INTRODUCTION
In today's time the pace at which e-commerce is diffusing is no less than evolutionary.
However, there are a number of factors fostering the same such as globalization, economic
liberalization and appropriate public investments. In recent years globalization has become a
topic of debate. On one hand it allows the cross flow of products, capital and labor across the
borders which leads to convergence. Whereas on the other, it acts as a threat as the state loses
its ability to control its own economic development. The United States has played a key role
in the development of the internet as well as applied them to create new models of e-
commerce.US firms have been supported in these efforts by favorable government policies, a
largely deregulated telecommunications market, a dynamic venture capital market, and
positive attitudes toward information technology (1).However, in other countries apart from
the US, there is quite a difference in the extent to which different economies support and
promote e-commerce. Some businesses prefer to go online in order to expand their existing
market while others don't. Likewise, some prefer buying online in order to save time and
money while some are skeptical about the quality and hence prevent buying online. E-
commerce falls under the B2C category (Business to consumer) which includes online retail
and online shopping (2)
E-commerce operations:
E-commerce operations management is basically application of operations management to the
ecommerce industry. A number of processes such as forecasting, inventory management,
human resource management, etc. are all involved along with focusing on managing an
ecommerce operation.
Global Ecommerce:
Global e-commerce basically refers to supply of products and services across geopolitical
borders through online retail and marketing. It allows expansion of a company from its native
country i.e. origin to sell products across the world. According to data, there is a 276.9%
increase in worldwide e-commerce sales over the most-recently tracked period. According to
Statista, in 2018, an estimate of 1.8 billion people purchased goods and services online.
During the same year, global retail sales amounted to 2.8 trillion U.S. dollars and projections
show a growth of up to 4.8 trillion U.S. dollars by 2021. (www.statista.com).One of the
simplest ways to enter the market is to prioritize online advertising or social media. This
requires an international approach to Google Ads, Product Listing Ads, Facebook, and
Instagram through geographic targeting. Promoting social content and advertising online in
other countries, even if all you do is track engagement rather than sales, tests viability. But
perhaps the best strategy is to experiment with market places in target regions where 60% of
global sales now take place.
Further, the regional market shares worldwide in terms of e commerce are mentioned along
with the major players.
Worldwide numbers aside, ecommerce’s regional markets rank as follows:
1. Asia: $831.7 billion
2. North America: $552.6 billion
3. Europe: $346.5 billion
4. Australia: $18.6 billion
5. Africa and the Middle East: $18.6 billion
6. South America: $17.7 billion
Asia-Pacific - A home to digital powerhouse
The major two countries which led to growth in retail sales in the Asia-Pacific region are -
South Korea and China. According to globe newswire, over 50% of the online shopping of
goods and services takes place in the Asia-Pacific region. However, the regional growth
leaders for the next 5 years are the markets of South and Southeast Asia, such as India,
Indonesia, Thailand, Vietnam and the Philippines, as they grow from a recent low percentage
of online shopping penetration (3). Though ecommerce rose to the top in South Korea three
years earlier than China, China is the digital powerhouse in Asia-Pacific and the world. E-
commerce sales reached $354 billion USD in 2016 when it became the largest channel in the
country, accounting for 17% of total retail sales. In that same year, China's e-commerce
market surpassed the U.S. to become the largest market in the world. Major players- Alibaba
and JD.com
North-America: Second largest retail market
Major players in this region are US and Canada combined. According to Forbes, by 2020 it
will acquire about 16% of retail sales which is not too far behind the Asia-Pacific region. The
major focus in both the countries is affordability and multiple options for delivery such as
pick up from store, hourly or daily basis delivery.
Western Europe: Third largest retail market
UK is a clear e-commerce leader in this region followed by Germany and France. For Up,
sales will increase by 12% to reach US$337bn in 2017. Whereas, in Germany, e-commerce
sales will grow 11% to reach US$65bn in 2017 and sales in France will rise by 9% to
US$42bn according to reports
Major players in e-commerce industry across the world (4):
Global 2017 web sales Merchandise
Retailer Country
rank growth category
1 Amazon.com Inc. 21.2% United Mass merchant
States
2 JD.com Inc. 42.0% China Mass merchant
3 Xiaomi Inc. 30.0% China Computers/electronics
4 Apple Inc. 11.0% United Books/music/vide o
States
5 Walmart Inc. 61.5% United Mass merchant
States
6 Suning Commerce 40.0% China Mass merchant
Group Co. Ltd.
