Retail
Chronicles Monthly Newsletter | Volume 5 | Issue 5 | August 2020Â
CONTENTS
03
RISE OF OTT PLATFORMS IN INDIA Indian OTT market to reach $5 billion in size by 2023 as per the latest report by BCG titled ‘Entertainment Goes Online’
07
STARTUPS - THE NEXT BIG THING IN INDIAN ECONOMY India has the 3rd largest startup ecosystem in the world with about 50,000 startups in India in 2018;
11
RETAIL INDUSTRY IN INDIA Currently, India’s retail industry makes up 10% of its GDP and about 8% of its employment
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GROWTH OF OTT: A CHANGING LANDSCAPE The low cost affordable revolutionised consumption in
of mobile data and smartphones have overall video content India
WRITERS Ankit Singh | Rishabh Lakhani | Vishwas Chaturvedi | Shubham Bhandari
DESIGN TEAM Pushpak Holani | Ayush Goyal | Shikhar Gupta | Jeet Doshi
EDITING TEAM Abhishek Wakode
RISE OF OTT PLATFORMS IN INDIA - ANKIT SINGH MBA RM
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August, 2020
In India, almost 15 years ago when Internet was more of a luxury than necessity, if someone had told us that 10 to 12 years down the timeline, we would be watching movies and TV over the internet we would have laughed at him. But, the rise in technology, increased reach of mobile networks to remote locations, and the introduction of 4G has turned the table for sure. Today, India is not only the country with cheapest data plans but also it is the highest data consuming country as well.
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With the rise of internet over the past few years, there is a new sector which has grown rapidly, i.e. The OTT platforms. An Over-The-Top (OTT) platform provides an application-based service that streams content directly on the user’s device connected to the internet without going to traditional distributors. Today, we not only have international players like Netflix, Amazon Prime but also the Indian players like Hotstar (now Disney+Hotstar), Voot, SonyLIV etc. are gaining significant market share.
August, 2020
Introduction of these platforms have not only allowed Indian users to explore diverse contents around the world, but users can also explore native contents from different parts of the country. Irrespective of the variety of the international content, there have been numerous Indian original contents which are in the spotlight for a long time. Even though most them are based around crime, horror and thriller, and lot of people may find them dark, but the success of Netflix’s “Sacred Game”, “Ghoul”, “Typewriter”; Amazon’s “Mirzapur”, “Breathe”, “Pataal Lok”, “The Family Man”; Hotstar’s “Criminal Justice”, “Special Ops”; Voot’s “Asur” is unprecedented It is not that people prefer only the thriller genre. There are many examples to show that Indian viewers are always up for experimenting. For e.g. TVF’s “Permanent Roommates”, “Tripling” and “Panchayat” with Amazon, Zee5’s “Chintu ka Birthday” and who can forget the fresh season of “Sarabhai vs Sarabhai”. The breakout of Covid-19 and the imposition of Lockdown saw a huge surge in the subscription base of these platforms. According to Forbes, Indian players like Zee5, Voot, AltBalaji saw upto 80% rise in their user base. Due to the shutdown of cinemas, many movie releases which were earlier put on hold, have now moved towards direct OTT release. Movies like “Gulabo Sitabo”, “Shakuntala Devi”, and “Dil Bechara” are a few examples of the same.
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August, 2020
OTT platforms have been in existence for several years now and, there has been a continuous growth in their user base. The cheap & continuous availability of internet, with ongoing lockdown from past 5 months, has made the curve a little steeper. According to Startup Stories, video OTT revenue was around ₹2000 Cr. in 2017, and is expected to be around ₹6000 Cr. by 2022. Indian OTT market is expected to be among the top 10 by 2022.
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This lockdown may have been exhausting for everyone but, it has also tapped onto the unexpected rise of the OTT platforms, and it wouldn’t be wrong to say that it is the blessing in the disguise.
