Singapore and expand into the rest of Southeast Asia.

From the imminent B2C and C2C bloodbath, to mobile commerce, the Uberization of logistics, and drone deliveries, here is a look back at some of our predictions for ecommerce in Southeast in 2015.

1. The year of M&As: consolidation will rise in the B2C ecommerce space

Photo credit: Wikimedia Commons

Last year we said that 2015 would be the year that smaller ecommerce companies ran out of their own steam, i.e. organic growth, and would either have to merge or acquire to keep pace with deep pocketed players. Consolidation did happen this year.

First, Ardent Capital-backed WhatsNew acquired lifestyle vertical site Moxy in Thailand early in the year to pivot into female-focused ecommerce and expand into Indonesia. AndLazada swallowed up Lamido in March. In July, Luxola, one of Southeast Asia’s leading beauty e-tailers, got picked up by LVMH, the Paris-based luxury powerhouse that also owns Sephora.

“If you’re selling other people’s brands, you are competing not via a local group of competitors but with everyone. In this type of market, you might imagine having one large national winner.

You might imagine that winner is ruthless about scale and cost, and is run by a visionary leader who with an extreme long-term focus. Such a company might not make real money for a long time — but when it does — it will be incredibly powerful.” – Andy Dunn, founder & chairman, Bonobos.com

In his seminal essay “Ecommerce is a Bear”, Andy Dunn, founder and chairman of Bonobos.com, elaborates why B2C ecommerce is a winner takes all game. Just look at the US. where Amazon dominates or China where in a span of less than 10 years the game has boiled down to two key players – Tmall and JD.com.

Unfortunately, there have been casualties as well of the hyper-competition in B2C ecommerce in Southeast Asia. As mentioned above, fashion retailer Paraplou Group shut down in October after two years and having raised $1.5m USD. To succeed in B2C, it requires a laser-focus and deep pockets, both of which Paraplou lacked.

Accuracy rating: A

2. Digital agencies will adapt or go extinct

Our region is unique in that it lacks a long-tail publisher ecosystem and as a result has a much more simple ad tech environment. As a result, agencies’ traditional scope of work will be reduced. More importantly, due to this “no-tail” landscape, monetization will be commerce — and not ad — driven therefore disrupting the traditional agency media arbitrage cash cow business.

In the end, the traditional digital agencies’ scope is reduced to executing global contracts and buying offline media (in the US, these agencies still have a role to play due to a more complicated ad tech environment and media mix). These agencies won’t admit it but the ground has been shifting.

Disappointed with their global agencies, Fortune 500 brands have been increasingly reaching out to performance-focused partners like SP Ecommerce and aCommerce to help them with driving real orders and revenues instead of banner ad impressions and incremental Facebook Likes. Having an end-to-end view enables dedicated ecommerce partners to optimize brands’ performance across the entire ecommerce value chain, from banner ad click all the way to last-mile delivery and customer service. Agencies are at a disadvantage here due to the lack of visibility beyond impression and clickstream data.

Having said that, agencies are not that stupid and see the rise and importance of ecommerce in Southeast Asia. However, observing something and acting upon it are two different things. GroupM is rumored to have started looking into building an ecommerce marketplace and team in our region but changing a 30 year-old DNA to cope with ecommerce, physical operations (aka the hard shit), and modern marketing is like trying to 180 the Titanic. WPP, Publicis, and Dentsu/Aegis missed the boat on ecommerce in China long time ago – e.g. Publicis very recently acqui-hired BysoftChina, a Shanghai-based ecommerce agency, a sad 10 years after the start of the ecommerce boom in China.

Accuracy rating: A+ (granted, this one wasn’t that hard)

3. The marketplace space will get overcrowded

Photo credit: JC+A

We predicted the competition in the marketplace space to heat up and boy did it heat up. Forget China, the next ecommerce gold rush is in Southeast Asia.

However, unlike China, there’s no Great (Fire)wall to keep the barbarians out. As a result, we are seeing JD (China), Shopee/Garena (Singapore), Carousell (Singapore), AliExpress (China), PCHome (Taiwan), and Line Shop (Korea) among many others flocking to one of the last untapped frontiers of ecommerce marketplace gold in the world. Note that this is in addition to local incumbents like Lazada, Tokopedia, Tarad, and WeLoveShopping.

However, unlike in the B2C space, we will not see consolidation for the foreseeable future. This is because unlike in China, where Taobao dominates with over 90% of the C2C market, marketplaces in Southeast Asia will each try carve out a niche. Taobao (through Alibaba) was able to dominate the market by riding off the last two decades’ manufacturing and export boom in China. SEA is not a manufacturing powerhouse like China.

We’ll expect Line and Shopee to battle it out for mobile marketplace domination. Line has called in reinforcements by poaching Ariya Banomyong, the former Google Thailand Country Head, to lead Line’s second biggest market outside of Japan and to drive ecommerce and local product innovation.

