posted on 09 Dec 2019
Nalini Trivedi (name changed) came across a page, womenclothestudio.com, while browsing Instagram on a Sunday evening. The page offered her an attractive jumpsuit for just ₹360. Not seeing an option to pay cash-on-delivery (COD), Trivedi made the payment online and received a bill that said she would receive the order within a week. Several days later, she had still not received the order. She called the number listed on the website but it was unreachable and the page itself disappeared after a couple of days. Her long complaint mail to them also bounced.
Trivedi’s experience captures the entire gamut of social commerce—commerce and selling facilitated by social media—where recommendations are made on the basis of a user’s likes and preferences. This ease of shopping, however, also comes with inherent danger, like in Trivedi’s case.
Enter secure platforms that help offline businesses go online, use referral systems to buy, sell or promote products and services, all the while capitalising on people’s usage of social media.
Unlike random pages on social media apps like Instagram, these platforms keep all the stakeholders’ interests in mind while aiming to increase the number of transactions. And unlike Facebook Marketplace, social commerce platforms also take on the responsibility to handle logistics, returns, payments—generally COD—and any disputes.
The medium generally used to distribute product information is a social media platforms like WhatsApp, Instagram and Facebook, and the product is sold to the end customer by a friend, family or relative. Social commerce platforms provide ecommerce functions, but use social media to help them through it.“Social commerce is a broad term where eventually somebody has to use his personal contacts to do business,” says Kunal Sinha, co-founder and CEO of GlowRoad, a social commerce platform that started in November 2017.
GlowRoad, along with platforms like Meesho and Shop101, has a B2B2C model, where the reseller sees a product on the app, and sends product images and description to potential buyers via social media. Once the end-customer chooses a product of their liking, the reseller can add their margin, add the buyer’s address and after choosing a payment option, order the product. While the seller gets the price of his product, the reseller gets a cut, the customer gets the product delivered, and the platforms charge a small margin for themselves.
As a safeguard, social commerce platforms pay sellers after a specified period to reduce discrepancies and ensure customer satisfaction.
While reseller platforms like Meesho and Shop101 help create entrepreneurs and homepreneurs, others like CoutLoot help offline sellers go online with ease and without making any investment. For small businesses, selling via traditional ecommerce is a task that involves several processes and a lot of paperwork. Whereas on CoutLoot—an O2O social commerce platform—there is no need for lengthy paperwork, says Jasmeet Thind, co-founder. “To take your store online, all you need is your phone and internet,” he explains.
Sellers can list their products on CoutLoot and potential buyers can connect through social media platforms or CoutLoot’s own app. Before the product is sold, the buyer and the seller can talk and bargain on the platform too, giving the complete experience of an offline store. CoutLoot also provides translation into 12 local languages to enable easier conversation between buyers and sellers.
Mall91, another vernacular, local language-focussed platform that sells products through live and TV shopping apart from direct selling, also partners with influencers who try the products in front of the camera after which people can choose to buy them. The platform incorporates social media on a referral basis, where getting a customer to purchase from the platform gets the referrer commission. This commission is not a margin, as on the reseller platforms, but a proportion of the platform’s own commission.
BulBul and simsim are other live and influence-marketing social commerce platforms that work on a similar model.
Push vs pull
While ecommerce platforms are built for the topmost population of metro cities, social commerce platforms are designed to attract people from smaller cities, towns and villages. The applications are available in various vernacular and regional languages and the interface is simpler.
People go on ecommerce platforms knowing what they want to purchase. They search for a product, compare prices across buyers and purchase it. This marketing strategy is called pull marketing, where the company spends money to pull customers on its platform with the idea that they will purchase. Social commerce uses a push marketing strategy, where the product is pushed on people’s phones using social media, points out Nitin Gupta, founder and CEO of Mall91. Thus, the customer acquisition cost for social commerce platforms is lower. “We don’t spend more than ₹20-25 to acquire a customer,” he says.
