Meet the new E-tailers

Ayesha Jhulka, who played Anjali in the 1992 blockbuster Jo Jeeta Wohi Sikander, went viral recently. The meme featured her singing the line ‘chahe tum kuch na kaho, maine sun liya’, from the hit song ‘Pehla Nasha’. The lyric translates to ‘even if you haven’t said a word, I have heard you’. It could be romantic, or, in today’s age of privacy, downright creepy. The widely shared joke was on the latter, more specifically, on AI algorithms on e-commerce platforms.  

Have you noticed how ads, for instance, for a high-definition TV or 22 carat gold ring, pop up on your web browser, just when you were thinking of redecorating your house or making it official with your partner? 

In spite of these intrusive targeting, e-commerce websites such as Flipkart and Amazon don’t have the reach they dreamt of. The target audience is too varied. Therefore, brands now rely on alternative e-commerce models in India, which operate through social networks (such as the family WhatsApp group), communities (such as websites giving grooming advice) and videos by influencers (stars and local celebrities, even Sonali Phogat may be welcome). These models rely on trust and familiarity. 

The alternative e-commerce model story started first in China, like most do these days. Social commerce start-ups such as Pinduoduo, Little Red Book and Yunji saw booming business in our neighbouring country, challenging the might of Alibaba and peers by managing billion-dollar IPOs. Pinduoduo raised $1.6 billion on Nasdaq (valuation of $24 billion) in 2018 while Yunji raised $121 million on the same exchange earlier this year (valuation of $3 billion). These newbies are likely to corner 20% of the overall e-commerce sales there is this year. 

India has a demographic similar to China, according to Dhruv Kapoor, partner at venture fund Sistema Asia Capital. Also, both countries have seen an explosion in smartphone use and cheap data. Between 2017 and 2019, around the time these alternative models began gaining ground in India, smartphone use went up from 22% to 37% and internet penetration from 28% to 40%. The iron is hot, so the smithy must strike.

In India, platforms such as Meesho, GlowRoad and Shop101 offer one kind of alternative e-commerce. They hire “resellers”, regular people working from home, to sell their curated collection of products. The reseller, after adding a margin of 10-15% to the price, markets the products through their network on WhatsApp or Facebook, and the delivery is made by the e-commerce platform. These social platforms post revenues of Rs.100-200 million, though no profit has been reported yet. The second alternative model is built around content and communities. Websites such as POPxo, MensXP and others draw people in by generating content that interests them. Once they have the crowd, of say a few million, they lay out their wares. Their revenue is in the range of Rs.80-100 million, again with no profit yet. 

The third alternative model is being built as we write this feature. Investors call it social commerce 2.0, which may sound a bit precious but it captures the freshness of the concept. On platforms such as SimSim, BulBul.TV and WMall, when you watch videos of your favourite stars, links to buy the products they are sporting will pop up. Imagine watching The Dark Knight Rises and a pop-up informs you that the Bat-Suit is available at a 20% discount, when bought with Bat-Ears, on waynesidesellers.com. That’s not happening, but you get the point. In 2018, Chinese platform Taobao generated a whopping $15.1 billion through live-streaming transactions.

The video model is cutting edge but social commerce is what is popular in India. In fact, when Facebook made its first-ever and only Indian investment, it selected Meesho and put in $25 million in the four-year-old start-up in June 2019. That, you must agree, is some belief in its prospects. Meesho is not overwhelmed since it has had other suitors. In fact, it raised $125 million after an investment round led by Naspers, and is on its way to being a unicorn. Meesho did not participate in this story, but GlowRoad’s co-founder Nitesh Pant is happy to shed light on this emerging business. 

The Amazons and Flipkarts of the world, he says, are addressing a faceless mass. “They try to sell a large number of SKUs to an unknown user,” says Pant, adding, “then they try to acquire that user with a discount.” This means large marketing and customer acquisition cost (CAC). “According to some findings, they spend $10 in acquiring a single customer, and they don’t know how long that customer will stick around. The e-commerce platforms are bleeding,” he says. Pant says that GlowRoad’s CAC is less than a third of what the biggies spend, at $3. Its distribution network, like other social commerce platforms has hundreds of contacts, through resellers. So, the platform has to spend on acquiring resellers, not thousands of customers. Consequently, average order value (AOV) on social commerce platforms such as GlowRoad is Rs.500-700, while on Amazon, it is over Rs.2,000. Their order value is considerably lesser but the traffic is growing at breakneck speed. GlowRoad’s per day transactions tripled from 5,000 to 15,000 over last year. 

