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Home > Smart Living> Innovation > Why social e-commerce works in India, and especially in Bharat 

Why social e-commerce works in India, and especially in Bharat

The e-commerce model has its roots in the way Indians prefer buying and selling — with a personal touch

Trust, access to a curated catalogue of products and the nudge factor from the seller make social e-commerce a hit in some markets. (iStock)

In small-town middle-class neighbourhoods, one practice gathers steam in the months leading up to the festive season: An enterprising person, usually a woman, buys saris and fabric wholesale and then, through some smart, word-of-mouth marketing, resells them in the neighbourhood using her home as a base. There are many reasons buyers, especially women, flock to this informal store—the selections are curated to their tastes and needs, they have a comfort level with the seller and trust her, and the seller often offers discounts and pay-in-instalment schemes they wouldn’t get from traditional brick-and-mortar stores. At the end of the day, everyone goes home happy.

This is the exact model that social e-commerce apps like Meesho, DealShare, BulBul and GlowRoad replicate—and it’s one of the reasons social e-commerce is such a hit in India and other parts of Asia. In fact, unlike most other e-commerce models, which we have adapted from Western markets, this is one trend that’s making its way to the US—earlier this month, US tech magazine Fast Company carried an article, titled This $360 Billion E-commerce Trend Is Huge In Asia—And It’s Coming To The U.S. Next, by Vinnie Lauria, who heads a Singapore-based venture capital (VC) firm.

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While the likes of Flipkart and Amazon pride themselves on their range of products, these apps are focused in their curation; they know that many of their customers are first-time internet users who need an easier-to-navigate app that doesn’t have confusing depth of information. They are also lighter and faster—built to be used on entry-level smartphones and patchy data networks. Language is another factor that sets them apart from the bigger e-commerce players—the default language for most of them is tailored to the local language of the user.

Vidit Aatrey, founder and CEO of six-year-old Meesho, which turned a unicorn this year, explains the phenomenon. “Nine out of 10 individuals in India have a dream of starting their own small business, but starting a business requires a lot of capital. People who never had the opportunity to start a store came on to our platform and became entrepreneurs for the first time. They could start their shop on WhatsApp, access anything from our supplier marketplace, and only purchase those items for which they received orders.” Meesho has over 15 million micro-entrepreneurs in its network, 80% being women from small towns.

According to a December 2020 report by management consulting firm Bain & Company, social commerce in India is expected to reach $16-20 billion (around 1.2-1.5 trillion) by 2025 and $60-70 billion by 2030, while the share of social commerce in India’s e-commerce market is expected to register a compound annual growth rate (CAGR) of 65% between 2020-25.

“Social commerce has also presented a cost-effective alternative for larger businesses and brands reeling under the pressure of mounting customer acquisition costs and struggling to protect these precious customers from competitors wooing them endlessly with deep discounts,” writes Ankur Pahwa, e-commerce and consumer internet leader at EY India. “Social commerce, because of its close association with social media, has inherent advantages when it comes to engaging and retaining customers,” he adds.

So, while it’s still a small size of the overall e-commerce pie, it’s a sunrise sector predicted to grow exponentially. From a non-existent share even five years ago, the sector saw revenue of $554 million in 2020-21, a sevenfold growth from the previous year, according to data from analysts Venture Intelligence.

Aatrey says the problems of unorganised retail across tiers 2, 3 and 4 regions are characteristically different from the problems of the organised segment across metros and tier 1 cities. “Unlike in metros and tier 1 cities, product purchase decisions in tier 2+ regions were always based on trust—either on the local mom-and-pop store or the local entrepreneur who sourced products and sold them to his community of friends and family. In a way, social commerce always existed and access to digital resources has only provided it greater reach and scale,” says Aatrey.

He attributes Meesho’s success to a simple, early insight—that over 90% of the Indian retail market is unorganised, catering to customers whose shopping behaviour is very different from their tier 1 and metro counterparts.

DealShare, a Bengaluru-based startup, uses social e-commerce to offer deals on essential purchases like everyday grocery and food items. Their tech is also aligned to this, says Rajat Shikhar, chief product officer of DealShare. “We don’t carry a large catalogue. Our focus is on localised demand—what kind of food and grocery items sell in which region—and we stay frugal in terms of inventory, unlike bigger e-commerce players.”

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The nudge factor also comes into play when you are buying through someone you know socially, and this is again something that distinguishes social e-commerce from its traditional counterpart, says Prashanth Prakash, partner at leading VC firm Accel, which has invested in GlowRoad in this category. “Along with trust, curation and nudging play an important role in purchase decisions in these markets. Someone you know is telling you to buy, and is also helping you do it by teaching you how to use the internet, maybe for the first time. This on-boarding is an important step,” explains Prakash. He believes the lack of penetration of organised retail, both online and offline, beyond the top 100 postcodes in India has been a huge factor in the success of this “very vibrant” sector.

“We have micro-influencers in every market, and social is their gateway to the internet, unlike an earlier generation of internet users who discovered it through search or email. Naturally, social is also their preferred way of shopping,” says Shikhar.

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