Sonakshi Nathani had just quit her job with Microsoft and moved back to her hometown, Raipur, in end-2018. She wanted to start up her own tech company. In Raipur, her family ran a grocery store and she noticed that the store was getting a lot of their orders from WhatsApp chats. However, since there were no processes to handle such “online” orders, the store staff had to spend a lot of time processing the orders and reconciling inventory and books.
Her first instinct was to check out Shopify, the Canadian e-commerce platform for setting up online stores. However, Shopify was not designed for such small stores and for WhatsApp-based operations. And that’s when Sonakshi and her friend Ashutosh Singla, decided to make a “Bharat”-first platform for helping offline stores list online. Bikayi was born.
When it comes to the $1.2 Trillion (2021F) Indian Retail industry, the local unorganised Kirana stores are a crucial piece of the puzzle. Small offline retail stores or Kiranas selling products/services like groceries, FMCG products, pharmaceuticals, Pan Shops, and barbers along with the slightly larger modern variants selling things like Apparels, gym equipment, and Bakeries occupy a very proximate relationship with the end-consumers.
Thus, being the ultimate last-mile retail stakeholders, such traditional retailers occupy >80% of the massive Indian retail market. Recognising this reality, technology upstarts and e-commerce players are now racing to digitise the “Dukaans” and work with them to penetrate this pie. This wave of digitization is especially aimed at Tier 2 and 3 India, also known as Middle India or Bharat. This is the first in a long series of articles we will be sharing on the Bharat Retail ecosystem.
We will also be exploring Softbank, Crypto governance, “Superpowers”, and lots more in this issue. Read on and don’t forget to answer the questions in the “Your Thoughts?” section. Let’s dive in!
Shopify For Bharat
By Ashutosh Gehlot
Throughout the 2020 lockdown, traditional offline stores occupied an important position with respect to supplying daily essentials. However, such stores had to establish a digital connection with their customers to participate and survive. Thus, a massive opportunity opened-up, that of establishing a digital storefront for such offline stores.
In reality, this shift towards establishing a supplementary digital presence was already in the works much before the lockdown. Driven by the deep penetration of WhatsApp in India, many traditional offline retailers had already taken the first step towards digitization by doing a lot of business through WhatsApp chats. Furthermore, tailwinds like the GST amendment and the UPI revolution, have gradually been making retailers optimistic about such changes. However, the pandemic fast-tracked this gradual cycle and has potentially brought sustainable changes for both the sellers and their end-consumers.
The basic proposition from platforms facilitating such digital storefronts is quite simple. The SaaS (Software-as-a-Service) platform helps the offline stores establish a custom online catalogue for their products. Such an online catalogue functions just like any e-commerce website and allows the retailer to easily share the store link on social platforms like WhatsApp, accept orders and payments, record customer details, and share order status updates with the customer. Stores get the benefit of their own branding and access to all the customer data and marketing.
The target customers include Kiranas, Restaurants, Bakers, Resellers, and anybody who wants to do commerce. Major players like Bikayi, Dukaan, MyStore (by Khatabook), Digital Showroom (By DotPe), OkShop (By OkCredit) and Orderhere (by MagicPin) are all chasing this opportunity with varying business strategies and by adding a sleuth of other features on top of this basic framework.
Before we get into the specifics for such “Shopify for Bharat” platforms, let’s take a step back and explore why we keep making an analogy to Shopify and not Amazon. The reason comes down to the core difference between a platform and an aggregator.
Platform vs. Aggregator
Amazon is an aggregator. The consumer-facing Amazon app or website maintains a direct relationship with the customer and seeks to be the “The Everything Store”. Due to its direct control of customers, Amazon is able to aggregate all suppliers under its own app. The supplier/manufacturer/brand, in turn, easily gets access to the entire customer base of Amazon along with its e-commerce infrastructure including logistics. In return, the supplier has to pay a commission on every order to Amazon and give up direct control (and data) of its customer base. The supplier also faces the risk of competition from Amazon’s private labels, which are empowered by its control of data. All in all, Amazon is a tremendous enabler for emerging brands but may not be the primary channel preference for brands which grow enough to focus on sustainability and scalability.
Shopify, on the other hand, is a platform. It enables a brand/manufacturer/supplier to create their own branded e-commerce store while retaining full control of the customer relationship and data without worrying about competition from private labels. Basically, Shopify is a B2B SaaS offering instead of a consumer-facing marketplace. The supplier, in turn, pays a fixed subscription cost and a minimal transaction cost. The downside is that the brand doesn’t get access to an existing customer base but has to create its own.