August, 2020
STARTUPS - The next big thing in Indian Economy -RISHABH LAKHANI MBA RM
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August, 2020
WHAT ACTUALLY ARE THE STARTUPS AND DOES INDIA NEED THEM FOR ITS ECONOMIC DEVELOPMENT? Startup is an organization which is in its nascent age of operation initially financed by its entrepreneurial founder who believes that there exists a demand for their product and they can capitalize on it. But due to the uncertain nature of their products, limited revenues and high costs in the long run it becomes unsustainable without some external funding. With all these uncertainty and risks involved India still need them for its economic augmentation. India enjoys a demographic dividend of 112 million young individual who fall in the age bracket of 20 -24 years. And keeping in the mind the needs of its young generation India needs almost
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10 million new jobs a year. Since all of these jobs can’t come from traditional sources, we require new avenues to look up for jobs. There comes the role of startups. Startups act as the hub for entrepreneurial efficiency, innovation and harbinger of cutting-edge technology and are disruptive in nature. They bring the competitive dynamics to the economy and make sure the economy stays healthy and diligent. They create more jobs and bring the most efficient business process to the table. There is direct impact on the cities they operate in and bring a lot of additional small business and jobs in the home city. Bangalore got transformed after Narayan Murthy founded Infosys there and today Bangalore is tech hub of India and one of the biggest employment generating city of India.
August, 2020
As India gear up to become $5 trillion economy by 2025 startups have to play a bigger role. As of accounting year 2018 -19, India’s nominal GDP was $2.7 trillion. To reach the $5 Trillion mark by 2025, India needs to grow at a compound annual growth rate of 10.8% from here on. Given the current scenario, the pandemic undoing years of work and with lowest level of production there is no rational to assume that we will be able to achieve our target. Our only hope is the startup economy and innovation. The world is looking over a new dawn of the economic development where physical labor and assets utilize knowledge and innovation to augment goods and services. Keeping the optimistic outlook, it is the startup ecosystem that will bring the new ideas and steer India in the post pandemic world.
“India will be home to 10,500 startups by 2020” These startups are catering consumers with food delivery, clothing, ecommerce, entertainment, cab services, insurance, investments, medical checkups and with whatever one can imagine. Involved with multiple industries and leveraging innovation and technology Indian startups are disrupting numerous industries ranging from retail to healthcare and they are not only expanding in Indian subcontinent but also abroad and are becoming global brands. Indian startup Ola has expanded its activities to other countries including Australia, New Zealand, and the UK. Thanks to country’s unmatched demography India has 33+ startups that have already reached valuation of over and above $1 billion and almost 39000+ small to micro startups. This ecosystem has created more than 7,50,000 jobs and yielded 500+ acquisitions. Projection indicates that by 2025 startups will employee 3.25+ million individuals and produce 100+ unicorns with a total market value of $500+ billions.
With the state intervention and support, India has the third largest base of startups. India has a startup base ranging from educational tech startups (EdTech) to healthcare startups. As per NASSCOM,
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August, 2020
The startup sector is stressed for survival at the moment. The investment sentiment is also subdued and is expected to remain so in the coming months. Lack of working capital and cash flows may lead to major layoffs over the next 3-6 months by startups. The startup sector should be viewed as a propellant for the country's growth and a contributor to India's vision of being Aatmanirbhar.
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Startups have a huge potential to innovate. However, in the current times, startup companies are reeling under huge pressure owing to a lack of working capital. The government and industry needs to reach out to support them through funding and business opportunities. Investors must play an important role to provide the Indian startups funding, mentoring, and hand holding support to stay afloat and come out at the other end of this crisis.
August, 2020
Retail Industry in India - Vishwas Chaturvedi MBA RM
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August, 2020
INTRODUCTION Since our childhood, anything that has been taught to us, the first step is always setting up a context & then moving forward. Let us also follow the same process to grab a better understanding of retailing. As long as the people have existed, there has been a selling/buying or bartering of consumable goods/resources. For example- the exchange of cows and sheep for milk or wool respectively. We can go as far back as 800 BCE when the ancient Greek people set up markets to sell their merchandise. Cut to the present times, we have got retail giants like Walmart and IKEA. So, what exactly is retail? In a layman’s explanation, it is the selling of various goods & services to customers to make a profit out of it. The operating channel might be different but the core concept remains the same. Retail Chronicles | Page 12
The figures too witness the same with retail contributing a mammoth 10% to the GDP and an estimated $600 billion market employing approximately 3.5 crore Indians. Such promising figures should spark a curiosity to explore more of this sector. So let’s dive right into it. With 50% of our population under 25 years and 65% of our population under 35 years, we are currently blessed with one of the largest workforces which contributes largely to our economy. With organized retail growing at close to 20%, 50 retail organizations placed themselves in FORTUNE 500, of Indian consumers due to the increasing disposable income of the middle class- retail industry is bound to witness an upward graph.