While purchasing on an ecommerce platform is a well-planned buying decision, customers on social marketing platforms make impulsive buys. Moreover, ecommerce platforms show thousands of results in a product search whereas on social commerce, someone who knows your choice sends you a few personalised recommendations of a product based on your likes and preferences. “Someone keeps window shopping for you, and sends you products once every few days, personalised for you. If you then think you want to buy it, you buy it,” says Sinha of GlowRoad, which grew to $20 million in Gross Merchandise Value (GMV) when it was launched in 2017, and recently crossed $100 million.
The entry point for users is an aspirational catalogue. This includes things they are inspired to buy from TV serials and movies.
Nitin Gupta, founder and CEO, Mall91
Since social commerce is geared at smaller cities and towns and helps offline businesses move online, the products on the platforms are often non-branded and cheaper. “The entry point for users is an aspirational catalogue. This includes the things they see and are inspired to buy from TV serials and movies but are sometimes not available in their town,” says Gupta. The categories of items available include fashion and apparel, FMCG goods, beauty and grooming products, electronics, wearables and daily need products among other things.
The way ahead
Social commerce platforms are successful because of their inherent trust factor [as people only buy from a known connection] as well as the use of platforms like WhatsApp, Facebook and Instagram that people are already comfortable with. Besides, they enable conversation in local languages, use chat features before check-out and provide users a video-based product experience. “One of the biggest challenges we faced was to bring an experience to users in their own language to make them very comfortable,” says Vidit Aatrey, CEO, Meesho.
RedSeer Consulting, in its January 2019 report, noted, “There are multiple reasons why these people choose not to shop online—trust being the biggest factor. It is this trust gap that many social ecommerce players are seeking to bridge by converting the social media sellers (who are selling on platforms like WhatsApp, Instagram) into an intermediary.”
Thind adds, “Because the seller and the buyer chat before a deal, the seller can give more information and the buyer can bargain. The auto translate feature in apps translates the language to your local language which leads to the parties trusting each other.”
Social commerce is not without its challenges. Sometimes, when buyers know the price and details of a product, they tend to buy it directly from the website, as in the case of traditional ecommerce. Hence, social commerce platforms have ensured that their name does not appear anywhere in the transaction process. “We need to protect the interest of our resellers... GlowRoad’s name is not revealed to the end customer in any of the processes, even during delivery. If it would, the reseller would get killed in between,” Sinha says.
Since the spending capacity of users from smaller towns and cities is low, the ticket size coming from these places is also low. Besides, people often choose the COD option, putting the responsibility of handling and dispersing cash in the hands of the platform. Shipping to and from smaller cities and towns also becomes a challenge. To deliver products with low monetary value only adds to the operational burdens of these platforms.
“I think social commerce will become the largest ecommerce for categories such as fashion, accessories cosmetics and more because 93 percent of total commerce in these categories is unbranded,” says Aatrey. Social commerce remains among the only channels that work with unbranded products, giving them a first-mover advantage in this largely untapped product category in India. “This has just started in India. So I think it’s going to get bigger and more innovative,” Sinha adds.
And if China is anything to go by, it might just produce the next class of unicorns in India. At present, China sees a 63.2 percent year-on-year growth in social commerce platforms. The platform Pinduoduo has been the fastest growing social commerce app in China’s history, becoming the country’s third largest app in just three years since it started. While Pinduoduo’s average order value is $6, as compared to $30 on competitors Taobao and Tmall, and $60 on JD.com, the platform, after its IPO on Nasdaq, was valued at $60 billion. Gupta says, “The behaviours [in India and China] are different but the markets are similar. The next 3, 4, 5 years, we can see exponential growth.”
Source: Forbes India
View original content here.
StoreHub has raised a US$8.9 million (RM36.2 million) funding round led by returning investors Vertex Ventures Southeast Asia & India, with participation from Accord Ventures and a private family office with dual headquarters in Southeast Asia and Europe.
Licious, a Bangalore-based startup that sells fresh meat and seafood online, has secured $30 million in a new financing round as it looks to expand its footprint in the nation.
By creating a zero investment model for sellers, and building trust among buyers, social commerce startups such as CoutLoot and Mall91 are changing the rules of ecommerce.