DEPARTMENT OF BUSINESS ADMINISTRATION

UNIVERSITY OF LUCKNOW

ECOMMERCE
PROJECT ON

SUBMITTED TO PROF.SANJAY MEDHAVI

SUMITTED BY: MOHD.FRAZ FAROOQUI KARISHMA

Contents
1. 1.1. 1.2. 2. 3. 3.1. 3.2. 3.3. 3.4. 4. 4.1. 4.2. 4.3. 4.3.1. 4.3.2. 4.4. 5. 6. 7. 8. INTRODUCTION Objectives Limitations RESEARCH METHODOLOGY COMPANY PROFILE Key players Growth Internal structure Supply chain MARKET ANALYSIS Overview Key drivers Consumer analysis Demographics Psychographics Competitor analysis SWOT ANALYSIS RECOMMENDATION CONCLUSION BIBLIOGRAPHY 5 5 6 6 6 7 8 8 9 9 9 10 11 12 12 13 15 17 17 17

List of Figures
1. 2. 3. Fashion and You Supply Chain FNY Customer Psychographics SWOT Analysis 9 13 15

Acknowledgement
Hereby I express my gratitude for the assistance and valuable guidance provided by my Mentor Mr. Sanjay Medhavi also towards my entire faculty member who helped me in understanding the module and applying the learnt knowledge in the project. I am highly indebted and thankful to Divam Jain at Fashion and You for his guidance and providing for necessary information regarding the project & also for his support in completing the project. My thanks and appreciations also go to my fellow classmates in developing the project and people who have willingly helped me out with their abilities. Mohd .Fraz Farooqui Karishma

1. Introduction Consumers these days are very aware as compared to a couple of decades ago. The easy availability of information on products and competitors, impact of technology on retail has made shopping more comfortable for the consumer. Filling in a few details and a couple of clicks is what it takes to shop these days. The impact of World Wide Web is tremendous in e-commerce. Kotler et al describe E-Commerce as companies or sites that offer to transact or facilitate the selling of products and services online. They further categorize e-businesses into two types: Pure click companies and Brick and Click Companies. Pure click companies are those which have launched a website without any previous existence as a firm (Fashionandyou.com &Myntra.com) and brick and click companies are existing companies that have added an online site for information or online selling (Futurebazaar.com, shoppersstop.com). The scope of online retailing is also tremendous. According to an American Research firm, Forrester, both US and European online retail will grow at a 10 percent compound annual growth rate from 2010 to 2015, reaching $279 billion and 134 billion, respectively, in 2015. Similarly, ASSOCHAM (Associated Chambers of Commerce and Industry of India) believes that Indian online retail industry could grow to Rs. 7000 crore by 2015. The current Indian Online Retail market stands at Rs. 2000 crore growing at an annual rate of 35 percent. Online Retail prospects both nationally and globally seem bright and one firm taking proper advantage of this fact is Fashion and You, hereafter FNY an online fashion retailer. 1.1 Objectives of the Study The purpose of research is to understand the online apparel retail market in India and further comparing it with the concerned company Fashion and You. For the same purpose, a key learning into the current market scenario is very important finding out who the consumers and competitors are. Studying the consumers is important because to study a company, one must know what the consumer wants, who the consumer really is and why does the consumer react the way he does. Studying the competition is equally important because companies react to decision made by their rivals attack or defend. 1. To gain familiarity with a phenomenon of online apparel retail 5