August, 2020
OPPORTUNITIES The transformation that has been witnessed by the Retail Industry in India over the past few decade is dramatic. Gone are the days when the manufacturer was more confident to sell more by just ensuring more availability of that product with him. It is more than that now. Retailing today isn't just selling a good but also making a long-lasting relationship with the customer, building a loyal customer base & also selling an aspiration in addition to a product. Let us have a look at the opportunities. 1.Rural Market – India is a very diverse country. The consumption pattern of urban centers is very different from that of the rural ones. But if we can gauge the right buying pattern & products, the largely untapped rural market can prove to be very profitable. Retail Chronicles | Page 13
2.CONTRACT FARMING – Specific to the agriculture sector, today the retail marketers purchase directly from farmers, thus reducing middlemen & providing proper cost to farmers and also set the proper price for consumers. Not just this, but they also make a contract with farmers to get a proper amount of crops. 3.Urbanization – With the passing away of time, joint families going off trend & coming of a new form i.e. nuclear family. Add to this the increasing urbanization. Thus, the income level has increased because both members have started earning. This has also resulted in the genesis of organized retailing. 4.EMPLOYMENT – Based on the facts presented above, Retail marketing is one of the largest employment generating industries providing jobs to almost 3% or 3.5 crores of the Indian population August, 2020
CHALLENGES A decade ago, an average Indian would buy only the are necessities & focus on saving the rest of his income. But the dynamics have changed now. With higher purchasing power, a higher standard of living, and a large number of young population that is ready to spend more on apparel,electronics(thanks to the western culture of shopping & commercial marketing on TV, internet), we have come a long way.
1. Electricity - A high volume of electricity is required for purposes like ACs, escalators, Billing Systems, etc to keep maintaining and running the big retail outlets. But electricity is a huge issue in India with frequent power cuts deemed as normal. And with retail outlets coming under commercial systems, the power tariff is also high for such outlets. Thus the businesses invest in huge generators systems as back up & see reduced profit margins. 2. Rising competitiveness - The numerous players coming in the market, try to sell their goods/products at a lower cost by offering various lucrative schemes to attract customers. Thus, there's a reduction in the profits & a difficulty to make a loyal customer base.
But every opportunity comes with its set of challenges & Indian Retail is no exception. This sector is still developing & needs improvement to compete with other countries. Various obstacles need to be overcome. Let's shed some light on the predominant ones. 3. Infrastructure – India has been working constantly in alleviating this issue, but it’s still visible. Post Globalization, it has become more compelling for countries to build efficient transport & infrastructure to meet world standards. In the retail sector's context, India needs to work on this by building more storage plants, warehouses & timely distribution of products. Retail Chronicles | Page 14
August, 2020
Due to the highly unorganized structure of the retail sector in India, people in rural areas travel long distances to procure supplies & find it difficult to increase their profit margins & also miss out the consumer understanding. After studying this genuine problem, Prasanna Kumar, Mahesh Bhat, Rajasekhar, and Amith S Mali started VilCart in 2018.
A B2B e-commerce startup, that wishes to alleviate such problems in rural areas through the use of technology, supply chain & logistics facilities, started its operation in just one district of Karnataka is now catering to the needs of over 5000 Kirana stores in more than 1000 villages. It all started with Prasanna noting the complex grocery supply chain in his nearby rural shop.
