Internet in Indian context – The prime mover
If 2000-10 was the decade of voice, the current decade 2010-20 would be the decade of data. Over the next three years, data could more than double in size to a US$14 billion industry, contributing over half the incremental industry revenue and add 500 bp CAGR to an otherwise slowing voice industry. The economic payoff of a data-connected population would also be significant. A World Bank study shows every 10 percentage point increase in broadband penetration leads to a 1.38 percentage point increase in per-capita gross domestic product growth in developing economies.
With 121 million Internet connected consumers, India’s tally lags 565 million Chinese Internet users by more than some distance. However a 42% CAGR in Internet subscribers over a 3 year period from 2008-2011 provides ample reason to get excited about the Internet market’s potential for stellar growth in India. An industry study by Assocham and ComScore indicates that the Internet user base in India is approximately 125 million and among the BRIC nations, India has been the fastest growing market adding over 18 million Internet users and growing at an annual rate of 41 per cent.
India is one of the youngest online demographic globally with about 75 per cent of online audience between the age group of 15-34 years. Among the age segments, 15-24 years of age group has been the fastest growing age segment online with user growth being contributed by both male and female segments. The female population accounts for almost 40% of 125 million internet users – indicating that gender equality on the information superhighway is catching up.
The Assocham-ComScore report on Internet usage in India (october 2012) indicates – The top five popular categories accessed online are social networking, portals, search, entertainment and news sites.
Online travel has seen growth across all subcategories including car rentals, online travel agents, airlines as well as hotels and travel information sites.1 out of 5 online users in India visit the Indian Railways site.
Others waiting to benefit include companies offering Indians everything from online travel bookings, recruitment and matrimonial portals. The country’s Internet retailing market will reach $2 billion by 2014, with consumer electronics, toys and games growing the fastest, forecasts by Euromonitor show. Retail category penetration has increased to 60 per cent reach and has grown to 37.5 million unique visitors a month. The travel segment sales will grow at a compound annual growth rate of nearly 38% in five years from 2009, and total $5.7 billion in 2014, according to Euromonitor. Apparel has been the fastest growing subcategory in retail and reaches 13.4 per cent online users in India.
These are still early days for Data and Internet in India and there are many business empires and business models which would scale up with the rise of the internet and Always on real time data access. The Internet and data industry in india may be 10 years – but the big numbers are starting to build up. Watch this space.
Infographic: Indian Tablet Markets: Charting the growth curve
2012 has been a year of tablets! (indeed). The Indian tablet growth story is very much in line with the global growth in tablet and tablet based consumption. Here’s an infographic that relates to the growth of Tablets in India and the segment wise splits.
What could be India’s next Killer app on Internet?
Internet was introduced to India in 1998 and over the last 14 years, Internet penetration has increased to 121 million (10.2% of India’s Population). India already is the 3rd largest country in terms of numbers of Internet users globally.
The convenience of train travel booking through the IRCTC website is seen as a significant catalyst to the growth of Internet penetration across India (Smaller towns, Rural areas included) and the grand old-dad of e-commerce in India. India, which is a conservative society in terms of Credit card spends, has never shied away from spending for Railway tickets online. Thus IRCTC is in effect India’s first killer Internet App.
IRCTC – Number of tickets sold & revenue (2003-12)
For a geography and an economy such as India, Internet would in future, be the tool for deliverance of education, healthcare, governance, information and banking to the masses. There is enough and more focus and push from the government to increase internet penetration in the
country. So what then could be India’s next Killer Internet App? The basis of “killer app” is increasing the Internet penetration. This is how it could really start working-
1. Vernacular Internet – With the Indic scripts and other language technologies coming to the maturity threshold, Internet in India would follow a vernacular path to massification.
