Everyone loves a good deal. There have been sightings even of the British royals browsing through discount-racks (though that may never be shown in The Crown). Therefore, it seems like common sense to bring all the best deals on a single platform, particularly in a price-sensitive market like India where “last price?” can be declared a national catchphrase. There are various such platforms too, and they come in many formats—ones that arrange for cashbacks on purchase, ones that collate offers/discounts and ones that put together coupons from various brands. In this crowd, Jaipur-based Dealshare stands out.
This start-up does not merely advertise deals, they craft these deals by working together with small manufacturers. These manufacturers, of local brands and white-label goods, have high-quality products but may suffer from a poor marketing and distribution network. Today, Dealshare has around 1,000 such manufacturer-partners and, for some of them, the platform provides 75% or more of their business.
Dealshare, founded in September 2018, is unlike other deal-discovery platforms because of its ‘social’ nature. Its primary medium is not a website but WhatsApp and now a mobile app. The platform aims to help people find and forward good bargains to their loved ones; it offers deal-hunting as a social activity.
“When our generation came online, it was through a browser and a desktop or a laptop. But, over the last 10 years, a majority of new internet users are coming online with the smartphone and using a social app such as WhatsApp. So, for the new generation of users, a different business model is required… Internet 2.0, across the world, is basically mobile and social driven,” says Vineet Rao who started Dealshare with his school friend Sourjyendu Medda, Sankar Bora and Rajat Shikhar.
All the founders have spent a considerable amount of time in the consumer space. Rao has spent over a decade at Microsoft in Seattle, where he worked both in enterprise cloud computing and with consumer brands. Since moving back to India and before he started Dealshare, he was associated with three start-ups: Shopwest, SpectraVR and SilkCloud. Medda has spent a large part of his career with companies such as Britannia Industry, Metro Cash and Carry India, and Raymond FMCG. Bora was one of the co-founders of Myntra and has been part of other start-ups, and Shikhar has worked with and headed product teams in FoodPanda, Myntra and Jabong.
Medda says that his experience in the industry helped him spot this opportunity. “Over the last 10 to 12 years working in the FMCG sector, I realised that a lot of value gets lost between manufacturers and consumers. Brand owners are doing their own sales, marketing and channel, therefore something that gets produced for Rs.30 sells for Rs.100, on an average,” he says. Keeping this in mind, Medda and Rao were brainstorming and that's when the idea for the platform struck them.
During their market research, they observed that most people in small, affluent towns and even in the outskirts of cities such as Bengaluru were still shopping from kirana stores. These buyers are still not comfortable with big e-tail names such as Amazon or Flipkart. What these buyers like is socialising with friends and family, and making value-buys. Keeping this in mind, the team began fine-tuning their model and first for Jaipur. Today, they do approximately 12,000 deliveries per day in Jaipur, where Big Basket and Grofers do around 1,500 odd deliveries. “We are already the second-largest retailer in Jaipur after D-Mart,” says Rao. After Jaipur, they expanded to other cities in Rajasthan and now they are present in 25 cities across five states, in places as diverse as Mumbai and Delhi, and Dausa and Tonk.
WhatsApp as a channel
All of this started with one WhatsApp group more than two years ago, in which deals would be shared every day. First it included friends and family, who invited their contacts, who invited others. Today, Dealshare reaches 50,000 customers through 200 WhatsApp groups. The deal is shared as a link that takes a buyer to Dealshare’s page, where the order can be placed and then the order is forwarded to the manufacturer. The gross margin at MRP on the platform stands between 30-40% at the time of procurement, whereby they pass a substantial amount of those benefits to the customers. The MRP of these products is 20-25% cheaper than the popular brands.
On the app, the buyers are encouraged to share the deals through WhatsApp. The buyers can unlock offers this way and the platform bags more clients at a fraction of what it would have otherwise cost. “About 80% of our customer acquisitions and daily traffic is purely organic, and hence we are able to operate with a customer acquisition cost of nearly one-eighth of traditional e-commerce,” says Medda. Every day, they see around 100,000 consumers on their app and process around 50,000 orders.
Besides this clever strategy of reducing customer acquisition cost, the founders have used another smart insight. Rao says that they worked on giving the buyer an experience of shopping at their local kirana store, something he says other larger e-commerce sites do not follow. He adds, the other sites try to replicate the experience of large-format retail stores, and therefore we see icons of carts for the checkout page. Dealshare wanted to keep it simple and friendly for a mass audience, like it would be at the neighbourhood store. Therefore, they had a simple interface that merely lists items on the front page and allows buying at a click. The customer only has to enter their address once, and then keep adding things to the cart and finally opt for CoD (though today they have CoD and online payment options both). The purchase is delivered to the doorstep.
The interface was given a lot of thought, with an in-house team working on it and testing it using a focus group, and using their feedback. The page now uses desi colours and design accents and allows transacting in different languages. The app, Rao explains, looks more like Facebook than Amazon, with feeds listing the latest offers that you can browse through and share.