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He decided to solve this problem for all rural Kirana owners. Rural Kirana shop owners are forced to shut shop 3-4 days a month to procure materials from nearby towns. They purchase from different vendors, arrange their logistics to carry the products to their villages, sometimes even carrying on their twowheelers to cut costs. Prasanna travelled across Karnataka, Andhra Pradesh, and Tamil Nadu, between 201317 and interacted with Kirana owners, identifying their problems. The rest of the founders too joined it after. “Even a small change in the way we work can create a big impact on how we do business with them. This is where the people we employ makes a difference. They understand the mindset of the business owners and help us grow our business," say the founders.� A huge potential is surely there for Indian Retail. With some analysis & strategies, there can be a tremendous forward growth path. Non-marketing factors like gas prices,weather, etc. should be avoided and new schemes should always be launched. The Retail Industry in India has come forth as one of the most dynamic and fast-paced industries with more players entering the market. But because of the heavy initial investments, they are yet to witness the actual potential the retail possesses. Our Retail Industry is surely & gradually paving its way towards becoming the next booming industry.
August, 2020
GROWTH OF OTT: A CHANGING LANDSCAPE
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SHUBHAM BHANDARI MBA RM
August, 2020
With the world coming at a standstill and people getting trapped in their homes this year, many companies had to cut their businesses and some even had to shut their shops. But, there are some businesses which have boomed during these times. YouTube, Netflix, Hotstar, Amazon Prime and many more streaming media services have had the time of their life. This is the new era of on demand content providers, which are called Over-The-Top (OTT) Media services. Over-The-Top services refer to movies, videos, or television content provided via the internet rather than cable or satellite connections. These are subscription-based services which provide the users with on demand content and these are more preferred because the users can watch whatever they want and whenever they want
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rather than watching what is displayed by the service provider. Perfect Way to Escape Boredom Covid 19 has brought wonderful time for OTT platforms as people can’t go out for entertainment, OTT platforms bring entertainment to these people in these tough times. The cable providers have a fixed schedule but at OTT platforms the user is the host. Movies which were planned to be released during this time, but couldn't get released due to the closure of theatres are now getting released on OTT Platforms. People were bored in these times at home and these movies, series, along with sports which are being played behind closed doors are also streaming on these platforms. For example, IPL will be streamed on
August, 2020
Hotstar, and Sony Liv is streaming UEFA Champions league. Rise of OTT Platforms in India With the data prices and cost of owning a mobile phone in India among the cheapest in the world, it is no surprise that India is becoming one of the largest consumer base for OTT platforms across the globe. Disney+ hotstar has the highest number of paid subscribers in India with more than 300 million active users per month. With the entry of Reliance jio in the telecommunication market users for these OTT platforms have increased tremendously. OTT platforms are a serious threat to the
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cable and satellite service providers as the cost of subscription is comparatively low in the OTT platforms.. For example, VIP subscription of hotstar is â‚š 399 per year which includes movies, web series, serials, sports and much more. Some of the biggest channels on television have also started their own OTT platforms and along with normal cable they are also streaming the content on their platforms. For example, Sony Liv, Zee5, Hotstar.
August, 2020
Cost Benefit The cost of watching a movie has drastically come down. In cinemas, the average price to watch a newly launched movie in India is around ₹ 200 to ₹ 300, but on the other hand, the yearly VIP membership of Hotstar is just ₹ 399, and for Amazon Prime it is ₹ 999 per year, People now don’t have to book the tickets, and they are no more dependent on availability of the seats. They just have to log on to their OTT platforms and watch them at their leisure.
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We understand that the experience of watching a movie on the big screen can not be replicated, but under current circumstances people are preferring convenience and safety over the theatre experience. We see this trend to continue even after the current pandemic situation improves. The millennials will prefer video on demand services at their convenience, rather than completely switching back to their traditional way of consuming content.
August, 2020
Retail Chronicles is a monthly newsletter of Retail Lab, the retail committee of KJ Somiaya Institute of Management, Mumbai. Images used in Retail Chronicles are subject to copyright.
/retaillabsimsr @Retail_Lab @Retail_Lab
K J SOMAIYA INSTITUTE MANAGEMENT, MUMBAI.
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