The US Economy

The US economy continued its strong rebound in FY 2015-16, with unemployment falling, wages growing, and consumer confidence at its peak. Given the dollar strengthening, the US economy is poised for accelerated growth this year and in the years ahead. Growth is expected to be 2.2% in 2016 and 2.5% in 2017, with inflation slowly rising and inching closer to the Federal Reserve’s goal of 2%

As the US economy showing growth trends, there is a stupendous growth in new job creation. The average pay has also risen after years of stagnation. This was a direct consequence of an improved business environment and investment climate. Gains in employment coupled with low borrowing costs have helped fuel household demand and led to an overall increase in consumer spending. Rising housing prices are also providing a boost to the economy.

Much has been done over the past several years to strengthen the US financial system. Major steps have been taken to implement the post-crisis reform agenda and move towards a safer financial system, which is now quite evident.

E-Commerce Industry

Global retail sales, including in-store and online purchases, are set to grow to $28.3 trillion by the end of fiscal 2018 from $22.5 trillion in 2014. The global E-commerce market is expected to grow at a CAGR of 17% from $1.3 trillion in 2014 to $2.5 trillion by the end of 2018. (Source: eMarketer.) The worldwide expansion of the Internet has considerably contributed to the transformation of trade and store transactions. Many consumers are switching to online shopping, or simply integrating the practice into their regular shopping to research about purchases online before buying in-store.

Here are the seven trends that is expected to have a big impact on E-commerce in 2016:

Emerging Trend Implication on Retailers
Consumers will complete the majority of their shopping journeys via multiple devices. Retailers will need to redesign their online buying experience to reflect the fact that the majority of users visit them via multiple devices. Campaigns must be activated on all devices and all properties fully tagged to leverage mobile and desktop.
Smartphone shopping will continue to gain ground. As an increasing share of transactions happens on smartphones, retailers need to prioritise their mobile app strategy and optimise their mobile buying experience.
While on tablets people can use websites that aren’t mobile-optimised, on smartphones it’s crucial to have either a mobile-optimised website or an app.
Expect more big online shopping days with even bigger sales. Retailers will need to rebalance their online and in-store strategies for these big shopping days. Brick and click retailers should expect more traffic online than in-store on the year’s biggest sales peaks.
Retailers will see a high web influence on in-store sales. As retailers invest in these technologies, they must make sure that they also have the expertise and operating resources in place to manage customer interaction in real-time.
Marketing will shift from device-focused to people-focused. Consumers don’t think about their media consumption by device, browsing environment, or by publisher in a silo; therefore, neither should marketers. B2C organisations need to restructure their marketing teams to fully understand consumer intent and to look beyond the walled gardens.
Ads will become more relevant and non- intrusive. Shifting to non-intrusive and relevant ads will help advertisers to achieve genuine engagement with consumers, and lead to higher conversions.
Instant delivery services will become common. Retailers offering same-day delivery – or even faster – will enjoy a significant competitive edge in 2016. This trend will also drive a lot of advertisers to adopt the ‘in the moment’ style of advertising to drive conversions.

The US E-commerce Industry

The impact of E-commerce on the US retail industry continued to intensify, as the web accounted for nearly 40% of US retail sales growth in 2015. In many ways 2015, was a big year for the E-commerce industry in the US.

Shoppers in the United States spent $341 .7 billion on retail purchases on the web in 2015, according to the US Commerce Department, up 14.6% from 2014 -a rate that’s nearly five times as fast as the 3.1 % growth in store sales. When factoring out the $2.19 trillion in sales of automobiles, fuel and restaurants that the Commerce Department includes in its definition of retail sales - all goods not generally purchased online - the web comprised 10.6% of total retail sales of $83.22 trillion in 2015, up from 9.7% in 2014. E-commerce alone drove 39.3% of the $110.6 billion in total retail sales growth last year.

