E-commerce 3.0: Changing the way the next 400M shop via Social Commerce
Post the Jio revolution, rising internet penetration is bringing new consumers & businesses online and is expected to drive India’s e-tail market to $200B by 2026. This growth is exciting as it brings customers from Tier 3 and 4 towns who haven’t transacted online into the digital economy and democratizes their ability to buy products they aspire for. As we become more digitally inclusive, we are entering an era where newer commerce models have to emerge to understand the next 400M internet users and help serve these customers better. Will these customers search & buy? Will they browse and buy? Will they buy more on recommendation? What will be the moving factors on their decision to purchase online?
These are questions we asked ourselves repeatedly and one model we believe can re-imagine e-tailing & e-commerce to become relevant is social commerce. For those uninitiated, social commerce is the use of social networks in online e-commerce where social media platforms such as Facebook, Whatsapp, Instagram etc help bridge the trust gap by supporting interaction, user contributions, community involvement and referrals in assisting online buying and selling of products and services.
Why Social Commerce in India Now?
There hasn’t been a better time to build a commerce platform that leverages social media. India has grown from 168M social network users in 2016 to 259M in 2018 with average Indian spending over 2.5 hours across social media platforms such as Facebook, WhatsApp, Instagram etc. As smartphone penetration deepens, we expect more consumers to engage on social media platforms. This aside, given India’s diverse population with varied choices/selection ranges and the opportunity for long-tail products to be sold by smaller merchants is huge. India is a country of micro-entrepreneurs (we have over 50M of them today) and going forward we are poised to be the largest gig-economy in the world. We expect at least 20–30% of them to come online by 2025.
Providing a seamless experience for these micro-entrepreneurs to transact online and building a platform to integrate Social media where Indian users spend close to 10–12% of their time per day will be critical for e-commerce to scale in India.
Started in 2015, Shop101 was early to the social commerce opportunity. Since then, they have quietly build a platform that leverages social media and are dominating selling long-tail products by building trust online through resellers where traditional commerce haven’t been able to reach.
Creating an alternate low-cost distribution channel via resellers:
Shop101 unlocks the value in people’s social network through re-sellers who provide potential buyers with a relevant curated feed given they’re familiarity and understanding of the environment and customers around them. The platform empowers these resellers by providing them backend supply, logistics & payment services. These resellers then bring high visibility to products, bridge the trust deficit and reduces the cost of customer acquisition thereby solving 3 big problems that traditional e-commerce companies face today. Women homemakers, college students, and young entrepreneurs are looking to sell on social media and start their own businesses without any investment. (Watch the Interesting story of Arti that helps bring perspective here) India currently has over 40M homemakers and 10M students residing in the top 50 cities and even with 20% adoption in the next few years, we expect the reseller model to scale and create a parallel alternate distribution network. This channel leads to a low-cost distribution model given supply chain is now largely digital with goods physically shipped directly to the buyer avoiding transportation & stocking at multiple levels (Detailed pictorial representation is shown in the image below) Given the flexibility of the supply chain, Small-mid-sized new-age brands and long-tail products can now be distributed through Shop101’s platform.
A strong leadership team that has demonstrated early initial traction:
The founders Abhinav Jain & Aditya Gupta have put-together a strong leadership team with relevant domain expertise and strong previous entrepreneurial experience.
Leveraging combined power of social media, resellers, and manufacturers, the company has demonstrated strong progress (Grown over 5X in GMV) in the last 12-months since raising their last round of investment. They have shown promise of good execution by building a stellar product and ensuring operational rigor in customer service across both buyers and sellers on the platform.
Strong Monetisation Potential
Given the low-cost distribution model, the company has acquired a majority of sellers, resellers and consumers organically. Alongside this, the company has built strong monetization channels through payments, logistics, supply commissions which have helped them realize revenue from early on in their journey.
Overall, we were impressed by a strong founding team, their deep understanding of the business, focus on delivering good quality customer experience, data-driven and iterative decision-making process. The company has solved key-challenges that Indian e-commerce has faced and have factored in unique #HindustanHamara nuances in their business and product strategies that have helped them scale both sides of the market-place significantly. All these reasons alongside a huge-untapped market opportunity have given us the conviction to partner with Abhinav, Aditya and the team. We alongside Unilever Ventures are excited to join existing co-investors, Vy-Capital & Stellaris Venture Partners on the board of Shop101. I’d like to thank Rahul Chowdhri from Stellaris for introducing us to Abhinav and the team. Rahul, Siddhanth and I form the deal team at Kalaari for Shop101. We believe the social commerce journey is still at a very nascent stage and are excited to partner with the team to create significant value for micro-entrepreneurs and consumers alike!
Kalaari is committed to investing in great founding teams which are thinking uniquely to create impactful companies in India for India. If you know a company we should meet, we would love to hear from you.
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