Sistema Asia Capital’s Kapoor says that the older e-commerce firms have got their buyers in the big cities but the next big market, in the small cities, will fall into the lap of social e-commerce. Around 70% of GlowRoad’s orders come from smaller cities; the top-selling categories for the platform are garments and home decor. 

At the time of infusing funds in Meesho, Facebook India’s VP and MD Ajit Mohan had told TechCrunch: “A platform that is aimed at India 2 (which is India beyond big cities, who do not shop online actively, and the next billion users) and has such a large user base of women (80%) — when most people online in India are predominantly men — is a remarkable achievement.” According to a report by Gurugram-based consulting firm Zinnov, one of the main beneficiaries of Indian social e-commerce will be women-run home businesses. It claims that about two million women have already made $9 billion in gross sales, by reselling clothing and lifestyle products over a year and that the number of “housewife resellers” is expected to increase to 23 million by 2022. 

Kapoor says the social way of selling works remarkably well in smaller towns because of trust. “They (users) are not well versed with internet and payments, so for them, the deciding factor is trust. That will come if they know somebody from their community who they follow avidly,” he says.

Gather around

While Pant believes trust in friend or an influencer works best, Priyanka Gill of POPxo believes in the power of a community. “Content is the best, most cost-effective way to acquire and retain a large user base. It builds a huge affinity to the brand,” she says. POPxo has built its women’s online community of 42 million monthly active users (MAUs) , by generating content around fashion, beauty, lifestyle, work, fun and much more for five years. It now has a tab for shopping (See: Closing a friendly sale). 

The site has taken a great leap forward, from selling others’ products for a commission, to designing its own. POPxo makes a margin of 67% on private labels. They make popular products — 80% of a range is sold, on an average — because they have gathered valuable data from their users’ browsing data. The site’s algorithm captures pages/posts visited, session duration, buying behaviour and preferences, and so on.

Gill says, “I know what content works for them, what colours they like, what slogans they like and, because of that, we have a very high affinity and connection with the user. For example, if a particular image gets a million likes, I already know that people have liked the concept and it is ready to be turned into a product.” She would then convert that image into a phone cover or a shirt. 

She shares an example: “We were witnessing a lot of interest around ‘zodiac signs’ and astrology. We immediately produced 600 mugs and sold them out in a week”. Usually companies rely on merchandisers to know what to stock, besides consulting forecasters and trend predictors. “We don’t do any of that,” says Gill. POPxo has built a brand strong enough to have four offline stores in NCR. The site started making its own products only six months back, so the contribution of e-commerce to the company’s revenue is still low at 20%. Sponsored content makes up 35% of its revenue, influencer marketing 40% and advertising 5%.

If a start-up can make so much out of the content it generates, what about the media giants? Times Internet burnt its hand once while experimenting with an e-commerce platform on Indiatimes. It had to shut down that business in 2013, but that has not stopped it from trying again. Indiatimes Lifestyle Network (ILN) has taken a bolder approach by trying to build a full-stack e-commerce business — product, supply chain and customer care. This will be intelligently layered on its media content. ILN now has 50 million MAUs across four properties such as MensXP, iDiva, Whats Hot and itimes. Angad Bhatia, COO of ILN, had been preparing for this plunge for over a year and it was launched only three months back.

“We’ve been sitting on extremely rich data on what Indian men are consuming. We know what the trends are. We track proactively, what kind of content they’re consuming, especially in fashion,” he says. The insights drawn from this data helped them launch a men’s beauty brand called Mud, which started with a makeup range but now includes personal care products such as face wash, body lotions and shower gels. The brand was launched through MensXP, which ILN had acquired in 2012.

