Looking at non-metro, first-time buyers, e-merchants getting into social commerce
The social commerce model – pioneered by Facebook-backed unicorn Meesho and which essentially connects buyers and resellers – is seeing a rise in the number of non-traditional e-commerce businesses springing up across the country. These include Dealshare, Mall91, SimSim (which was acquired by Google’s YouTube video streaming platform), among others. The biggest conventional name to enter the space happened in July last year when Flipkart launched its Shopsy app, featuring a 15 crore catalog of products in categories including fashion, beauty, mobiles, electronics and home.
Products listed on these platforms typically include unbranded or lesser-known brands that are purchased by resellers in these marketplaces to sell on their social media channels to individual customers. The fundamental differentiator in purchasing power between the urban online shopper stationed in metropolitan and Tier I cities, and the smaller ticket-generating shopper in rural cities and Tier II+ is what drives businesses e-commerce companies scrambling through the social commerce jungle to deepen penetration in non-metro segments. However, retail industry experts believe that a replication of Chinese success in the social commerce space may hinge on India’s ability to support this venture with manufacturing capabilities.
Among the global names to enter the space, Singapore-based consumer internet company Sea Group’s Shopee e-commerce platform broke into the segment. Having only launched in November 2021, the app became the second most downloaded free app on Android platforms in December and January, according to data from SensorTower.
The small-town placement of these social commerce apps, through which they primarily seek to target first-time online shoppers, has been seen in the numbers recorded. Meesho, for example, in 2021 saw that 71% of all new users came from Tier 3+ regions like Malkangiri in Odisha, Baikunthpur in Chhattisgarh, Munnar in Kerala, Mankachar in Assam, Khalari in Jharkhand, Lalganj in Uttar Pradesh and Mahua in Bihar.
“Some models in China based on social commerce have been very successful. People are using social media to aggregate demand. Theoretically, in this model, you only manufacture or source after aggregating a minimum quantum of demand. Pinduoduo has had great success in China in this model. In India what we have seen is that the model is copied unlike China that the purchasing power there is significantly higher than in India, and secondly the supply chain and the e-commerce penetration in China are much better,” Arvind Singhal, chairman and managing director of retail consultancy Technopak told The Indian Express.
“In India, even when you are in the middle income group, purchasing power drops dramatically. Discretionary spending power is even more so. Many of these startups have a poor idea of addressable demand in India and the challenges of aggregating demand and delivering products. Moreover, Chinese supply chains are very efficient – an advantage that a company like Pinduoduo enjoys,” he added.
While the distribution of the online shopping market is still heavily in favor of traditional e-commerce businesses, compared to social commerce platforms, the majority of growth, even globally, is being driven by businesses. of social commerce. According to a RedSeer report, in the 2020 Black Friday sale in the US, leading social commerce company Shopify saw $5.1 billion in gross merchandise value, while Amazon was just under $4. .8 billion dollars.
A significant problem reported with this model is the widespread incidence of counterfeit and counterfeit products delivered through the platforms, given that there is little or no control over the supply chain and inventory. More recently, according to reports, an FIR was filed against Shopee in Lucknow by a complainant alleging duplicate products were delivered from the platform.
In response to a series of questions sent by The Indian Express, a statement from Shopee noted: “Shopee is a Singaporean company committed to helping small Indian businesses thrive through our online e-commerce marketplace. Our goal is to partner with India’s digital economy mission while contributing to the Aatmanirbhar Bharat Abhiyan. We are honored that thousands of local sellers are already growing their online business on Shopee.”
“The sale of counterfeit items and other intellectual property infringing products is strictly prohibited on our platform. We require our sellers to comply with both local regulations and our own policies. We also employ a variety of proactive screening measures to identify listing violations, and we provide procedures for intellectual property owners to request the removal of infringing listings,” he added. In India, the next frontier targeted by these social commerce companies is the grocery space, where many of them, including Flipkart and Meesho, have made their presence felt.