2016 Top 500 Retailers

The merchants, ranked in the ‘Internet Retailer 2016 Top 500 Guide’ - the largest e-retailers in North America, are a major force behind these trends. The Top 500 merchants’ US online sales of $286.2 billion comprised 83.8% of total E-commerce sales in 2015.

2015 vs. 2014

2015 Sales ($ billion) 2014 Sales ($ billion) Growth 2015 Share of Total Retail 2014 Share of Total Retail
Total retail* 3,218.29 3,107.69 3.6% 100% 100%
Total E-commerce 341.73 298.26 14.6% 10.6% 9.7%
Other non-store excluding E-commerce** 144.56 159.83 -9.6% 4.5% 5.6%
Store sales 2,732.01 2,649.60 3.1% 84.9% 85.3%
US Top 500 286.22 251.13 14.0% 8.9% 8.1%
Top 500*** 331.48 292.17 13.5% 10.3% 9.4%

Source: US Department of Commerce, Internet Retailer 2016 Top 500 Guide

*Excludes fuel and auto sales, restaurant and bars

**Includes direct marketers, TV retailers and other merchant types

***Includes international E-commerce sales

Sales by Primary Product Category and Retailer Type

Among the major categories, on the high end of the growth were hardware and homeware e-retailers that grew 22% and the housewares and home furnishing merchants which grew by 22.4%.

Category-wise sales

Category 2015 Web Sales ($ billion) 2014 Web Sales ($ billion) Growth (%) Number of Retailers
Apparel/Accessories 48.83 42.89 13.85 140
Automotive Parts/Accessories 2.83 2.53 11.83 15
Books/Music/Video 31.58 26.83 17.74 24
Computers/Electronics 36.66 35.45 3.41 47
Flowers/Gifts 3.81 3.56 7.23 15
Food/Drug 6.31 5.70 10.81 30
Hardware/Home Improvement 14.94 12.24 22.04 23
Health/Beauty 6.42 5.55 15.63 29
Housewares/Home Furnishings 10.65 8.70 22.44 41
Jewellery 2.23 2.01 10.97 16
Mass Merchant 135.13 116.90 15.59 39
Office Supplies 18.36 18.06 1.66 16
Speciality 5.39 4.43 21.58 25
Sporting Goods 4.68 4.13 13.26 28
Toys/Hobbies 3.68 3.21 14.81 12
Total 331.48 292.17 13.46 500

Source: Internet Retailer 2016 Top 500 Guide

The 156 retail chains ranked in the Top 500 Guide, those that sell via physical stores as well as on the web, grew online sales 11.6% last year to $107.9 billion from $96.6 billion. This growth occurred while store sales were stagnant or falling for many of the biggest players, making E-commerce a growing portion of total sales of many retailers.

Top 500 retailer type comparison

Business Type 2015 Web Sales ($ billion) 2014 Web Sales ($ billion) Growth (%) 2015 Share of Top 500 Sales (%) 2014 Share of Top 500 Sales (%) Total Retailers 2015 Total Retailers 2014
Web only 117.08 136.84 16.9 41.3 40.0 196 193
Retail chain 96.61 107.85 11.6 32.5 33.1 156 154
Consumer brand manufacturer 50.72 56.33 11.1 17 17.4 74 76
Catalog/Call centre 27.76 30.45 9.7 9.2 9.5 74 77
Total 292.17 331.48 13.5 100 100 500 500

Source: Internet Retailer 2016 Top 500 Guide

IntraSoft Technologies Limited - Overview and Business Performance

E-Commerce -

The company sells its products on their own website and also has shop in shop partnerships with other leading retailers to sell products on different marketplaces. Based on these partnerships, the Company is able to reach a large percentage of the online US population.

123Stores was ranked as the 262nd largest Online Retailer in USA, a gain of 130 ranks from #392 last year, as per Internet Retailer 2016 Top 500 Guide. This is the third consecutive year that 123Stores has featured in this prestigious list of online retailers. The Company was also ranked the 11th fastest growing online retailer.

