India’s E-Commerce: Great Leap Forward

Live commerce, quick commerce, group buying, WhatsApp commerce, dukaantech have made their mark.

Even as the pandemic led to a spike in digital adoption in 2020, it was only last year that the consequences of that shift became apparent.

Funding to tech start-ups hit record levels, a new unicorn company seemed to be around the corner at every point, and software salaries remained a talking point throughout the year, not just during the customary placement season.

While the tech start-up ecosystem was abuzz with these happenings, a larger shift was underway in the e-commerce industry.

New forms of online distribution and business models like live commerce, quick commerce, group buying, WhatsApp commerce, dukaantech and D2C roll-up made their mark last year.

“The first generation of e-commerce was designed for premium, high-income, English-speaking Indian consumers living in metros. The model was focused on big sellers and did not include neighbourhoods in small cities and towns,” says Akanksha Hazari, founder and chief executive of LoveLocal, a start-up that enables kirana stores to sell online. The company recently raised $18 million in pre-Series B funding.

The platform has two apps — one for sellers to list their products in a catalogue, create offers for their online stores and market themselves through social media channels, and a second a consumer app that acts as a portal for buyers.

A slew of similar start-ups like Dukaan, Bikayi and Digital Showroom last year raised Series A rounds — the stage when a tech business is said to have hit product-market fit.

Popularly referred to as ‘dukaantech’, these companies earn by offering their platform’s services to retailers through a subscription model, and not on a commission basis.

Another interesting trend adjacent to ‘dukaantech’ is conversational commerce on WhatsApp.

While the idea that chatbots integrated with the messaging platform can help businesses stay connected with customers has existed for a few years, it was only this year that one could see a widespread adoption of this channel.

Also, the messaging platform said it was testing a newer version of its tech for businesses to bring the time taken for merchants to integrate down from weeks to minutes.

The biggest splash in WhatsApp-based conversational commerce was made by Mukesh Ambani’s JioMart, which started testing its integration with the messaging platform in the beta mode. The full-scale launch is expected this year.

‘WhatsApp is extremely simple and easy to use. So, there’s no customer inhibition when ordering for supplies. It’s extremely intuitive; so, there are no barriers to technology. And digital shopping is now just an extension of messaging via WhatsApp to JioMart. It’s all taken care of effortlessly in a couple of steps,’ Jio Platforms Director Akash Ambani said last month.

For this reason, AI-based chatbot makers like Gupshup, Reliance Jio-owned Haptik, Verloop.io and Yellow.ai entered the fray to offer businesses tools to enable sales on WhatsApp.

“The entire market was waiting for this to happen. We can expect to see WhatsApp take an approach like WeChat in China,” says Haptik CEO Aakrit Vaish.

The chatbot company is aiming to hit the 50 mark in terms of the number of customers live on WhatsApp commerce this year.

The moneypot models

The disruption caused by the pandemic not only pushed established brands to seek consumers online, but also led to the creation of many online-first consumer brands.

As a result, 2021 saw a bevy of Thrasio-style start-ups raising hundreds of millions of dollars in funding.

These businesses are styled on the model innovated by US-based Thrasio, which acquires best-selling small brands on Amazon and scales them up with its money and marketing muscle.

Banking on this house-of-brands approach, two companies — Mensa and GoodGlamm — turned unicorns within a few months of being founded.

Several others like Globalbees, 10Club, Upscalio and GOAT Brand Labs have also set up shop in this segment — and all of them are on an acquisition spree, buying up diverse brands in verticals like beauty, home care, jewellery, sportswear and more.

“We are looking at companies with a wide range of revenues — from monthly run-rates of Rs 50 lakh to Rs 20 crore (Rs 5 million to Rs 200 million). While we will stay away from businesses that are busting a lot of cash, acquiring the ones that have only a marginal burn rate is not a problem for us,” Globalbees CEO Nitin Agarwal told Business Standard earlier.

The other new e-commerce space which has attracted a lot of dry power from investors in 2021 is quick commerce.

While grocery delivery start-up Grofers re-branded itself as Blinkit to focus on 10-minute deliveries, companies like Dunzo, Flipkart, Swiggy and Ola either made their foray in fast deliveries or upped the ante.

However, the unit economics and depth of the market that will pay for such services are still in question.

Siddarth Pai, managing partner of early-stage VC firm 3one4 Capital, says: “This business model requires large-scale investments in dark stores, maintaining inventory levels and data. There is no customer loyalty and product differentiation to begin with.”

For this reason, investors are not keen on betting on new start-ups doing quick deliveries.

However, the capital going into quick commerce companies is expected to have a positive impact on other segments.

“Areas like drones for quick delivery, automated dark stores and electric vans will benefit from the capital going into quick commerce,” says Pai.

Many ways to trigger buys

What 2021 has shown is that the e-commerce ecosystem in India is far wider than just the duopoly of Amazon and Flipkart, say experts.

“Live commerce is a very important development that has switched the trigger of buying from discounts and offers to credibility and engagement,” says Sreedhar Prasad, a senior management consultant who was earlier a Partner at VC firm Kalaari Capital.

Live commerce is a form of online shopping where customers make purchases during live streaming video events — and short video platforms like Chingaari and Moj, which jumped in to fill the void after a ban on TikTok last year, are leading the charge in this space.

Shortform content is expected to drive live commerce up to a market size of $2.5 billion-$3 billion by 2025, according to a Redseer report.

If the impulse of live content driving purchases is a trend in e-commerce, there is also one that seems to rely on quite the opposite instincts.

Group buying, a model in which several people come together to aggregate their purchases from an e-commerce platform, attracted a lot of attention in 2021.

Take DealShare, for instance. It shot into limelight in July 2021 when it raised $144 million in funding at a valuation of $455 million.

While the company’s gross merchandise value (GMV) rose five times to reach $200 million in FY21, it expects to repeat the performance in FY22 on a much larger base and hit the billion-dollar mark in terms of GMV.

Another trend in the category of social commerce — clubbing together models like group buying, influencer-driven e-commerce and purchases on social media platforms — that emerged in the past year was vernacular content.

“A lot of these emerging e-commerce models are filling the white space of e-commerce in Tier-II and -III geographies, and beyond. And a big part of this is due to vernacular content which is establishing trust and engagement for this audience,” says Pulkit Agarwal, CEO and co-founder of content-to-commerce platform Trell.

“I think the first generation of e-commerce platforms only focused on the top deck of India’s Internet users,” he adds. “We will take e-commerce to the 700 million internet population of the country, and beyond.”

Feature Presentation: Rajesh Alva/Rediff.com

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