and achieve new insights into it 2. To portray accurately the characteristics of this phenomenon market, consumer, company, competitor analysis 3. To determine the concerned companys strengths & weaknesses and to see if any opportunities or threats exist. 1.2 Limitations of the Study The market for online apparel retail in India is very new compared to other developed and developing countries. Therefore, there is not enough data available about the market, the players, share, etc in full detail. Also, companies are very secretive about certain matters such as the supply chain and do not easily disclose this information. Further research needs to be done in this area to make these things more clear. 2. Research Methodology As this research is not conclusive (no hypothesis developed), is casual and the problem is not clearly defined (nothing to prove as no hypothesis is constructed), the research is an exploratory research. Most of research is based on secondary data reports and press releases and from an interview. For the interview, no questionnaire was prepared as it was a telephonic conversation. 3. Company Profile Fashion and You is a by invitation-only private sales club, which partners with high fashion and luxury brands across fashion apparel, designer wear, accessories, footwear, watches, jewelry, fragrances, kids, home dcor, and holds private sales events for these brands on www.fashionandyou.com at prices up to 80% off. FNY has over 400 partner brands such as dunhill, Calvin Klein Jeans, Gucci, Dolce & Gabana, Escada, Guess, Blackberry, Ed Hardy, Ritu Kumar Manish Arora and Tarun Tahiliani. Fashion and You is a pure click company formed in early 2010 by Pearl Uppal (Ex Sales Director, Yahoo India) and Harish Bahl. Pearl Uppal, former Director, Sales, Yahoo India is Fashion and Yous Co-founder & CEO. CEO Pearl Uppal is an internet industry veteran and has extensive experience at companies such as Yahoo, Rediff and GE. She Graduated from IIT Delhi and is also a gold medalist from Delhi College of Engineering. Harish Bahl is the Indian Investor, Co-Founder and Chariman of FNY. Harish is the founder CEO of Smile Interactive and has incubated and grown several successful leading online businesses like Quasar (WPP Digital & Smile JV), Tyroo (Smile & Yahoo JV), Zoomtra and Zumtra. 6

He is also the chairman of the Digital Agencies Committee of the Internet and Mobile Association of India. Rahul Narverkar is Fashion and Yous Director of Sourcing who prior to joining Fashion and You, was the Senior General Manager, DLF Retail Developers. Narverkar has over 15 years of experience in retail and media. The website company is owned by Goldsquare Sales India Private Limited. Since its inception, fashionandyou.com has been growing at a tremendous pace. Fashionandyou.com employs more than 450 people spread across offices and distribution centers in Gurgaon, Mumbai & Bangalore. Fashion and You reason of success is its hugely experienced team and its early mover advantage. The website was operational in November 2009 and was offered only to a few people who kept on inviting others. Fashion and You are following in the footsteps of Googles Gmail that was also offered to consumers by invitation only. Of course Gmail then was offering a 1 GB inbox when others were only offering 4MB so the whole invitation only concept makes sense. With Fashion and You, the invitation only concept also seems relevant because they have a very unique selling model sales events, something that the Indian consumer has not witnessed yet. The ideology seems to be working as currently, Fashion and You has over 2.7 million registered users and are the countrys most well funded e-commerce website. Fashion and You raised $40 million (Rs 201 crore) from a group of investors led by Norwest Venture Partners and Intel Capital in 2011. This is touted to be the highest investment in e-commerce space in the country. For the company, it was the third round of investment -- and also saw participation from Sequoia Capital India and Nokia Growth Partners. Fashion and You raised its first round of funding during its inception from European and Indian private investors. In the second round, it raised $8 million from Sequoia Capital India in December 2010. 3.1 Key Players Norwest Venture Partners (NVP) is a global venture and growth equity investment firm that manages more than USD 3.7 billion in capital. Intel Capital, Intel's global investment organization makes equity investments in innovative technology start-ups and companies worldwide. Intel Capital has currently invested more than US$10.2 billion in over 1,165 companies in 51 countries. Nokia Growth Partners (NGP) is the premier venture investor focused on growth stage companies in the mobile industry. With 7

