Buoyed by cheap data and enhanced internet connectivity, social commerce is making headway in smaller towns. According to a recent report by RedSeer Consulting, the gross merchandise value (GMV) of companies operating in the social commerce segment grew three times year-on-year in September, 2020. The report estimates that about 55% of shoppers on these platforms were from tier II towns and beyond, 25% from tier I cities and 20% from the metros. Interestingly, e-commerce marketplaces, which have been around longer, still have limited reach in the small towns — 40% of their sales come from tier II towns and beyond, the reports states.
The social commerce market in India has companies such as Meesho, Shop101, Bulbul, Simsim, DealShare and Mall91. E-commerce marketplace Flipkart, too, entered this segment last year through its refurbished goods platform 2GUD. A recent report by Bain & Company estimates the GMV of social commerce players in the country at $1.5-2 billion, expected to grow to $16-20 billion in five years.
Addressing trust deficit
The Bain & Co report reveals that of the over 572 million internet users in India, only 160-190 million transact online. The key reason for this they say is “lack of trust about finding the right products”. Social commerce companies are trying to solve these issues through a mix of business models.
Under Meesho’s reseller model, for instance, users can share the products listed on the app to their network or on social media, and get a revenue share from the transactions. This helps the company in gaining the trust of users who are more likely to buy products from their acquaintances. Vidit Aatrey, founder and CEO, Meesho, says the social commerce platform has 70 million resellers spread across 100 cities in the country, and has served more than 2,000 new tier II towns since June, 2020.
According to analysts, the average transaction value on large e-commerce marketplaces is Rs 700-800, while on social commerce platforms (which target value-conscious consumers) it is Rs 300-400.
“Our products are priced 30-40% lower than the big brands,” says Vineet Rao, founder and CEO, DealShare. The company has a group-buying model, similar to that of China’s social commerce major Pinduoduo, wherein consumers can avail discounts by purchasing products from the platform in groups. It has tied up directly with manufacturers to list these products, and has formed 30,000 WhatsApp groups to spread the word about its deals.
These companies rely heavily on content marketing to gain user confidence. DealShare has a localised content team in the five states it is present in.
The third model, which involves selling through influencers, is also becoming popular. Short video platform Trell has been tapping this trend. “For the last four years, we were focussed on building the community, as we were aware that small town users will consume content before getting comfortable with shopping online,” says Pulkit Agarwal, co-founder, Trell. The company is now banking on its eight million content creators to sell products to its 35 million monthly active users.
As these social commerce companies amass scale, maintaining consistency in customer experience and quality of products will become crucial, say experts. “They will need to build on logistics solutions to solve issues such as lengthier delivery times,” says Saurav Chachan, engagement manager, RedSeer Consulting. Currently, social commerce companies take about seven days to deliver products to small towns; e-commerce players, owing to their various warehouses, can do so in three-four days.
Prabhu Ram, head, industry intelligence group (IIG), CyberMedia Research, says that several new models could emerge in this segment as traditional e-commerce companies, too, make significant strides in the smaller towns of India.