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ShopX is giving retailers in India a new way of sourcing from wholesalers: Startup Stories

Written by Avanish Tiwary Published on   5 mins read

Around 70% of its demand comes from tier-2 and tier-3 cities.

While customers in India are spoiled for choices when it comes to online shopping, the situation for small retailers is not the same. Most neighborhood stores and independent businesses in India rely on the physical wholesale market to get their supplies.

“Most of the retailers have to shut their shop on Sundays for at least four to five hours and lose business, as they have to go to the wholesale market to get their stock filled,” said Amit Sharma, co-founder of ShopX.

Launched in 2015 by Apoorva Jois and Amit Sharma—who until July 2014 ran five online private label brands in the apparel and home decor spaces—ShopX enables retailers to order products from its app without having to leave their shop.

When they stumbled onto the idea of creating a digital commerce platform for retail shops, the founders spent around three months testing the product with retailers, who Sharma and Jois said loved the prospect of having such an option.

“We realized it was a win-win idea for every stakeholder—retailers, brands, and us. As a business, we felt it could really be scaled to a multi-billion-dollar profitable business in the long run,” Sharma told KrASIA.

Sharma said they quickly built the first version of the app and launched it in May 2015. “It’s better to launch fast and learn, rather than wait too long and try to achieve perfection. We launched it as soon as we realized we have a minimum viable product,” he said.

Soon after a prototype was built, the founders approached Nandan Nilekani, co-founder of one of the biggest IT companies in India, Infosys. Within “five minutes of listening to the idea and seeing the product, Nandan said yes,” Sharma claimed. Since 2015, the company received USD 18 million in tranches from Nilekani.

It used the money to make a better version of the app, forge partnerships with suppliers, and create a supply chain. The company partnered with almost all brands in the phone and electronics category, and started listing their products on its app, giving retailers an array of choices to choose from and order online.

ShopX claims it has a much wider product selection than local wholesalers, from which retailers have been buying their stock for decades. Not only does ShopX have more product choices owing to its partnerships with many brands, buying from the platform also helps retailers manage their working capital more efficiently. According to Sharma, before ShopX came onto the scene, retail shop owners would go to the wholesale market once or twice a month and buy products for the entire month, which required large quantities of capital. The company said its clients place a new order at least twice a week, meaning they are able to spread out their spending.

Amit Sharma, co-founder of ShopX. Photo courtesy of ShopX.

“So, they have the advantage of ordering more frequently and on top of it, they don’t have to step out of their store. The third big benefit is a better fill rate, which is essentially the fulfillment ratio. The fill rate of a local seller is typically 70%, as they don’t always keep the stock of all colors and the latest models, whereas our fill rate today is 97%,” Sharma explained.

Around 70% of its demand, the company said, comes from tier-2 and tier-3 cities, as retailers there face a severe lack of range in their product selection. From the very beginning, the company built its solution and formed partnerships while keeping the retailers of small towns in mind. After finding success in semi-urban towns, it ventured toward metropolitan areas. Sharma believes in cracking the difficult market first, because the transition to urban areas, where people were more likely to adopt new tech platforms in their business operations, would be smoother.

In 2018, it started selling FMCGs (fast-moving consumer goods) and staple products, and increased its client base to neighborhood stores.

Sharma said ShopX works with more than 500 major FMCG brands in addition to thousands of small and local brands. According to him, the cost of distribution in urban areas is growing at about 10% year-on-year. “Most of them don’t have a technology platform, and the ones who do use rudimentary tools. In the absence of the latest tech, they don’t have last-mile data visibility and catch problems when it’s too late,” he said.

Companies suffer from a lack of insight, which impedes their ability to launch new products or increase their fill rates.

ShopX has a product called RetailX for the brands, allowing them to manage a network of retailers. It gives them an interface that shows information about what retailers and their customers are after, and creates targeted campaigns that are aligned with the kind of demand that comes from a specific area or neighborhood.

“We give them space on the app for banners as well. If they want to do some in-shop marketing like placing physical ads, say danglers or posters, we arrange for that as well. We give them a comprehensive marketing and distribution platform,” Sharma said.

In August 2018, ShopX raised USD 35 million led by Fung Strategic Holdings to expand its footprint to 24 states by the end of the year. Currently, it serves 180,000 retailers across 460 cities, delivery one million packages per month. It has 25 delivery hubs across the country.

The company recently launched a lifestyle and clothing category as well, as it seeks higher returns than those generated by FMCGs and electronics. Sharma said this move increased its net margins by 500%.

Currently, lifestyle and apparel listings are available only to the retailers in Karnataka, and the company will launch a pilot in Maharashtra soon. “Once we reach a point where we have tested the key assumptions and figured out the market fit, we will scale it up everywhere. So, within 2020, it will become a serious business for us,” he said.

Apart from carrying new types of merchandise, ShopX began issuing loans to retailers via a partnership with LoanTap this year. It claims around 10,000 retailers have already applied for finance, LoanTap has disbursed more than INR 10 million (USD 1,400) through the ShopX platform. “Currently, we are not monetizing this. But once it reaches a certain scale, we will work on a revenue-sharing model with LoanTap,” Sharma said.

The company currently competes with a handful of companies offering similar services, but Sharma is not worried about the competition. He said it’s good to have company in this fledgling space.

“Everybody in this space is working together to build a new industry, especially when it’s so young and large. I think, in the end, there will be three big players who will control this market estimated to reach USD 60 billion in value in 2025,” he said.

This article is part of KrASIA’s “Startup Stories” series, where the writers of KrASIA speak with founders of tech companies in South and Southeast Asia.


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