Flipkart’s social commerce platform Shopsy which was launched in July this year is eyeing to become the largest grocer in the country. Shopsy has started offering groceries as a category on its platform. Leveraging the Flipkart Group’s supply chain infrastructure and tech capabilities, grocery on Shopsy will cater to consumers across 700 cities, spanning over 5,800 pincodes. In an interview with Peerzada Abrar, Flipkart senior vice president Prakash Sikaria said the firm is expecting to clock around 100 million users on the Shopsy platform by next year. Edited excerpts:
What is social commerce and community group buying and what does it mean for Flipkart?
Flipkart’s Shopsy as a platform engages in reseller commerce. Since its launch in July 2021, it has seen significant growth, especially across categories such as fashion. Today, if you see social commerce in India, there are two kinds of buying that are happening - one is where consumers are using the platform for buying products for themselves and the second is entrepreneurial, where ‘community buying’ takes place. This is where we are targeting our Grocery launch. Largely what happens in Grocery social commerce is that a community leader or a reseller aggregates all the orders, and the orders are then delivered to this individual who then segregates and delivers them to individual customers, who in the first place had ordered through him/her. The reason it is a very interesting business model is that one of the biggest challenges from the e-grocery perspective is the cost of fulfilment. Today, e-grocery doesn’t effectively cater to low basket needs because of the shipping cost. And also, the amount of value that a customer can get, they don’t end up getting it because the cost of delivery is built into the prices. This is where the aggregation model becomes an effective approach, as due to intermediaries aggregating the basket there is enough value on the table to be passed on to the end customer and also result in the community leader being able to make money.
How is this model going to bring value and how is it different from the traditional way of doing e-commerce?
If you look at some of the global markets, the community commerce model on grocery has become extremely successful. One of the core pivots around it is the amount of unparalleled value that you can give to the customer. As an example, let us say that a customer wants to order something worth Rs 300. Now, delivering just a Rs 300 item is difficult. So, here what will happen is that a reseller or a community leader will aggregate multiple such Rs 300 orders in their community or in their locality. So, let us say they aggregate 10 such orders and place a singular Rs 3,000 order on Shopsy and they are rewarded for that in terms of the intermediary commissions that they get. Once the order is delivered to this community leader, the community leader then breaks this order into 10 parts of 300 each and delivers it to respective customers. Imagine the multiple kinds of approaches that can work here. It is important to note that while in a traditional reseller model, you can order from anywhere for anyone. One can sit in Surat and can order for someone in Indore, and they still make their commissions. Here, because they’re doing delivery as well, the model is more localized. So they will order for people living near them, and their neighbours or their society or their apartment people. And that is how the model works because delivery is an important component of this model. Either it is like a very close location so that someone can take a bike or a cycle and go and deliver or in the same society, which is like walking from one apartment to another apartment within the society.
There is an online grocery war, where players claim deliveries within 15 or 30 minutes. How is Flipkart’s Shopsy addressing the challenge of speed for delivering products or groceries?
There's a huge debate on if immediate grocery delivery is even needed and the kind of core structures it has. The Grocery social commerce model that we are launching, interestingly, lends itself to a hyperfast kind of delivery. What we are seeing when we talk to a lot of resellers, is that they pre-order fast-moving items for a better customer experience. So imagine a reseller order like 10 top branded soaps or 10 top toothpaste brands or 10 hair oils, for example. And think of them acting as a dark store themselves because they know that when such a need arises, people will ping them and because they are nearby, they are able to deliver in 5-10mins. It is still very early days and we'll see how it scales up. However, the model caters to both the T+1 or T+2 (settlement date of security transactions) deliveries that typically platforms as ours do through Flipkart grocery. But also this pre-order kind of approach is interesting where instant delivery can also happen.
Is there any difference in terms of the models and the opportunities in India compared to how community group-buying is evolving in China?
It is still very early days. I think the core of this model is an aggregation of delivery services. Hence the reduction in cost that is getting passed to the end customer as value, will remain. The assortment or small tweaks around Indian user behaviour, what kind of products they are ordering, what size of the order value they are putting across, might change. But the core would not change because of the very typical value dynamics there. While we are not yet seeing group-buying taking off in India the way it does globally, however, community buying is a model which we think will work in India.
What role would Flipkart’s investments in companies such as Ninjacart and Shadowfax play to help Shopsy?
These investments are to help Flipkart score e-commerce ambition and aspirations. Ninjacart helps us build a very robust fruit and vegetable supply chain that Shopsy will leverage as part of this grocery launch as well. Shadowfax, on the other hand, caters to hyperlocal deliveries. So, both play a kind of a role when it comes to Flipkart’s Grocery ambitions. Specifically for this launch, Ninjacart will certainly be helpful from a supply chain perspective. However, we are not looking at hyperlocal deliveries. We are still looking at T+1, T+2 deliveries. So Shadowfax solves that need for Flipkart Quick and might not be relevant from a Shopsy grocery launch perspective.
How is Shopsy going to be different from players such as Meesho, DealShare and Udaan, which have also set up community group buying models?
One is video commerce as an element that we are planning to bring in and really go deeper into the ecosystem. But at the core of it is the hyper value model. The logistics and the cost of logistics are extremely important. That’s why I think Flipkart’s approach is very different from a lot of other players where we are leveraging Flipkart’s own logistics platform to drive down the cost for the hyper value platforms that we are building under Shopsy. Our estimate is that the logistics costs for Flipkart are 50 per cent of all the other players, be it in grocery or fashion or general merchandise. And at the end of the day, that is what will matter because that is the value you're passing on to the customer. And that is where, other than the network effect and the very strong tech base that Flipkart has, I think the winning approach in social commerce would be making sure that you innovate on logistics to really create a value that you're able to pass to the customers.
How is Shopsy expanding its presence in Tier 2 and 3 cities?
I think by next year we'll be clocking around 100 million users on the Shopsy platform. And that is just a testimony to the kind of growth we are seeing. We clocked about a billion-dollar run rate in October, and then we are growing month-on-month. So very encouraging numbers. We easily see the Shopsy platform grow about 4X to 5X over the next year, and that is what we will try to achieve.