Is ‘community buying’ in social commerce key to reaching ‘Bharat’?

Online shopping through Flipkart and Amazon has become second nature to city dwellers. But it is often a dilemma for consumers in Level 4 and 5 markets. This is why despite the growing hype of e-commerce, it represented only 4% of the total retail trade of food, groceries, apparel and consumer electronics in India in 2020. This share is expected to grow to 8% by 2025. For Indian e-commerce start-ups, tapping into consumers who live in rural and semi-urban areas of India or “bharat” as it is often called, seems like the final piece of the puzzle. This is where social commerce comes in. As the name suggests, social commerce is commerce via social media. Startups such as Meesho, Mall91, DealShare, and CityMall, among others, benefit from a network of community leaders or “distributors”. Sellers collect orders from their social networks by sharing product catalogs via WhatsApp. By placing bulk orders for groceries and other daily necessities, these sellers get the items at attractive discounts from wholesalers. This form of social commerce helps startups lower their customer acquisition costs, as they benefit from the social connections of their vendors. The form also helps make online small ticket purchases viable.

Other concerns associated with online commerce, such as mistrust and poor digital literacy are also mitigated by social commerce. Perhaps that’s why online grocery platforms like BigBasket and newcomers in the fast-paced commerce space like Swiggy, are looking at social commerce to grow their user base. We spoke to Sourjyendu Medda of social e-commerce startup DealShare, to understand more about the two different models of social commerce, the ‘distributor’ model and the ‘community buying model’. The distributor model espoused by Indian social commerce startups offers a blast from the past. It’s the same model that Tupperware and Amway have leveraged to create a network of self-empowered women entrepreneurs. However, the new community buying model is one that startups like Pinduoduo have pioneered in small towns in China. Interestingly enough, Chinese venture capital firm Shunwei Capital, which counts Pinduoduo among its portfolio companies, is now sharing its social business knowledge as an investor in Meesho, the only rhinoceros in this space in India. The market, though nascent, represents $2 billion in gross merchandise value (GMV in 2020) and is expected to grow to $16-20 billion by 2025. Share of social commerce in India’s e-commerce market ($38 billion in 2020) is expected to grow from the current market by 1-2% to 4-5% of the projected market of $140 billion by 2025. However, the market is not without challenges. As venture capital firms bet heavily on the sector, they know it’s a risky proposition. Some experts feel that while the community procurement model may see early appeal in India, the biggest challenge lies in the quality of manufacturing. Since the Indian manufacturing sector has not developed, the products of mediocre quality will lead to higher returns for the customers, making it a loss proposition. As such, only categories such as groceries and daily necessities may succeed under the group buying model. For the larger social commerce trend, only time will tell if the last piece in the puzzle makes online shopping for ‘Bharat’ possible.

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