2. UID aided- The UID would be key to provide an identity to every single individual in the country which is stored centrally and accessed by different services (Banking, Loans, education, professional, travel etc). Adhar which means basis in Hindi would be the fundamental construct to empowering people of India
3. Financial Inclusion – The government currently is working on a Direct Cash Transfer Scheme (DCTS) as a part of the MGNREGS ( Mahatma Gandhi National Rural Employment Guarantee Scheme) – financial inclusion which would reach the population at the bottommost layers of the social and economic hierarchy. Alongside there would be others such as Payments, Banking, Money transfer etc.
To me, these three aspects (Vernacular medium, Aadhar UID project and DCTS under MNREGS) coming together would form India’s next Killer App – which will enhance penetration across social levels, geographics and economical classes opf people. The Internet was the information super highway when it was designed. Connecting people to this super highway would be India’s next killer Internet App.
The flight of Tablets in India
Fall in Entry level pricing has been instrumental in driving tablet sales in India which peaked at 5.5 lakh units in the second quarter of 2012, growing 59% over Q1, 2012 as per CMR report. This is a 6 fold increase against the Q2, 2012 numbers and it is in line with my expectations of 2.5 million tablet units to be sold in india in CY 2012.
Micromax emerges as the surprise number.1 beating the fancied Samsung and Apple – Micromax cornered 18.4% of the market compared to Samsung’s 13.3% and Apple 12.3%. During 2Q 2012, 47.4 per cent of tablet sales were from new entrants in the market with a strong focus on addressing application areas in the Education and Entertainment segments. This trend demonstrates clearly that vendors are positioning their devices at India’s youth. Close to 90 vendors launched their tablets till 2Q 2012.The average selling value (ASV) of the tablets in 2Q 2012 has dropped to little above Rs 13,000 from Rs 26,000 in 1Q 2012, as a majority of vendors in early 2012 launched their products in the Rs 5,000-10,000 price range.
The major feature ternds include WiFi connectivity, 7″ form factor, Android OS as the de-fault, 1GHz processor speeds and 512MB RAM.
Indian tablet personal computer (PC) market will touch 7.3 million units by 2015-16 from around 1.7 million units in the current year (CMR Data). My estimates put tablet numbers in India to touch upwards of 2 million units in CY2012. The developing ecosystem of this device will also ensure adoption by many users.
In contrast to tablets, desktop sales grew only 11% and notebook sales grew 26% in last 12 months and will slow down given the cannibalization by tablets category. Also a lot of government effort is twards driving Tablet adoption based on use-case specific internet applications.
PC Sales in India – Q2 2012 (Gartner)
India PC market registers 17% growth in Q2, 2012 over Q2, 2011. The combined desk-based and mobile PC market in India totalled nearly 2.9 million units in the second quarter of 2012. Consumer buying accounted for 50 percent of total PC sales in the second quarter of 2012. Consumer PC sales grew 24 percent sequentially, which emphasizes the fact that media tablets are not yet cannibalizing the PC market in India like in the West. Consumer growth is being primarily being driven by entry level products. Computer makers such as HP, Lenovo, Asus and Samsung registered more than 50 percent growth in the consumer segment. Ultrabooks are still finding it difficult to penetrate the market. However, with the availability of the new Intel processor and declining price points, adoption of Ultrabooks would increase in coming quarters.
Laptops, which grew 54 percent compared to the second quarter of 2011, helped drive overall market growth. White boxes (including parallel import), which accounted for 45 percent of the overall desktop market, declined 18 percent in the second quarter of 2012 in comparison to the second quarter of 2011. The launch of Windows8 will impact the category in terms of certain vendors who will GTM the Windows8 first.
Lenovo has swung from a No.4 position in 2011 to No.1 position in 2012 basis a large TamilNadu govt order for the ELCOT project. On the other hand, Dell’s market share reduced by more than a fifth to 12.9% as compared to 16.7% in Q2 2011.
With Diwali coming up in November, the PC market is expected to continue showing momentum in the near future. Gartner believes that gifting during festivals along with subsequent shipments for the ELCOT deal will lead to further growth in the market. The study also reports a 25% growth in consumer purchases, which amounted to 50% of total PC shipments in Q2 2012.