7 Dell Inc. 1.0% United Computers/electronics
States
8 Vipshop Holdings 30.0% China Apparel/accessories
Ltd.
9 Staples Inc. -5.3% United Office supplies
States
10 Otto Group 10.0% German y Apparel/accessories
Indian E-commerce Industry Analysis
There has been a significant change in the ways Indians do business nowadays. The Indian e-
commerce market is expected to grow to US$ 200 billion by 2026 from US$ 38.5 billion as of
2017. Internet and Smartphone penetration has played a great role in this growth. India’s e-
commerce is expected to see a rise in revenues 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. 1991 was
the year which opened new opportunities for businesses in the commercial domain. It was
very difficult for someone to imagine how e-commerce would become an indispensable part
of our lives. The government of India first came up with IRCTC for online e-commerce and
then with the arrival of Flipkart with deep discounting, e-commerce became very popular.
Investments/ Developments
The major developments in the Indian e-commerce sector are as follows:
● Flipkart will launch more offline retail stores in India to promote private labels in
segments such as fashion and electronics.
● 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.
● Reliance retail has launched online retail.
● Google and Tata Trust have collaborated for the project ‘Internet Saathi’ to improve
internet penetration among rural women in India.
Government Initiatives taken to boost E-commerce
The Indian Government has started various initiatives-Digital India, Make in India, Start-up
India, Skill India and Innovation Fund, since 2014. Major initiatives taken by the government
to help the e-commerce sector in its growth in India are as follows:
● The Indian Government allowed the limit of foreign direct investment (FDI) in the e-
commerce marketplace model for up to 100 per cent (in B2B models).
● Government of India has invested a huge amount in rolling out the fiber network for
5G, which will help boost ecommerce in India.
● Government has allocated Rs 8,000 crore (US$ 1.24 billion) In the Union Budget of
2018-19 to BharatNet Project, to provide broadband services to 150,000 gram
panchayats.
Future Prospects
MSME will be benefited a lot in the upcoming days because of e-commerce as e-commerce
will help in financing, technology and training and has a favorable cascading effect on other
industries as well. The Indian e-commerce industry has been rising and is expected to surpass
the US to become the second largest e-commerce market in the world by 2034. The growth in
e-commerce sector will help in boosting employment, increase revenues from export,
increase tax collection by ex-cheers, and provide better products and services to customers in
the long- term.
SWOT Analysis
Strengths Weaknesses
Low inventory reduces operation Security measures in terms of
cost in terms of warehouse, online payment transaction.
insurance and security. Fake sellers and websites.
No geographical boundaries when it Long delivery timings except in
comes to expansion. metro and few other cities.
Cost effective because no need of Impossibility of physical examination
physical store is there. of the product.
Outsourcing the logistics makes the
company delivery process smooth
and connection to last mile and self-
logistics can help the company in
increasing customer satisfaction.
Opportunities Threats
Increasing internet penetration and Local and global players are making
digital literacy in India. competition intense in terms of
Changing trends: E commerce can market share.
reflect quickly in terms of Frequent changes in laws and
availability of the changing trends. regulations of the country.
Wide business growth in global and Privacy of the users’ data can be
national market. misused.
100% FDI is allowed in e-commerce Third party logistics can result in
allowing global players to invest in bad company image if not monitored
India. properly.
Major Players – Global:
Major Players – India:
Case Study - How Big Basket improved its operation and strategy to become a game changer
in E-commerce of grocery
Initial Phase:
Hari Menon, V.S. Sudhakar, Vipul Parekh, Abhinav Choudhary and V.S. Ramesh started a
company FABMART in 1999 as an online retail website. As new technology in the market they
could not shake the masses as there was no established their faith in e-commerce during the
20th century. To approach the ideal segment of the society, the company approached the
market through a new concept named ‘FABMALL’ which was a physical retail chain targeting
the people of Andhra Pradesh, Tamil Nadu, Kerala and Karnataka (5). The new brand set up 200
stores in 7 years but in due course of time they plan sold FABMALL to Aditya Birla Group.
