These tech firms are taking the e-commerce battle to India's hinterlands

How social commerce firms are democratising e-retail by tapping community group buyers from tier-2 and smaller towns across India

Like anybody else in the small town of Dausa in Rajasthan, Ajay Kumar Saini, a teacher, would stop by the local kirana store on his way back from school to buy household items. One day, his brother introduced him to DealShare, a start-up that has built an e-commerce platform for middle and lower-income consumers in India and offered him his referral code.

Though sceptical, Saini opened the app thinking it would be in English and wouldn’t have the products or brands he needs. But Saini was in for a pleasant surprise. DealShare let him browse in his native language and had all the items he usually buys. And they were available at very competitive prices.

“I was always under the impression that online purchasing is for those who have extra cash to spend and not for middle-income people like me,” he says. DealShare helps him save more than Rs 1,000 a month, he adds.

Saini’s family prefers local products like Aravali Atta, Shree Ram Bikaneri Bhujia and Saras Ghee. He has been a DealShare customer for about four months, shops five-six times and spends around Rs 3,000 on the app every month.

DealShare is known for pioneering the community group buying (CGB) model in India. It also allows a coalition of people, often living in one residential block, to obtain discounts by purchasing groceries and other daily essentials in bulk. The practice is usually organised by a community leader such as a local administrator or even a convenience store owner.

The model is handy for millions of customers of tier-2 and tier-3 cities and rural India, who are yet to benefit from e-commerce, and can potentially empower millions of retailers, too.

India is home to one of the largest middle- and lower-income populations in the world. While many of them have access to the internet, they are still not at ease with the concept of e-commerce, especially shopping-home essentials.

DealShare is one of the key players that is addressing this gap. The firm provides value-conscious consumers home essentials in an engaging and rewarding way. The product range, price coupled with a gamified shopping experience, has helped it cater to this class.

“India is a unique market with its highly diverse demographics. A large majority of consumers are driven by value and not brands,” says Vineet Rao, founder and CEO, DealShare. “And addressing the real Bharat’s requirement needs an indigenous model. And this is the foundation of DealShare.”

It includes product assortment (80 per cent of products are local or regional) or direct-from-factory procurement. This allows DealShare to procure quality products at affordable rates. The firm follows a gamified and viral demand generation and the “DealShare dost” (community leader) network enables it to operate at the lowest operational cost.

DealShare has reached $600 million in gross merchandise value (GMV) annual run rate (ARR), over 1,200 pin codes and 60 cities in three years. In July, it attracted $144 million in a funding round taking its valuation to $455 million. By the end of this financial year, it aims to hit a GMV ARR of over $1 billion and cover more than 100 cities across 10 states.

The ability to effectively use social media channels such as WhatsApp to engage with the customer base has been a game changer for DealShare. It also offers “share & earn” referral incentives.

While a large proportion of the business comes from commodities and staples, DealShare has also seen growth in categories such as personal care and general merchandise. DealShare is not alone. In the area of social commerce, it is competing with the likes of SoftBank-backed Meesho, BulBul, GlowRoad, Mall91, simsim and Shopsy.

India’s unorganised retail sector, estimated at $792 billion, is set for the next wave of growth, with digitisation enabling rapid expansion and greater reach. With a vision to enable 100 million small and medium-sized businesses (SMBs), including individual entrepreneurs, to succeed online, Meesho is democratising internet commerce by bringing a range of products and new customers online. What started as a reseller-focused platform enabling millions to sell online has now become a single ecosystem connecting sellers to consumers and entrepreneurs.

Nearly 600 million people in India are still unconnected to the internet, a majority from non-metros. Meesho entrepreneurs are unlocking this market by influencing demand and providing value-conscious customers access to affordable products.  More than 60 per cent of them are from tier-3-plus markets like Dimapur,Faizabad and Haldwani. Apparels, personal care, kitchen and home decor are the highest-selling product categories for women entrepreneurs reselling on the platform.

The firm recently recorded a milestone of nine million women entrepreneurs on the platform who have seen a 2.5x year-on-year growth in orders in 2021.

“Meesho is championing socioeconomic equity, enabling more women even from the remotest regions to find financial independence, while driving access to affordable and quality products across India’s hinterlands,” says Vidit Aatrey, founder and CEO, Meesho.

In September, Meesho raised $570 million in a funding round from investors such as SoftBank and B Capital Group, a venture capital firm co-founded by Facebook Co-Founder Eduardo Luiz Saverin. The company’s valuation more than doubled to $4.9 billion in less than five months.

With 15 million total entrepreneurs on the platform, Meesho’s reseller business model helps anyone using a smartphone set up an online business at zero cost. Entrepreneurs can create product catalogues on the app and sell to their local and digital communities with end-to-end customer, logistics and technological support from the company.

Another social e-commerce venture, CityMall — backed by investors such as General Catalyst, Jungle Ventures, Accel and Elevation Capital — is aiming to help about 300 million new-to internet users realise the power of online and e-commerce. Through its deep network of neighbourhood community leaders, CityMall is driving e-commerce penetration in the hinterlands.

Flipkart also launched its social commerce platform, Shopsy, this year. Since July, Flipkart said Shopsy has received an overwhelming response from consumers and resellers who hopped onto the platform for their “shop & earn” needs. Backed by festive fervour, the platform has seen 3.6x growth in app downloads, crossing the 10-million mark on the Google Play Store, within five months of launch.

“With the (new) 200 million digital consumers coming from tier-2 and 3 cities, we want to build a community that truly democratises commerce in the country,” says Prakash Sikaria, Senior Vice-president, Growth and Monetisation, Flipkart.

According to a recent Bain & Company report titled “How India Shops Online 2021”, social commerce is set to democratise e-retail, with three in five social shoppers coming from tier-2 and smaller towns. Tapping into this opportunity, Shopsy has expanded its presence in tier-2 and 3 cities such as Bathinda, Barpeta, Gandhinagar, Morena, Mandla, Muzaffarnagar, Raipur, Sri Ganganagar and Saharanpur during the festive period. It is unlocking the potential of digital commerce for under-served consumers.