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Is 'community buying' in social commerce key to reaching 'Bharat'?

What is the 'community buying' model? Does social commerce hold the key to expanding online shopping in the grocery, apparel and consumer electronics retail in the country? Let's find out

Indian ecommerce | Startups | Social network

Harshit Rakheja  |  New Delhi 

Online shopping through Flipkart and Amazon has become second nature for city dwellers. But it’s often a dilemma for consumers at Tier 4 and 5 markets. This is why despite the growing hype for ecommerce, it only accounted for 4% of the total food & grocery, apparel and consumer electronics retail trade in India in 2020. This share is projected to grow to 8% by 2025. For startups, tapping into the consumers living in rural and sub-urban 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 through social media. such as Meesho, Mall91, DealShare and CityMall, among others, make use of a network of community leaders or ‘resellers’. The resellers collect orders from their social networks by sharing product catalogues over WhatsApp. By placing bulk orders for groceries and other daily essentials, these resellers get the items at attractive discounts from wholesalers. This model of social commerce helps drive down customer acquisition costs, since they leverage the social connections of their resellers. The model also helps make online small-ticket purchases viable.

Other apprehensions associated with online commerce, such as lack of trust and poor digital literacy are also mitigated through social commerce. Perhaps this is why online grocery platforms such as BigBasket, and new entrants in the quick commerce space such as Swiggy, are looking at social commerce to grow their userbase. We spoke to Sourjyendu Medda of social ecommerce startup DealShare, to understand more about the two different models of social commerce, namely the ‘reseller’ model and the ‘community buying model’. The reseller model being espoused by Indian social commerce offers a blast from the past. It’s the same model that Tupperware and Amway leveraged to create a network of self-empowered business women. However, the newer community buying model is the one that startups such as Pinduoduo pioneered in the smaller towns of China. Interestingly, Chinese venture capital firm Shunwei Capital, which counts Pinduoduo among its portfolio companies, is now sharing its social commerce knowhow as an investor in Meesho, the only unicorn in this space in India. The market, though nascent, accounted for $2 bn in gross merchandise value (GMV in 2020), and is expected to grow to $16-$20 bn by 2025. The share of social commerce in India’s e-commerce market ($38 bn in 2020) is expected to increase from the existing 1-2% to 4-5% of the projected $140 bn market by 2025. However, the market is not without its challenges. While VC firms are betting heavily on the sector, they understand that it is a risky proposition. Some experts feel that while the community buying model may see early traction in India, the bigger challenge lies in the manufacturing quality. As the Indian manufacturing sector is not evolved, products are of mediocre quality that will lead to higher customer returns, making it a loss-making proposition. As such, only categories such as groceries and daily essentials may succeed under the group buying model. For the larger social commerce trend, only time will tell if it is the final piece in the puzzle that is enabling online shopping for ‘Bharat’.

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First Published: Wed, January 12 2022. 08:30 IST