$350M under management, NGP invests in companies and people that are changing the global face of mobility, communications and the Internet. Sequoia Capital currently manages US $1.4 billion and invests across venture, growth and late stage opportunities in India. It takes a long term view on investments and plays the role of an active, value added partner to entrepreneurs, business families and management teams. Smile Group is India's largest privately held group of ventures focused on the digital industry with extensive holdings in digital media, e-commerce infrastructure. Its founder & CEO, Harish Bahl is a serial entrepreneur and has several successful ventures to his credit with large global players like WPP (Quasar), Yahoo! (Tyroo) and ScanGroup (sQuad). 3.2 Growth In an interview in early 2011, CEO Pearl Uppal was asked what the five year plans for FNY were. She said she wanted FNY to be the global leader in online apparel retail and wanted to be responsible for the 10% of sales for major apparel brands. Presently, the company is growing at tremendous pace. According to a report by the company itself, within 15 months, the company had over 1.8 million member. Every 6 minutes they have a new member registered. They are working with over 400 brands and have an outreach in over 550 cities. They started selling apparel products but are now selling even consumer appliances and lifestyle products such as bed linens etc. They also have more than 11,00,000 page views per day with 75,000 members logging on everyday at exact 11AM (start time of a sales event). FNY has been growing at a rate of 35% since its inception. 3.3 Internal Structure Functioning FNY has an employee base of 250 employees working in different departments FNY has four major departments Marketing, Sourcing, Supply Chain and CRM. The companys Headquarters lie in Gurgaon while its sourcing offices are in Gurgaon and Bangalore and Mumbai. Decision making in FNY is centralized which means all departments and offices report directly to the HQ and receive orders from there. As mentioned earlier, CEO of the company is Pearl Uppal, Chairman is Harish Bahl and Director for Sourcing is Rahul Narverkar. In-depth information about the role of each department and office is not available easily therefore not mentioned. 8

3.4 Supply Chain Management Similar to topic 3.3, FNYs supply chain remains a mystery as the company is very secretive about it. However, in a company report for the suppliers and prospective suppliers, hints about its supply chain are provided. As the company is not into manufacturing and only into retailing, its suppliers are the brands itself. FNYs Supply Chain (SC) is an 7 step process. In its first step, FNY signs an agreement with the supplier the brand for sale of its product. After this, an e-catalogue is produced in FNYs in house studio. If the catalogue is approved by the reviewers, promotions to all members via Email/SMS and social media are delivered about the sales event. Then, the sales event is launched at 11AM and lasts for 3 straight days. At the end of the sales event, the company tallies up all orders and a purchase order is issued and sent to the supplier. The supplier then sends the products ordered and these are delivered directly to FNYs processing unit where they are sorted and packed in FNYs packaging. After the product is prepared, it is send to the customer the products final destination.

Figure 1: FNY Supply Chain

4. Market Analysis 4.1 Overview Online retail is catching up its pace slowly but the future seems promising as many offline retailers are eying to hop on online platform to ensure sale over the internet. At the same time retailers are also looking online medium as an integration of their offline presence. It was the Future groups foray into online retail in 2007 that started the trend, though Fabmall was the first online retailer in India (it set up an online shop in the late 1990s). Shoppers Stop followed by its etailing venture in late 2008 and so did the Anil Ambani-owned ADAG

group, which launched RelianceMoneyMall.com the same year. The overall scene of online retail is getting better and better every year. The Internet and Mobile Association of India (IAMAI) has pegged the e-commerce market in India at Rs 9,210 crore. A report released by the industry body ASSOCHAM said that the online retail industry could grow to 7000 crore by 2015. Furthermore, ASSOCHAM states that booming economy and rising disposable incomes have contributed to the evolution of online shopping. The current market size stands at 2000 crore and is growing at an annual rate of 35%, with growing internet penetration and access to high speed internet on multiple low cost devices India is set to have the third largest group of Internet users after US and China in the next 2 years. Research Firm Forrester estimates that both US and European online retail (representing 17 Western European nations) will grow at a 10 percent compound annual growth rate from 2010 to 2015, reaching $279 billion and 134 billion, respectively, in 2015. Furthermore, growth will be driven in both regions by new business models such as flash sales and group buying, as well as improved merchandising to provide a broad selection of products available online. 4.2 Key drivers for online retail in India: Internet and PC penetration (6.05% - High speed internet connections and high performance PCs and Laptops available to consumers at reasonable prices) Indias middle-class is escalating, with growing purchasing power and limited personal time 288 million people. Increasing usage of credit cards (18.3 million) and debit cards (181.4 million) coupled with a growing young population (315 million) who spend significant time online (21 hours per week). Convenience of online product research, comparison shopping and competitive pricing Mounting prices of merchandises escalating fuel prices (petrol @ Rs.67/liter) and at the same time online retailers are offering merchandises on discounted rate and extreme climatic condition especially unbearable summer heat across the India. Increasing demand from tier two and three cities Social networking sites are very much influencing in driving online retail in India. Many retailers are using it as a potent tool to get marketing and sales leverage India retail is witnessing the growth in online retail and online retailers are trying to experiment by inculcating new and fresh strategies to edge out others. Different modes of selling daily sales, sales events, etc. 10