And then there’s Carousell who’s recently rumored trying to raise a fresh $50 million Series B to expand across Asia. Others like Lazada, MatahariMall, and WeMall (True Corp’s rumored upcoming ecommerce venture) it will try to replicate the Tmall model. Old schoolers like Tarad and Kaidee will try to maintain their grip on the lower-end of the market.

Accuracy rating: A+

4. Cross-border ecommerce will accelerate with AEC

Cross-border ecommerce unfortunately didn’t take off in 2015. The ASEAN Economic Community (AEC) was supposed to launch by end of this year but by now we all know that it will take much longer since governments don’t operate at startup speed.

Even then, there are so many growth opportunities within domestic markets that it just doesn’t make sense to focus on cross-border growth within ASEAN, as evidenced by the recent focus on Indonesia’s ecommerce opportunity.

However, cross-border from a B2B and supply chain perspective did take off in 2015. Arvato’s Mitch Bittermann joined aCommerce as Group Chief Logistics Officer to focus on driving B2B logistics, much of which is engineering the supply chain from China into Southeast Asia and vice versa.

China’s second biggest B2C ecommerce player JD.com just entered Indonesia by launching JD.id. This will bring their infamous and massive China supply chain network into Southeast Asia, laying the foundation for “Silk Road 2.0” and expanding China’s soft power and hegemony through commerce and digital.

Rocket Internet’s Lazada Group, one of the largest ecommerce marketplaces in Southeast Asia, established its cross-border headquarters and global sourcing operations in Hong Kong – the goal being to offer brands and merchants in China and HK with a single entry gateway into Southeast Asia.

“We see tremendous potential in Southeast Asia as consumers continue to embrace online shopping largely facilitated by the rise of internet and increasing mobile penetration.

As the leading ecommerce player, we offer brands and merchants in Hong Kong and China with the only single retail gateway to enter Southeast Asia,” – Aimone Ripa di Meana, CEO Crossborder, Lazada Hong Kong

Accuracy rating: D

Photo credit: Loic Lagarde

5. Demographic evolution: foreign entrepreneurs will flood the market

Over the past year, we’ve noticed two patterns of talent flow into Southeast Asia. The first one is the one we predicted – a pull of talent into the region attracted by the booming ecommerce and tech market in SEA.

This trend is driven by the slow economic recovery in Europe and US. We’re seeing applications from outside the region continuously on the rise, even from hotspots such as Silicon Valley.

The second pattern of talent flow is a push one, driven by new companies entering Southeast Asia. With the increased focus on SEA as the next big thing in ecommerce, more and more companies are flocking to the region.

China’s JD just launched JD.id in Indonesia and Garena is making big bets on Shopee, their new mobile marketplace. HappyFresh, a online grocery delivery service, recently launched in Indonesia and Thailand and has their regional marketing team based in Jakarta now. Singapore’s Carousell is rumored to be raising $50 million to expand across Asia.

With these companies coming into SEA, there has been an additional influx of talent into the region, originating from China, Singapore, and Europe as most of these firms are bringing their mid- and senior-level management along.

Accuracy rating: B+

6. The Uber-ization of logistics and everything else

GrabTaxi moved into logistics in 2015. The Malaysia-based company started experimentingwith next-day delivery services in March, called GrabDelivery. The service, now calledGrabExpress, is available in major Southeast Asian markets like Indonesia and Thailand.

“CEO Anthony Tan told TechCrunch that the firm would experiment with new services in the wake of SoftBank’s $250 million investment in it last December, and this is one of the first ideas to be floated.” –TechCrunch

Uber on the other hand has yet to expand their ‘UberRush’ service into Southeast Asia, or any countries outside of the US.

The biggest surprise here is probably GoJek from Indonesia. The company rose from “zombie”-mode to become the biggest threat to GrabTaxi and Uber in Indonesia in a matter of a few months. As of today, GoJek offers courier/delivery services (GO-SEND), guaranteeing 60 minute delivery anywhere in the city, in addition to a plethora of other services such as food delivery (GO-FOOD) and groceries (GO-MART).

Outside of pure logistics, there are companies like HappyFresh and YesBoss that are trying to “Uberize” grocery deliveries and pretty much everything else, respectively.

Accuracy rating: A+

7. Mobile commerce still crippled by poor UX

Image via Dangquocbuu

Based on our aggregated data, mobile generated 51% of visits and 22% of transactions in 2015. This number is up from 18% and 12% in 2014.

However, with conversion rates on mobile 3-4x lower than desktop, mobile commerce hasn’t truly reached its tipping point yet in Southeast Asia despite the region being identified as the perfect storm for mobile commerce.

This isn’t a demand side issue but rather a supply side issue. SaleStock, a fast-growing fast-fashion ecommerce site in Indonesia, is foregoing desktop completely and only providing a mobile, albeit non-native, shopping user interface. This showed us that from a user/demand side perspective, mobile commerce works really well in Southeast Asia.