As at 31 March 2016, the Company sold products through partnerships with,, Amazon Canada, Alibaba’s,, New Egg,, Rakuten ( and The products are available to USA and Canada customers only.

The Company’s business model is based around creating a large distribution network wherein they can offer customers a better shopping experience including a better price point by leveraging on their technology, efficient supply chain, and deep relationships with suppliers. The proprietary technology platform allows the Company to scale order volumes with minimal human intervention, enabling cost savings as volumes grow.

As on 31 March 2016, the Company sold more than 5,00,000 unique SKU’s (Stock Keeping Units) in their catalog covering more than 1600 suppliers.

Business Performance, 2015-16

E-commerce Revenues increased from Rs. 322.64 Crores to Rs. 699.07 Crores during the year registering a growth of 117% Y-o-Y.

For FY 2015-16 the number of orders grew by 155% Y-o-Y to 19,69,233 orders from 7,72,981 orders. As on 31 March 2016, inventory at warehouses was, Rs. 55.30 Crores. Largely this inventory comprises of fast moving items, which help the Company give the customer a wow shopping experience.

Top Product Categories during FY 2015-16:

Categories Percentage
Furniture, Patio, Lawn & Garden 30%
Musical Instruments & Gadgets 20%
Home Improvement & Art Crafts 14%
Kitchen, Dining & Appliances 13%
Toys, Games & Baby 11%
Sports & Outdoor 8%
Others 4%


With favourable systems and thrust on automation the Company is expected to become more scalable. There is a lot of momentum amongst the Company’s existing suppliers, as many new suppliers and products have been added.

With partnerships with, (Nasdaq:AMZN) and Inc. (Nasdaq:EBAY), the Company is poised for phenomenal growth in their E-commerce venture given the fact that online retail is growing 3 times faster than traditional retail, and customers increasingly prefer to shop online due to universal selection, superior customer experience and minimal delivery timelines. With the impending launch of their site in partnership with Alibaba in the US and expansion into the Canadian market, the Company looks forward to building a business that can create an ultimate customer experience.

The Company’s strategy is to expand and cover all marketplaces in the US first, so that the distribution network reaches 100% of the US online shoppers. Once a leadership role is established in the US, the Company aims to expand their coverage to other markets.

E-greetings -

123greetings continue to see increased mobile usage year-on-year with a 15.14 Lakhs card sent out in FY 2015-16 versus 9.59 Lakhs cards in FY 2014-15. Mobile application downloads reached 10.43 Lakhs as on 31 March 2016. The E-greetings business revenue for FY 2015-16 was Rs. 17.80 Crores.

Financial Performance

FY 2015-16 was a growth year for IntraSoft. The Company ended the year with over US$100 million of E-commerce revenues, a significant step in the journey.

• The total Income was Rs. 721.48 Crores up by 108% from Rs. 347.43 Crore.

• Profit after Tax was Rs. 41.51 Crores up by 596% from Rs. 5.96 Crores.

• Cost of Goods Sold (Inc. Shipping) for FY 2015-16 was 81.7%, a rise of 1.3%, from 80.4% in FY 2014-15.

• Gross Margins was 18.3% compared to 19.6% last year. As the sales momentum continues to improve, the Company continues to see an improvement in Gross Margins from their existing products and suppliers. However, Gross Margin year-on-year was not comparable because of the addition of newer suppliers and products to the catalogue, which helps increase sales as the Company grows.

• The Board of Directors recommended a Dividend @ 20% i.e. Rs. 2.00 per Equity Shares for the FY 2015-16.

Internal Control System and its Adequacy

The Company has put in place adequate controls that are commensurate with its size and the nature of its operations.

These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorised use or losses, executing transactions with proper authorisation and ensuring compliance of corporate policies. Regular internal checks are carried out to ascertain the existence of adequate system. The Management also reviews the other control systems and procedures to ensure its application.