From a long term perspective, it is unclear how the PC market will shape up when the average Indian turns to tablet as the primary computing device. While tablets have been eating into PC shipments – that hasn’t happened yet in India. The iPad posses less of a threat to PCs in the Indian market at least for now, because of its hefty price tag.
E-Commerce – The Intent would need to change from Valuations to Sustainability
While Flipkart and Snapdeal have soared as Consumer Internet mega-brands – there is something systematically wrong about the e-Commerce market in India. It is working on Valuations rather than Sustainability and thats not the one for long term.
Flipkart, Snapdeal, Yebhi, Myntra, Infibeam, eBay, Homeshop18 – the list of e-commerce companies in India has come fast much too fast and too many. The category is still only in its infancy stages with enough and more action waiting to happen. The 1st round of e-commerce action in India is in prime action. Most of these e-commerce portals are in the funding phase. What is concerning is the fact that all these portals seem to be promising the 3 same things – range, price and service. Heavily discounted prices , management of extensive product categories and extensive customer service could lead to a cash burn. If consumers buy only for cheaper prices, free delivery, soft trials/ no-questions asked returns and Cash on Delivery … then the question is, will anyone ever make money? I don’t think anyone has a good answer to that.
The key to the e-commerce objective is logistics management both inward and outward. Logictics in e-commerce fulfillment is the tail that wags the dog. And then there is inventory management. For a great customer service experience, an end to end integration is most advisable which means building up of infrastructure and adding headcount/overheads. (On the contrary, an outsourced supply chain will spoil the service delivery experience for the e-commerce portals. All Infrastructure/overheads would mean quantum leap in annual sales for break even. Incremental sales is one thing, Incremental profits in a heavily discounted category in a crowded market place is a chimera. The intent is to become the Amazon of India. Amazon relied on the funds from its 1997 initial public offering (IPO) to tide through the aftermath of the dotcom crash that took out most of its rivals. Without competition, it could afford to lose money on building infrastructure. It would take $2.8 billion in losses over six years before it declared its first quarterly profit in January 2002.
Unfortunately, the e-commerce market in India is heavily crowded – this doesnot offer the (pseudo)arbitrage opportunities that Amazon had in its time. Thus, the whole proposition of consumer delight only ends up burning cash and capital. As all industries there is consolidation waiting to happen even while most of the portals are trying to aggressively build up the valuations. Self sustaining business is taking a back seat in the game of valuations and investors really need to identify the horses for the long run. Else, this is one crash that is waiting to happen.
India’s enterprise software market (2012 thru 2016) – Gartner
Despite challenging economic conditions, the increasing globalization of the Indian economy is leading to a growing need for modern software with the latest features and improved functionality – none so more as with Enterprise in India. With Indian enterprises continuing to embrace IT to improve productivity and drive growth, penetration of ICT infrastructure has been growing rapidly during the past decade. The primary drivers of growth have been domestic demand, the growing maturity of users and incremental enhancements in the technology. A combination of high domestic demand, presence of global vendors and entry of new small vendors with innovative products have made the overall ecosystem apt for robust growth.
Gartner expects the enterprise software market in India to grow at 13% in 2012, and revenue will cross $$3.22 billion in 2012. India’s enterprise software market is forecast to maintain its strong performance, with an estimated compound annual growth rate (CAGR) of 13.6 per cent from 2009 to 2016 – the third highest growth rate in the world.
In 2012, India will be the fourth largest enterprise software market in Asia/Pacific. The country is forecast to account for 11 per cent of the region’s total revenue of $29.33 billion USD for Asia/Pacific this year, the equivalent to 1.15 per cent of the total worldwide software of market share of $280 billion USD billion.By 2016, India’s share of the software market in Asia/Pacific is expected to reach 12.1 per cent, representing $5.4 billion in revenue, or 1.5 per cent of total worldwide software market revenue of $361 billion. In comparison to other countries in the Asia/Pacific region, such as China (with 27 per cent share of regional spending in 2011), the software market in India is still relatively small and evolving.