Funding:
The team of 5 came together again and started ‘BIG BASKET’ in 2011. In 2014, through 15
funding rounds, the firm was able to generate $100 million in a year. Further, UAE’s Abraaj
group funded the company to expand into tier 3 and 4 cities. As the market started expanding,
so did the issues in the operations department of the company (6).
Business Plan:
The company provided services in various areas of the cities and hence adopted the just-in-time
model. They tied up with various small shopkeepers and other local stores for the purchase of
the goods and then delivered them to the customer (7). This helped them save their
expenditure on inventory holding and land. But this model didn’t help their case much as they
delivery time was 2-3 days and on time delivery was becoming a big-time constrain (6). These
factors lead to a reduction in customer retention and posed major challenges to the company.
Updated business Model:
The company started investing huge money in operations to grow and grab a lion’s share of the
market. To cater to a large segment of the consumers, the inventory was expanded to stock the
materials. Goods were being purchased in bulk to increase the profits in the long run. Big
Basket collaborated with ‘DELYVER’ to achieve timely delivery of the products (5). Quality
maters a lot with groceries and in order to achieve the same, a quality measurement scale with
certain parameters was set. The company came up with the idea of ranking the customer and
clustering them according to the time of purchase.
Current scenario:
Today, the firm has more than 20,000 products and 1000 brands associated with them across
26 states. It has achieved a fill rate of 99.98%, on-time delivery rate of 99% and a product in
stoke rate of 96% (5).
Case Study: How Amazon dealt with third party sellers and last mile delivery in India
About:
Amazon Inc. is an American multinational corporation headquartered in Seattle, Washington
that operates in the fields of e-commerce, cloud computing and artificial intelligence. It is the
world’s largest e-commerce marketplace and cloud computing platform. It was founded in 1994
by Jeff Bezos in Seattle. Amazon started its India operations in 2013. Amazon has invested close
to $5 billion in its India operations (8). “Amazon as a company is like a fort, but the fort is (only)
as strong as its moat,” said Akhil Saxena, vice president, customer fulfilment at Amazon India.
“Operations is the moat around the fort.” By operations, Saxena is referring to warehousing
and logistics.
Challenge:
Unlike the American market, regulations do not allow e-commerce companies in India to hold
their own inventory (9). Amazon had to adopt a marketplace strategy where third party sellers
can sell directly on Amazon. But this led to problems of how to verify the quality of products
sent to consumers by third party sellers through Amazon and many sellers had inadequate
resources to sell on Amazon.
Logistics was also a challenge for Amazon since logistics as a percentage of total supply chain
costs rack up to an estimated 12.5% in India, more than 1.5 times what is comparable in
developed economies despite labor costs being lower here (10). Also, in India 67% of the
population lives in rural areas characterized by an underdeveloped infrastructure. Only
about 35% of India’s population is connected to the internet. The address system is also not
standardized (11). All these factors made last mile delivery in many locations in India very
difficult.
Solution:
Amazon countered the challenge of third party sellers by a program called as Fulfilled by
Amazon (FBA). Through FBA a seller uses all of Amazon’s services to sell, store and send a
product to the buyer. About 90% of sellers use FBA and Easy Ship, Amazon’s courier service.
Through FBA, the seller sends its products to an Amazon FC, where they share space with other
brands and Amazon’s private labels. Once ordered, the products are picked up by either
Amazon’s own logistics service or third-party courier companies and sent to the buyers – many
of whom are Prime members, entitled for faster and free delivery. By offering these services,
Amazon India today provides its 2.25 lakh sellers on Amazon an infrastructure that they would
never be able to build on their own (10). Imagine a buyer in Bhopal getting delivery of a fruit
bowl from Bengaluru within three days of the order.
Amazon countered the challenge of last mile delivery by a program unique to India called I have
space (12). In this program people who have a little space can partner with amazon to deliver
goods in their locality. Amazon gives them a bag with the packages in the morning that has to
be delivered within a two to four kilometers radius. No additional investment is needed on their
part, they earn some extra money and Amazon only incurs the cost of getting the packages to
them. They use an app to make the deliveries and Amazon has a system to collect the cash and
any packages that have not been delivered. Even the payments are done online on the first or
second of the month, so for the partners it is a seamless process. The partners are familiar with
the addresses and can make deliveries more efficiently.