The emphasis on internal control prevails across functions and processes, covering the entire gamut of various activities. An effective and comprehensive review by the Audit Committee of the Board has strengthened the internal controls and other systems within the organization.

Opportunities and Threats

The biggest advantage of the online medium is its accessibility. Any innovation can be transmitted far more effectively and widely and can be, therefore, far more disruptive of any placid momentum. Consequently, customer preferences keep evolving and business models of companies have to keep up. Free of regulatory restrictions, this space offers a dynamism and flexibility that is unimaginable in any other space. This freedom and dynamism, while encouraging an out-of-the box approach, can prove to be challenging to the existing players.

The online experience is all about novelty, anyone offering that, will be able to capture a larger share of the market. The challenge posed is in the fact that any innovation online turns stale within a much smaller timeframe and innumerable replications of any successful idea make it difficult to separate the innovator from the imitator.

Unlike in the physical space, market preferences are transient and constantly shifting. While this can be a challenge, pre-empting this trajectory can pave the way for the biggest opportunities in the online space. It is not just about anticipating customer preferences, it is also about moulding them. Consistent engagement through feedback forms and surveys as well as opening up social media platforms through an open channel of communication can be maintained differentiates this space and ensures a closer connect with market realities than is possible in the physical space. Market research takes an all new form in this digital age.

Human resource

Our people are the strongest assets. We are committed to build the best-in-class team led by exceptional individuals.

We have built a work culture that is entrepreneurial, meritocratic, empowering, caring, and encourages growth of mind-set. Our culture fosters excellence and gives people space to take initiative and experiment. We aim to give unique opportunities to our employees in terms of learning, career development, recognition, and family well-being.

We offer robust programmes at the entry level and also for mid-career professionals. We believe in developing our people as that would lead to growth of our people as well as the organisation.

Our HR practices, employee care, people philosophy, and engagement all have been well recognised through a range of external honours and awards for the Group as a whole and for our individual businesses.

The Company and its subsidiary had 291 employees on its rolls as on 31 March 2016.

Risks and their Management

The Company’s business model has a comprehensive and integrated risk management framework that comprises of practices for proactive awareness, appraisal, and counter-action to reduce the impact on the key business objectives of being a prominent player in the online retail space.


The Company’s business is seasonal. Generally a third of the annual revenue is generated in the third quarter of the financial year.


This is most pertinent for the E-commerce space, which is concentrated in the US market where the third quarter is the festive season. The Company has ensured redundancies are removed from its systems and processes to ensure that it seamlessly addresses the demand spike in the third quarter of the fiscal. In 2015, the Company has already shipped 15,500 packages a day on an average during the week before Christmas. Besides, the proprietary technology, the efficient logistic partners also facilitate the Company to take this number even higher in the coming years.


The business faces the risk of high competition from other market players.


The Company continues to keep up with any changes that its marketplace partners goes through. The management is completely focused on deriving as much growth and as much sales momentum as possible. The Company is working towards having the highest number of suppliers and the largest distribution network. The Company continuously works to reduce the order lag time (the time from which the order is received till the time the order is executed). More and more online consumers are getting conscious and want the order to be delivered in the fastest minimum time. The Company is geared up to match the customer’s expectation and keep them satisfied.


The capacity to build up a large supplier network poses several operational challenges.


The Company is investing more in manpower who can go on the ground and sign up suppliers. The increased investment in people will help overcome the challenges. The Company has also invested a lot of time in visiting trade shows and conferences where they have been successfully been able to sign on new products.

Forward-looking statement

The statement in the Management Discussion and Analysis reflect current expectations of the Company and are inherently uncertain. The actual results could differ materially for various reasons, including among others, fluctuations in foreign exchange rates, changes in global economic conditions, consumer spending, world events, the rate of growth of the Internet and online commerce, the amount that the Company invests in business and the timing of those investments, change in the Government regulations, tax laws and other statutes and incidental factors.