End users in Asia/Pacific are expecting to increase their spending on application and infrastructure software, with China and India being the most optimistic and leading the way for budget increases, followed closely by Malaysia and South Korea. The high intention to increase budgets in India is expected because of the rapidly growing economy, globalization of operations, and ongoing investment in India as a customer service-related outsourcing destination. Optimism regarding spending within Indian organizations reflects confidence in India’s regional economic performance, as well as the need to adopt better technology to effectively compete in a tougher global environment.
Tablet user & usage attributes infographic
This is in continuation to a series of infographics on the Tablet globally, the Indian perspectives and the device use cases proposition. This post examines the use cases for tablets – the segmentation of consumers and the difference between a WiFi tablet usage and a Network tablet use cases.
Please leave me your comments and suggestions.
Tablets in The Indian Perspective
With 475K units shipped into India in 2011, the Tablet category is still small when compared to Laptops or Smartphones (~9 million p.a). However there is traction, there is space, ergo there is huge growth. The following infographic tries to capture the growth perspective of the infant tablet devices category in India – from 2010 to 2017.
How Android stormed India! (The dynamics and insights behind the growth of Android)
How the Red Worm (Android) came from nowhere to demolish the Black Worm (Symbian)
1. Introduced in 2Q,2009, it has taken Android 10 quarters to come from a zero base to the best selling Mobile OS in India.
2. Android has an installed base of 3 million users in India.
3. The very first Android phone in India was launched in Q2, 2009 by HTC Dopod
4. Android beat Windows to become the no.3 OS in Q2,2010
5. Android became the no.2 OS in India in Q4,2010 beating Blackberry
6. 10 quarters after the launch of Android,in Q3, 2011, Android became the No.1 Smartphone OS in India beating a rapidly declining Symbian.
Prior to Android, Indian Smartphone OS was polarized by Symbian which ran across smartphones from Nokia, Samsung, Sony Ericsson and LG. Barring Blackberry, other OSs such as Windows, Linux had never been market favourites really. Android provided the much needed variety and option for Smartphone OSs in India.
7. Only a meager 2% of total Android activations in India have been CDMA devices. 79% of CDMA Android devices are Samsung devices.
8. Samsung having sold 1.2mn Android devices is the largest Android seeder in the Indian Market. HTC follows with .93 mn 9. Android handsets sold. Sony Ericsson is a distant third with .43mn Android devices sold.
10.Both Samsung and HTC contribute 70% of the total Android sales in India.
11.Samsung, HTC, Sony Ericsson, LG and Moto contribute to 90% of the total Android sales in India. While a number of local manufacturers have tried to ride the Android wave, success has so far been limited.
12.Sub-brands such as Galaxy, Wildfire, Xperia, Desire, Optimus and Milestone have contributed to 75% of the total Android sales.
Decline of Smartphone ASP and Android ASP in India
13.As against the ASP of smartphone devices, Android ASP drop has been more aggressive. Android OEMs have been aggressively trying to position to newer categories of users, thereby increasing the audience, appeal and the numbers. Between Q1,2009 and Q3,2011, Android ASPs came down by 43% while the overall smartphone ASPs came down by 19%.
14.In the 7 quarter period, Q1,2010 to Q3,2011, Android multiplied sales by a factor of 41x. Corresponding ASP drops was 36%.
15. Mid end Androids have been the most successful in Indian markets with 56% of total Android sold belonging to the $100-$299 category.
With Samsung testing the sub-10K price segment for Youth categories for Android, this category will accelerate in time sto come.
16. Interestingly enough a lot of local Indian brands tried riding on the wave of Android in lower segment but as stated earlier Android’s have been more successful when launched and marketed by the larger brands.
Data sourced from Import numbers for mobile phones in India
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