Online Retailers offer in-trend products at heavily discounted prices. Free and Next or Same day delivery. Free gifts with purchases or a lucky draw system. COD or Cash on Delivery is offered by a few websites and this concept is quite popular amongst consumers from Tier 2 and Tier 3 cities.

4.3 Consumer Analysis The Indian consumer market has never had it better. Higher disposable incomes, the development of modern urban lifestyles and an increase in consumer awareness have affected buyer behavior in cities, towns and even rural areas. According to a 2007 report by McKinsey & Co., India is set to grow into the fifth largest consumer market in the world by 2025. Buying power has also expanded to new consumer segments be it the youth or the urban woman. The vast rural hinterland of India is beckoning and the sheer numbers make it impossible to ignore. In this scenario, creating consumer loyalty is now a whole new challenge. The Indian consumer story is one that has caught the attention of the rest of the world. Rising incomes in the hands of a young population, a growing economy, expansion in the availability of products and services and easy avail- ability of credit all of this has given rise to new consumer segments and a rising acceptability of debt. While consumerism has seen a gradual build-up, what is certain today is that there has been a genuine uptake in consumption. Whether it is mobile phones, credit cards, apparel or organized retail, people clearly seem to be spending more and the consumer seems to be everywhere, whether it be the large metros, the emerging new cities, the small towns and even rural India. The Indian consumer is not just in big cities and metros these days. Due to the widespread availability of Internet, people in the most remote of places in the country can purchase products online. Online retailers are offering products to consumers in these areas. According to a report by ASSOCHAM, 35-40% of online purchases are made in tier 2 and tier 3 cities. A young population of 288 million and a below 18 population of 310 million means that for most online retailers, this is the target market the influencers. These days, decisions such as buying a refrigerator is not just the parents but the 5 year old childs opinion is also heard. High disposable income in the hands of the young and growing trend of credit has made these impulsive people shop more online. Also, the

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fact that they want their product now and customized has increased the demand for online retail. 4.3.1. FNY Customer Demographics According to a report released internally by FNY, these are some of the consumer Demographics: 52% of FNYs shoppers are female, 48% male Amongst the 52% female, 53% are between the ages 25-35, 32% between ages 18-25, 14% are above 35 years and 1% are below 18. Amongst the 48% male shoppers, 42% of the shoppers are above 35 years of age, 34% lie between ages 25-35, 23% between ages 18-25 and 1% of them is below 18 years of age. Apart from big cities, FNY shoppers are also found in tier 2 & tier 3 cities. However, 39% of the shoppers are from Delhi/NCR, 19% from Mumbai, 13% from Bangalore, 6% from Hyderabad, 4% from Pune, 4% from Chennai and 15% of the shoppers are from over 300 other cities across India. 4.3.2. FNY Customer Psychographics According to a report released internally by FNY, these are some of the consumer Psychographics: FNY believe their female shoppers to be highly ambitious, have a large social network, are financially independent and sound but dont have much shopping time therefore prefer to shop online, between 25-35 years of age, would shop from designers such as Versace, Coach, etc, listen to music by Coldplay, Dido and Rihanna and watch TV serials Sex and the City and How I Met Your Mother. They also believe their Male shoppers are ferociously ambitious, like to experiment with their style, also have a large social network and are financially sound, are self-made hard workers, between the ages 25 35, well educated, would shop for products by designers like Armani and Ferragamo and also like casual weal like Abercrombie and Fitch, watch Bond movies and are sports enthusiasts.