However, for each SaleStock there are many other companies that have gone desktop first potentially due to many factors such as 1) a desktop site being easier to build due to many templates out there, 2) a legacy brand/corporate site inherited and forced to turn into ecommerce, 3) the digital/ecommerce person in charge having grown up in the desktop era and thus having a “desktop-first” mindset, and 4) brands and retailers “dipping their toes” into ecommerce and therefore starting with something “safe”.

We have seen positive trends in 2015 though. For example, Lazada now gets more than 50 percent of their traffic from mobile channels after making app development a priority. They’re also one of the first e-commerce players in Southeast Asia that launched both their iOS and Android apps.

MatahariMall started with their mobile website and worked backward to create their desktop experience. Today, over 30% of MatahariMall’s transactions are generated through mobile and, having recently launched its native app, this percentage is expected to increase even further.

Even Google is realizing that a poor mobile experience is hurting its business, with companies less likely to advertise on mobile due to lower conversion rates. In April, Google launched a new update to its search algorithm called “Mobilegeddon” which favors sites that are mobile-friendly and penalizes those that aren’t.

Accuracy rating: B+

8. B2B ecommerce will be the new black

2015 saw the launch of B2B businesses across Southeast Asia. In July, Ardent Capital invested $2.5m into Bizzy, a marketplace where small and medium-sized businesses, as well as large corporates, fulfill their office equipment needs for day to day products like ink, paper and computer peripherals, as well as business services and industrial products.

Since then, the company has seen 50% month-on-month growth, confirming that while B2B isn’t sexy, it’s a lucrative business where margins aren’t shaved away through hyper-competition like in B2C.

“The best thing about B2B is that the customer is at your doorstep and they know what they want. B2C trends shift as consumers change their habits (tech, fashion trends, disposable income level etc), whereas B2B is predictable and is less affected by seasonal or macro trends.

Businesses need supplies and merchandising every month, or else they cannot run their business. We have seen nearly a 50% return rate and an average monthly spending per customer of around $1,400.” – Peter Goldsworthy, CEO and Founder, Bizzy.co.id

Lippo Group-backed Venturra Capital, which recently raised a $150m fund for tech investments across Southeast Asia, considers B2B as one of the three big buckets to focus on, with the other two being consumer tech (think MatahariMall) and Internet of Things. Lippo’s B2B project is still in stealth but the company has been actively hiring staff and will soon launch under MatahariBIZ.com.

While Southeast Asia is still far away from the B2B numbers that China is showing – B2B accounts for over 75% of total ecommerce Gross Merchandise Value (GMV) in China – we’re off to a good start with key players like Ardent Capital and Venturra Capital focusing on this lucrative but much underrated opportunity.

Accuracy rating: B

9. Cash on delivery will remain necessary to win SEA

Based on aCommerce’s latest aggregated numbers, cash on delivery (COD) made up 74% of transactions in Southeast Asia, up from 53% the year prior.

If you look at China, COD was 70% of B2C transactions in 2008. However, by 2014, Alipay had surpassed COD as the dominant payment method, with over 85% of 11/11 shoppers expressing a preference towards using Alipay vs. only 21% for COD.

Whatever happened in China won’t happen in Southeast Asia though, at least not in the foreseeable future. Alipay became popular the same way PayPal became popular in the US – both payment products had a massive distribution channel, being eBay for PayPal and Taobao for Alipay.

Southeast Asia faced two challenges that will pretty much cement the dominance of COD for at least the next several years – 1) fragmented marketplace ecosystem and 2) lack of a single big market like China or US.

These factors make it hard for any single online payment platform to reach critical mass required for a standard to be established. There’s 2C2P, Omise, AirPay, and Line Pay among many others but none of them truly dominates like Alipay does in China or PayPal in the US.

Accuracy rating: A+

10. Drone deliveries will definitely happen (not)

Okay, drone deliveries did happen but not on a commercial scale. After Amazon’s initialpublicity stunt pilot, many others followed. Alibaba tested delivering tea via drones earlier this year. SingPost successfully ran a drone delivery test in October. Google is predicting to pull off drone deliveries on a commercial scale by 2017.

Even though drone deliveries didn’t go commercial in 2015, we believe companies like SingPost, DHL, and Alibaba are building the foundation for what will be the future of parcel delivery in Southeast Asia.

With the infrastructure and physical (i.e. islands) challenges across Southeast Asia, drone deliveries will be the future of logistics in our region. We even think adoption and commercialization of drone deliveries will be faster in Asia due to a much more relaxed regulatory environment compared to US and Western Europe.

Southeast Asia being strategically located next to China, the epicenter of drone design and manufacturing, will only help accelerate this trend.

Accuracy rating: B

That’s enough from us. What were your major expectations for ecommerce in Southeast Asia in 2015? How many of these became reality? Any surprises or disappointments?

Also, look ahead to what’s brewing for next year and check out our 10 trends that will shape ecommerce in Southeast Asia in 2016.