“There is a set of rapidly growing Indian millennials, who are looking for a lifestyle that accentuates their personality,” says Bhatia. “While their relationship with bigger marketplaces (such as Flipkart and Amazon) is great, it’s very functional. There is no community feeling when you deal with the biggies, but platforms like MensXP and POPxo give that.” 

Bhatia adds that while e-commerce giants are geared for quick sales, through user-interface designs that focus on convenience, their platform tries to make the user aware of what they are buying. “Our motive is to give meaningful experience, facilitate more conscious decision-making,” he says. For example, they do interviews with film and cricket stars. One with Aditya Roy Kapur had him discussing his beauty regimen before and after the shoot. “The crux was to destigmatise men’s beauty,” says Bhatia. MensXP reached the 1,000 orders a day mark within its first three weeks. 

Kapoor of Sistema agrees with Bhatia and says that once a user comes to the site for content, they will want more. “They need some gratification and you can monetise that either by affiliate model or e-commerce model.” He says that it is a well-established model in the west but it is being tried in India only now. For example, the Glossier, a blog that was turned into a multi-million dollar cosmetic brand. Emily Weiss began writing ‘Into The Gloss’ in 2010, while working as a fashion assistant at Vogue, and four years later, she launched with four products. With revenue of over $100 million, Glossier is now valued at $1.2 billion.

Like POPxo, Mud too designs its products based on user feedback. Three to four months ago, a community member on Instagram posed a question asking what customers wanted in their personal-care products. “It was clear from the data that customers are increasingly looking for natural products. But during our brand’s shampoo development, we were not able to find an alternative to surfactant that lathers up shampoo. We put out this problem to our readers/users and we were led to a plant-based alternative by one of them,” says Bhatia. Two months ago, a community member nudged the team to create a concealer stick for men, a product typically used by women. Mud’s product team quickly began work on it and the product is to be launched soon. 

Even when an innovation is community led, no reward is given out. “A community built on incentives and rewards is not long-lasting. People only join to take rewards. We want a genuine community,” says Bhatia. It takes a village to sell a product but, these days when nearly all are addicted to TikTok, can a well-scripted video do the trick too?

Manufacturing desire

E-commerce typically targets three types of customers. First is those who know what they want, the second is those who are not sure what they are looking for and the third is those who don’t plan to buy anything. The first is serviced by regular e-commerce sites, the second by sites that give AI suggestions and the third by live-streaming commerce or video commerce. 

Video commerce, in India, is done through apps such as Bulbul.TV and SimSim. These are recent launches, still being tested and one of the founders spoke to Outlook Business but did not want to be identified. The rationale of video apps is the same as the reselling apps such as Meesho, GlowRoad and Shop101, which is to reach out to those buyers who still stay clear of the Flipkarts and Amazons. These users are put off by the lakhs of products and SKUs they have to wade through to get to the right one. “Not everyone is comfortable doing that,” says the founder. “There is no other way you can make India comfortable, except by engaging them through videos.” 

Traditionally, shopping is done with friends or family in India, and these video apps want to recreate that experience, complete with the friendly shopkeeper. “There has to be a human interface and you have to speak in the users’ language,” he says. Therefore, these video apps are mostly made in regional languages and have an influencer speaking to the user. They also steer clear of mainstream brands; the few advertised include Mamaearth, HipHop Skin Care, Everteen and Bliss of Earth. Most of them are products for women. 

These are still early days for alternative e-commerce models in India and there are challenges. “Demand can come from anywhere in India, but unlike regular marketplaces, sellers on these platforms may be spread out, raising the cost of delivery. Then there are colour, size and return issues with fashion, and the order value is lower. You have to make sure that you make economics work in that order size till you have large volume,” says Kapoor.

Also, can they ever scale up like big e-tailers in India? Buyers rarely buy high-value articles such as smartphones or electronics on social commerce platforms. But Pant says that they are on par with the likes of Amazon on lower-value items. “On like-to-like category comparison, such as apparel, the AOV of a Myntra and Amazon will be only Rs.50-100 higher than us, because their margins are higher,” he says. They are building their success with smaller blocks, and Gill adds that this can be repeated many times over to scale up. “The unit economics is very exciting,” she says. 

India’s e-commerce market is estimated to be $220 billion by 2025 and alternative models are racing to take a big bite of that delectable pie.