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Figure 2: FNY Customer Psychographics

4.4 Competitor Analysis Nationally, FashionandYou.com faces stiff competition from a lot of established and emerging online apparel retailers such as Myntra.com, Exclusively.in, shoppersstop.com, bestylish.com and futurebazaar.com. Online Apparel Retailers are a mix of both pureclick and brick-and-click companies. A brief analysis of a few of FashionandYou.com competitors is shown below: I. www.myntra.com - Myntra was started by a group of IIT/IIM graduates in early 2007 and is headquartered in Bangalore with regional offices in New Delhi, Mumbai and Chennai. What started off as B2B setup has ventured into quite many apparel product categories such as casual wear, formal wear and even ethnic wear for consumer. Their product repertoire includes merchandise from some of the worlds most popular brands and spans across all categories from clothes to shoes to accessories. Providing access to the best domestic and international brands to people outside the reaches of metropolitan and mall culture, the online shopping portal is today one of Indias leading players in the online fashion industry and seeks to expand their customer base even further with a advertisement campaign (bestmediainfo.com). In terms of funding, Myntra.com received a first round of investment of $5 Million in 2008 from NEA IndoUS, IDG Ventures and Accel Partners for geographical and 13

II.

III.

IV.

V.

portfolio expansion. In a second round of investments, private equity firm Tiger Global and IDG Ventures and Indo-US Venture Partners invested a further $14 Million in the business in 2011. These investments have made Myntra.com one of the most well funded E-commerce companies in the country. According to a report by exchange4media.com, Myntra.com had rolled out its first television commercial in July-August, which was a brand awareness campaign. The latest campaign Ramp it up is targeted at potential customers focusing on how high fashion feel is for anyone who believes in good fashion. www.99labels.com: 99labels.com is a members-only, flash sale site offering luxury brands in fashion apparel, lifestyle products, accessories and footwear, watches, jewelry, fragrances and home dcor. It offers up to 90 per cent discounts on branded merchandise. In May, 2011 Info Edge Ltd invested $3.5 million in the concern for an undisclosed share. Info Edge runs the recruitment website Naukri.com, Matrimonial website Jeevansaathi.com and Real estate portal 99acres.com. The funds provided by Info Edge to 99labels.com will be used to increase the number of international brands on the website as well as invest in ERP (enterprise resource planning) and CRM (customer relationship management) systems. www.exclusively.in: A mere six months after raising $2.8 million from Accel and Helion (2010), exclusively.in is backed by another private equity firm Tiger Global who have invested a staggering $16 milling in the business. Founded in 2010, Exclusively.in offers a variety of products including jewelry, handbags, crafts, paintings and wedding attire. It is primarily targeted at NRIs and has been catering solely to the USA market so far but now has plans to roll out to various new markets in 2011 including UK. Exclusively.in announced its official launch into the UK market, which is a large consumer market for Indian fashion. By the end of December 2011, Exclusively.in will reach 15 markets including India. www.shoppersstop.com: A brick and click company, which sells all, typed of consumer products from apparels to electrical appliances etc. For an Indian customer, shoppers stop is no alien. Been in the market for over a decade now as a brick and mortar retailer, shoppers stop ventured into online retail in 2007. www.futurebazaar.com: the Company that owns Pantaloon India entered the online marketplace around the same time as Shoppers Stop. 14

5. SWOT Analysis

Figure 3: SWOT Analysis

5.1 Strengths Very Well Funded ($48 million) As mentioned earlier, FNY is one of the most well funded online retailer in the country. Early Mover Advantage the fact that FNY set up shop in 2010 and gained tremendous pace in a short span of time while others were still in their infant phase attracted a lot of interest from investors and generated a lot of interest amongst consumers. Board with a lot of experience in the area Their CEO, Chairman and Director for Sourcing are all well established and know in the industry. Excellent investors to add more experience in the pot - FNYs list of investors incorporates both Indian and foreign investors who have invested in some of the worlds most famous companies. Their expertise can be of great value to FNY 5.2 Weaknesses Website not as easy to operate as others like yebhi.com Yebhi has a very easy and user-friendly category list and search program. 15

