How social commerce is becoming the new frontier in online shopping

Start-ups such as Meesho, VMall and BulBul.TV are getting into areas that were left untouched by e-commerce majors

Just when you thought e-commerce was the next big thing in the economy, the venture capital tap has opened up to a slightly different set of enterprises -- tech start-ups that use the power of social media to enable commerce.

‘Social commerce’, which consists of firms like Meesho, VMall, BulBul.TV, among a dozen others, is the latest buzzword doing rounds and has the caught the fancy of internet observers across the board. Big venture capital (VC) investors such as SAIF Partners, Accel, Omidyar, Naspers and Sequoia are among many others who already entered the game.

By some estimates, over $300 million has been poured across social commerce in the past few years. Only last week, two players mopped up series ‘A’ rounds: DealShare raised $11 million from Matrix Partners and US-based Falcon Edge, and Mall91 raised $7.5 million from Go-Ventures, the investment arm of ride-hailing firm GoJek.

The enthusiasm hinges on not only on the early success of such business models but also the hunger to capture the next 100 million internet shoppers by targeting them at the places where they essentially exist — WhatsApp, Facebook, YouTube (video content sites) and various other social platforms.

These new ventures are capitalising on the penetration of social media platforms, and in some cases creating commerce platforms with social features. Most of the ventures are essentially giving tools to home-based sellers to manage commerce through WhatsApp, the quintessential messaging platform that commands over 400 million monthly active users in India.

The frenzy is driven by the success of Meesho, a four-year old Bengaluru-based start-up that has raised over $200 million alone, and counts Facebook as an investor. Meesho is a platform on which sellers put up their goods and connect with re-sellers -- essentially homemakers looking to earn an extra buck -- who agree to use their own WhatsApp network to on-sell these items for a commission.

Meesho, on its part, provides sellers with inventory management tools, payments and logistics support. Though the company does not disclose business numbers, Meesho claims a network of two million re-sellers spread across 700 cities, mostly tier-II and beyond. Its deep penetration in non-metro areas was a major factor that got Facebook interested in the start-up, Ajit Mohan, India managing director, Facebook, had said at the time of investment.

In a sense, the industry is mirroring trends in neighbouring large economies. Take for instance, Pinduoduo in China. The social commerce platform, which enables WeChat users to sells on the same app, hit the US stock markets in mere three years of launch at an eye-popping $25 billion valuation. In FY18, Pinduoduo recorded $68 billion in gross merchandise value sales, or four times the combined value of Indian e-commerce market.

As Sequoia’s Rohit Agarwal puts it: "Every salaried person in Indonesia is running a small side-business; from school teachers to retail employees and highly paid Big4 consultants to startup engineers. Start-ups are trying to create the same behaviour in India."

Video and vernacular are two other areas that these start-ups are leveraging to expand their user base. Take BulBul.TV and SimSim for example. Both are essentially video platforms, much like TikTok, that allow users to create video and build their following on the platform. The only difference here is that the videos are created to sell the products advertised or presented within them.

Another social commerce platform Mall91 combines live videos based shopping, local language voice recognition-based catalog discovery and Whatsapp like chat/messaging checkouts— features it claims directly work with the ‘Bharat’ audience.

"Regular e-commerce works on search — you type in what you want and it shows up — or scroll through or click on a picture," says Sajith Pai, a director at Blume Ventures. 

“Still, it needs certain awareness and comfort, to be familiar with the UI, to know what you want and to overcome the friction. Social-Commerce removed some of those friction, and now content-commerce will remove some others. It is almost as if, the expanding e-commerce landmass needs new hooks to connect with audiences,” he adds.