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Indian social commerce startups ride out the pandemic

Written by Avanish Tiwary Published on 

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Since 2018, India has been seeing a rise in usage of social commerce platforms such as Meesho, Shop101, GlowRoad, and Bulbul.

Minakshi Bansal, a housewife and mother of two who hails from Patna, a tier two city in Northern India, lingers on Facebook almost all day long on days when there aren’t many domestic chores to attend to. But she’s not a typical social media addict.

“I am not there to follow up on my friends’ most recent updates or selfies,” Bansal said.

She posts pictures of women’s apparel and jewelry on her Facebook page for sale. Once someone likes anything she posts, they ask her to ship it to them.

Bansal is one of the now millions and still growing Indians who are using social media like Facebook in combination with social commerce startups to run their own small e-commerce business online.

In October last year, she enrolled in one of the social commerce platforms that list apparel, home décor, and personal care products, among others. Bansal learned how to share pictures, details, and prices of these products with their family, friends, and acquaintances through Facebook, WhatsApp, and Instagram.

“We make it easier for resellers to share our catalogue on Facebook, WhatsApp, Sharechat, and others. Facebook and WhatsApp being the two most dominant channels, are used more frequently than others,” said Abhinav Jain, founder and CEO of Shop101—one of the many social commerce apps in India.

When Bansal gets an order confirmation from the members of her online social circle on Facebook or WhatsApp, she opens the social commerce app she uses and buys the product on their behalf and the company does everything else—delivery, money collection, and paying Bansal her profit from the sale she made.

Since 2018, India has been seeing a rise in the usage of social commerce platforms such as Meesho, Shop101, GlowRoad, and Bulbul. As the traditional e-commerce sector has largely been conquered by Flipkart and Amazon India, these startups are scripting a new wave of online commerce primarily targeting the next 500 million netizens from smaller cities.

Bansal told KrASIA, she sells products worth INR 50,000 – 60,000 [USD 673 – 808] a month sitting from home by just broadcasting pictures of clothes and other products on social media channels.

But, everything changed after the COVID-19 pandemic hit the country and India went into a complete lockdown by the end of March. “During the lockdown, all my income had come to nil as social commerce website I was working with had to stop operations,” Bansal said.

“Since our platform is built towards delivering physical goods, everything was on pause. So, that time was quite tricky for us as well as our resellers who depend on platforms like ours for their monthly income,” Jain said.

While the lockdown adversely impacted digital companies, including e-commerce platforms, social commerce startups saw the worst of it. As a fledgling sector in the country that is yet to secure its footing among the masses, a nation-wide brake on the economy couldn’t have come at a worse time.

“We were practically shut for 45 days between April and May. Due to the lockdown and its impact in the following months, we have totally lost this year,” Sachin Bhatia, co-founder and CEO of social commerce startup Bulbul, told KrASIA.

Bhatia said the company was processing more than 150,000 orders a month till February, which has significantly gone down now.

Startup

Read this: Social commerce startup Meesho lays off 200 employees as COVID-19 stresses business

As operations had stopped, social commerce companies including Facebook-backed Meesho temporarily veered into essential categories like online grocery and FMCG products that were allowed by the government. Mumbai-based Shop101 started offering digital products such as bill payments and online learning in April as an experiment. The lockdown also gave Shop101 the time to strengthen its technology offering.

“We used that time to build our core infrastructure IP which would help us reach profitability much faster. We built an underlined system that today helps us predict which order has the most potential of getting returned,” Shop101’s Jain said.

After two months, the company discontinued its digital payment and edtech products. “We did this because it was a time of adversity and all hands were on deck. But now as the economy has opened up, we are ensuring our main product is back.”

Festivity to the rescue

When India started to open up the market in a phased manner starting June, social commerce companies threw all their forces to ensure their resellers and influencers come back to their platforms.

“India was not opening up the market uniformly as businesses in certain states opened first while other states were in lockdown because cases were higher there. It was a hectic period as we were continuously mapping out which areas are serviceable and accordingly informing our resellers about it,” Jain said.

According to Jain, although the company lost buyers and sellers during the lockdown, once the business started to open up they started to come back to the platform. “Because they [resellers] have also lost business, we are seeing higher engagement from them.”

One stark change in buyer behavior that Jain saw was the demand shift in the category. Till last year, fashion and ethnic wear were one of the largest categories for Shop101. But as people’s lifestyle in the last six months changed and work from home has become a new normal, the company is seeing a “disproportionate growth” in categories such as home décor, beauty, personal care, and kitchenware.

After months of being cooped up inside their houses, not being able to meet family or friends, and holiday plans being canceled indefinitely, the festive season in India, came as a welcome distraction and an opportunity for companies to capitalize on the pent-up demand.

While major e-commerce companies like Flipkart and Amazon India collectively raked in USD 6.5 billion in October during their yearly festive season sale, Saurav Chachan, senior consultant at RedSeer Consulting said, “social commerce companies are also going to use the shopping hype during the festive season to get back on track.”

Shop101 has started its festive sale called ‘The Great Indian Re-selling Challenge’ from November 17 to 21. As part of the festive period offer, Shop101 is giving bonus money to sellers which is proportional to the quantum of products they sell.

“Last year we did it in September-October, but this year we are doing it in November. All the weddings that didn’t happen earlier this year due to lockdown and social distancing rules that prohibited mass gatherings, would start happening now. We are already seeing an increase of purchases for clothes,” Jain said.

Long-term changes

In its attempt to diversify its portfolio from being a social commerce platform, Shop101 made a low-key launch of its new platform Dash101, earlier this month.

Jain said, while micro-entrepreneurs use Shop101 to earn a part-time income, he realized their tech infrastructure can also help businesses to digitize their shops and come online. The new platform, Dash101, allows businesses to open their online shop including delivery and online payment facilities.

The unceremonious lockdown and its aftermath forced entrepreneurs to squeeze their marketing spend, focus on being cash-positive, and diversify their portfolio.

Take Bulbul for example.

Unlike other social commerce startups such as Meesho, Shop101, and Glowroad, that work on the typical reseller model, which essentially involves the network of housewives, students, and part-time employed individuals to sell products—Bengaluru-based Bulbul ropes in mini-influencers to make short explanatory videos of products for their followers.

Read this: These video commerce startups are trying to take on Flipkart and Amazon

“Although influencers were making many videos for us, a large chunk of the content was created in-house which involved extra expenditure,” Bulubul’s Bhatia said. The company also had to spend money on marketing and advertising to ensure these videos reach the masses, hoping customers would visit its app and purchase. This increased the cost of customer acquisition significantly.

As its business took a hit during the lockdown, Bhatia decided to do away with marketing-led sales and completely focus on the influencer-led sales model. In September, the company started exclusively working with influencers as well as approached new talent to make videos for them and sell in lieu of the incentive they would earn on each sale.

“Videos made by influencers have always had a higher conversion rate on our platform. It was something that was staring us at the face, but we never scaled it in a significant way,” he said.

Bhatia said, the team utilized the downturn period to focus on this model, and in the next three-four months the company is going to scale this up. It recently announced a corpus of INR 10 million [USD 134,000] that would go towards influencers.

“Since the pilot, our average order value has gone up and returns have come down. So, the metrics suggest we are on the right path.”

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