Consumer doubts over authenticity of products Slow deliveries FNYs supply chain has a bit of a flaw where they can never be sure of how many products are available with the supplier as the Purchase Orders is issued after the sale event ends. List of products not very well defined FNYs category does not Not enough TVC Like Myntra.com, FNY does not involve in a lot of Television Commercials. 5.3 Opportunities Entry into neighboring countries Entering or launching their web-site in Bangladesh, Sri Lanka, Pakistan, Nepal and Bhutan to attract more customers. Mobile Application use of internet on mobile phones increasing drastically and FNY can really benefit from a mobile application which allows customers to purchase products from their mobile devices. Global Presence Entering more countries around the world will be a good idea as their business model of sales events is very unique. Indian Handicrafts India has a massive handicrafts industry and there is a strong demand for it. Selling handicrafts on their websites can be a good opportunity. Different Website Versions FNY can have different website versions for different states or regions of the country catering to the local market by selling local products. For example, FNY can focus more on Gujrati products to a person from Gujrat. 5.4 Threats Amazon.coms entry into the Indian Market in early 2012 Amazon.com the worlds largest online retailer announced its plans of entering the Indian online market in early 2011.This entry will happen in 2012 and is a major threat to FNY as Amazon have a global reputation and are a global leader in all product categories. Rival websites getting equal interest from investors As mentioned above, many pure click companies are receiving heavy investments from both national and international investors. This can be a major threat to FNY. Rival websites advertising heavily Myntra.com new campaign of Television Commercials is swooping the Indian Commercial space Indian customer still not confident enough to shop online Indian citizens are still wary of online retailers disclosing confidential information such as credit card details. They are 16

also not confident in the quality of a product ordered through electronic channels as they still believe in touch and feel. 6. Recommendation From the SWOT analysis, a lot of recommendations come in mind for FNY. It is a young and growing company and has a lot of ground to cover before it becomes one of the biggest players in the market. The area that FNY should be most concerned about is their supply chain. Purchase orders are issued only after the sales events are over. In FNYs case this is hazardous. Incase, there is a shortfall in supply, FNY cannot deliver the product to the customer and will have to cancel that order. This leaves the customer angry and he loses faith in the company. What FNY needs to do is to buy products from suppliers in bulk, store them in their warehouses and then set up a sales event. This way they have complete track of how many products have been ordered and how many remain. The fact that FNY sends a PO after the sales event is over has led to a lot of cancellations and has also left many customers disheartened. This process also delays delivery time as through this process, deliveries are made after 3-4 weeks. Most online retailers globally deliver within a week. If FNY buys products before hand and stores them, they can take care of both these situations at once. 7. Conclusion The future for both FNY and the online apparel retail market in India seems very bright indeed. With more and more websites coming up everyday and attracting an equal amount of investment from the world over, its only fair to say that the scope for online retailing in India is pretty good, as long as this good phase in the market isnt like the dot com bubble. However, more and proper research needs to go in this area in the Indian context to get fair and accurate results.

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8. Bibliography 1. Dishman, L. (2011, 05 13). Lifestyle. Retrieved 12 02, 2011, from Forbes: http://www.forbes.com/sites/lydiadishman/2011/05/13/exclu sively-in-targets-200b-indian-wedding-market-with-new-onlineboutique/ 2. Jha, P. (2011, 05 27). Venture Capital . Retrieved 12 02, 2011, from VCCircle:

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http://www.vccircle.com/500/news/exclusivelyin-raises-16min-series-b-led-by-tiger-global 3. Team, T. (2011, 05 11). Venture Capital. Retrieved 12 02, 2011, from VCCircle: http://www.vccircle.com/500/news/fashionretail-site-99labelscom-raises-35m-from-info-edge 4. Rai, A. (2011, 07 19). Private Equity. Retrieved 12 02, 2011, from The Economic Times: http://articles.economictimes.indiatimes.com/2011-0719/news/29791081_1_online-retailers-e-retail-private-equity 5. Porush. (2009, 07 31). India's Online Retail Saga - A Review. Retrieved 12 02, 2011, from Watblog: http://www.watblog.com/2009/07/31/indias-online-retailsaga-a-review/

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