Due to these measures Amazon India now has customers in 100 per cent serviceable pin-codes
in the country and is shipping packages from more than 50 fulfillment centers in 13 states (13).
It is expected to touch a GMV of $11.2 billion this fiscal year and is the fastest growing e-
commerce company in India (14).
Case Study: Flipkart enhances customer experience and revenue with major decisions in
operations
About:
Flipkart Pvt. Ltd, headquartered in Bangalore is one of India’s well established e-commerce
platforms. Founded by Sachin Bansal and Binny Bansal in 2007, the ownership has moved into
the hands of Walmart, a global player in e-business when the latter acquired a 77% controlling
stake in Flipkart in 2018.
The operations wing of the company has four main areas under it, namely, procurement,
warehouse, logistics and customer support. The procurement takes place at two levels, centre
and regional and the former monitors the statistics of the latter (15)) . Flipkart has 7 major
warehouses in and over 500 distribution centres in India. Its warehouse management system
consists of 3 stages namely, inward processing, storage management and outward processing.
The inventory is replenished once a product goes below the reorder point and the supply to the
warehouses is based on a first-in first out basis (15).
Challenge:
Flipkart and most other e-commerce firms are yet to gain profits in India where their focus has
been on widening the customer base. There is always constant pressure from the investors who
have pumped billions of dollars into the firm, just banking on the Indian market (16).
In 2016, Flipkart had to not only reduce their loss but also ensure that the customer base was
expanding. Operations experts say that around 60% of the supply chain costs that e-commerce
companies incur is due to storage and inventory while 25% of it accounts for warehouse
management. Technology was not widely used and processes such as scanning, categorizing,
documenting, etc. were being done manually which resulted in reduced accuracy (17)
Solution:
Flipkart approached the problem with patience and made amendments to the different
processes involved in the lead time of a product. The first change brought in the form of
reduction of service level agreement (SLA) procurement to two days. The usual duration was 6-
7 days and Flipkart wanted to implement this after an analysis that showed that sales would
increase greatly if orders are delivered on time. Flipkart decided to cancel the SLAs that
couldn’t meet its demands. This meant that the just-in-time sellers had to forecast and
manufacture their goods in advance (18). Flipkart went on to achieve 100 million registered
customers on its platform later that year which constituted for 63% of India’s population that
had broadband connectivity (19).
Later that year, in a bid to cut operational costs by 30%, Flipkart started merging departments
and hiring lesser individuals. The engineering department of Ekart and the advertising and
ecommerce units were merged as one while independent categories such as furniture, home
decor and kitchen appliances were merged as home. The company also merged the
procurement departments of media, warehouse, IT and supplies. Flipkart tightened its product
return policy by reducing the duration from 30 to 10 days while it also made plans to bring in
automation in its warehouses. The firm moved to alternative delivery methods with Ekart
setting up common pick up points. They partnered with 280 outlets of Apollo pharmacy from
which customers could pick their goods up. Flipkart’s revenue doubled in two years as it
touched the 30000 crore mark in 2018 against its 15000 crore revenue in 2016 (20).
In March 2019, Flipkart implemented its plan to bring in automation in warehouses as
Automated Guided Vehicles (AGVs) called cobots were introduced its Soukya sortation centre in
Bengaluru (21). An automated inventory management system called The Butler system was also
introduced to enable automatic, storage, replacement and order picking facilities. The products
procured are checked for errors and stacked in huge racks from where they are transferred to
city wise sections when orders are placed. The cobots read encoded information on the
packages placed on them and transfer them to the different pin code hubs within the facility.
They are capable of processing 4500 orders in an hour as opposed to 500 by humans and this
can be scaled up by 5 times with minimal changes. The current manpower employed is being
upskilled for higher value adding tasks (22).
The system which has a life span of 10-15 years is expected to gain its return on investment in 3
years. Smaller companies such as DTDC, Myntra and Jabong which adopted this system grew
300% year-on-year during their time of existence and Flipkart which has established itself very
well is expected to leverage its cobots to the fullest and grow its profits.
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