However friendly the interface looks, it can’t have been easy to get customers to trust their local brands, especially with packaged foods and staples. Medda says that they got around this by encouraging people to try out the products with incentives, which are supported by the brand. Once this set of buyers begin to take to the brand, the social nature of the platform makes the brand ‘go viral’ with these buyers recommending it to their contacts.
‘Bulking’ up
This intimate marketing works for this start-up that has built a business around the bulk operation, with a product mix of 2,000 SKUs per location which includes staples (45%), packaged food products (30%), homecare (10-15%), and fresh food and personal care (10%). (An Indian kirana store usually stocks anything between 1,000 and 8,000 SKUs, according to a 2015 research paper.) Medda says that their platform takes in any product that trades at a daily or semi-annual frequency, and does not keep anything that is a one-time purchase such as jewellery or furniture. “The whole model has a low customer-acquisition and customer-repurchase cost and it is possible only when consumers are bringing in more and more consumers rather than us spending on marketing, and that is why we stay away from one-time purchases,” he says.
This bulk-focussed business demanded, and also helped build, a lean operations-model. “The hardest nut to crack was operations because our average transaction values were not high, and therefore we needed an ultra-low-cost operations model,” says Rao. They tried to find a partner that would do it at such costs but soon realised that they would have to build it themselves. Rao says that they tried 20-30 iterations before finally coming up with a model that costs only a third of what it would to any other grocery player. They can today ship (delivery + warehousing cost) 5-6 kg weight for Rs.50, which is way lesser than the Rs.150-160 the other players spend for the same weight.
Dealshare also cuts down on delivery costs through their Dealshare Dosts, who are essentially local community influencers who pick orders from the warehouse, sort and deliver them. These dosts are paid according to the weight of the delivery and, on an average, they make Rs.5 per order, says Medda. They currently have 300 such influencers and he says that their stickiness rates have been very high, even close to 85-90%.
The smaller number of SKUs of this bulk-focussed business has made operations more efficient and helped cut down on the inventory requirement. Warehouse space needed is lesser, and resources needed to manage them are lesser. “Our inventory turns are very high,” says Medda, “We keep stock only for 10 days, while D-Mart keeps stock for 25 and other retailers for at least 30 days.”
Money bags
The start-up has plans to expand, and recently raised $32 million in equity and debt through three rounds. They raised $21 million in a Series C funding (December 2020) round led by WestBridge Capital, along with Alpha Wave Incubation, a venture fund managed by Falcon Edge Capital, Z3Partners, Matrix Partners India and Omidyar Network India and independent angel investors. With the latest funding, the founders claim that the company is growing by 3x with capital efficiency at 10x, much higher than other e-commerce companies.
Investors are drawn by the idea of building for Bharat (or the next billion) and the experience the founders have in this space. “The founders’ well-researched ideas, relevant experience and ability to execute swiftly truly set them apart,” says Tarun Davda, Managing Director at Matrix Partners. InnoVen Capital’s Ashish Sharma shares a similar view. “It requires a different DNA to understand an affluent customer in Mumbai or Bengaluru, who is comfortable with e-commerce, versus the mass segment in Jaipur or Ajmer who has different affordability and is not used to e-commerce. You need to have deeper consumer insights, a wide variety of offerings, beyond the standard branded products and low-cost supply chain/service delivery,” he says, adding that a tightly run operation around warehousing and logistics is also crucial to make positive unit economics.
A 2019 Redseer report concluded that social commerce sites in Tier-II and III cities have great potential for growth. According to the report, the next 100 million online shoppers will come from the smaller cities of India and “likely to have very different behaviour and needs vs the current group of shoppers. E-commerce platforms that tap into the social element…will target this emerging group of users and drive e-tailing growth, from the $24 billion annually (in CY18) to more than $90 billion by CY23.” The report named Dealshare, along with others such as Mall18, as being able to tap this market opportunity.
While the market is big, Forrester’s analyst Sanjeev Kumar says that it has seen challenges across the board. “It is a big market, no doubt about it, but both Amazon and Flipkart faced disruptions in Q2 2020. It has not been smooth sailing like we see in the US. Amazon US saw a growth of more than 40% in GMV in 2020, while in India, we estimate that growth was less than half of it. And that is when they have invested heavily in logistics and buyers have been flocking to these channels since pandemic, especially for grocery.”
He sees Dealshare growing if it is operating in high-growth segments such as online grocery and personal care. The start-up’s FY24 goal is to reach a revenue run rate of $5 billion and be present in 300 cities and be an EBITDA positive business.
Redseer’s Rohan Agarwal says that in order to succeed in Tier-II and Tier-III cities, start-ups must work on giving better deals than their local store, on building a platform that has easy-to-use interface and creating a space that allows conversations. “In larger cities, people value being able to save. Rs.20 but, in smaller towns, people like the conversations they have when they go to kirana stores. That is where you have to be able to build engagement with the customer base,” he says.
Since the start-up is already working on these three aspects and has veterans at the helm, it looks poised to grow in leaps. The niggling worry could be logistics cost, especially when the company is looking to expand more than 10x geographically. If that is set right, they may have a deal.