While most brands and suppliers maintain a presence on both Shopify and Amazon, Shopify gets their focus when it comes to scalability. Ben Thompson has explained these differences in great detail here.
But how does this apply to small offline retailers? In India, when it comes to digitizing Kiranas, both these approaches are taking shape. The likes of Jiomart, Amazon India, Flipkart, and Dunzo are all consumer-facing companies aggregating Kirana stores under their own ecosystem (We have written about this approach before here). While such platforms help the Kirana stores with increased customer discovery, the stores stand to lose out on their direct relationship with customers while giving up access to all their customer data and paying high commissions. The likes of Dunzo and Swiggy, have already started establishing their own Dark Stores based on such data, and the Kiranas have been quick to notice this trend.
Platforms like Bikayi and Dukaan, on the other hand, are B2B offerings helping Kirana stores maintain their control and independence. It could be argued that store owners would prefer this approach even while sacrificing the customer discovery benefits from an aggregator since a local store’s customer base is fairly well-defined. Furthermore, such platforms also enable passion entrepreneurs like Home Bakers, Resellers, and Artists, who do not typically have access to aggregator platforms like Amazon.
As in the case of Amazon vs. Shopify, both approaches may sustain over the long-term, with stores taking advantage of both solutions simultaneously. For the platforms in question, the target market thus is any person looking to do any kind of commerce, and on a macro scale, that turns out to be a massive market even with competition from Jiomart and Amazon.
Now let’s take a closer look at such platforms.
Take Your Business Online – A Product Deep-Dive
As we highlighted, the basic use-case for such platforms is to help stores list their catalogues online and then help them share the store, manage orders, and interact with customers. The fundamental requirement of such a product is simplicity and WhatsApp-friendliness, given the store owner’s limited technical capabilities and existing familiarisation with WhatsApp. This is the basic framework followed by almost all players in this space, while differences start to arise in terms of additional product features/capabilities and business strategies.
While the same platform can be used for any kind of local commerce, let’s take the example of a local Kirana store (selling grocery and FMCG) to explore the product.
Most of these offerings are app-based for now. As a Kirana store owner, the first step would be to download one of these apps (the most popular currently, according to app downloads, are: Dukaan, Digital Showroom, Bikayi, MyStore, OkShop) and make a mobile-number (OTP) based account. Onboarding as a store is as simple as inserting the store name and selecting a category of business (Grocery/FMCG in this case). As it says on Dukaan’s website, “Build an online business in 30 seconds”.
The next step is to add the product catalogue. One way to do this is to manually add each product along with details like an image, price, discount, description, variations (eg. Pack of 10, Blue colour etc.), and other information. A simple alternative, present on most apps, is to choose from a large gallery of pre-defined products based on the store category and then edit the specifics if needed. This feature was especially remarkable since it makes the entire process extremely simple. Bikayi also allows for excel uploads of the product catalogue as part of its premium offering (more on that later!). Well there you have it, our online store is ready!
The platform creates a custom store link for the owner to share across WhatsApp groups and other social media platforms. All platforms allow the store owner to customise and edit the store pages to varying degrees, add product categories, and add the store WhatsApp number on the platform for directly chatting with the customers. A simple order management interface allows the store to manage order statuses and extract past transactional data as well (Digital Showroom allows the store to manually add offline invoices in the system too, making the platform a single source of truth for all transactional data). For payments, while cash on delivery or in-store pickup is always possible, most platforms also allow for UPI/Wallet payments and even online payment gateway access.
In addition to these basic set of features common across most of the players, every company offers varying degrees of advanced features that the store owners can adapt. One common feature is access to a large gallery of ready-to-use marketing collaterals like Business Cards, Banners, WhatsApp stories that a store can use for promotions. Other specialised promotion features include Discount coupon codes, Customisable referral and loyalty programs (A really cool feature!), Free SMS Promotions, QR Code generation, and customer ratings & reviews. Furthermore, most platforms are quickly moving to add broad-based vernacular support, a crucial feature for the Bharat target base.
On the store operations side, every player has approached the product with varying degrees of complexity. Some players like Dukaan have optimised for simplicity and ease of use, while players like Bikayi have taken a more feature-rich approach allowing for more customisations and scalability. Some notable and interesting features incorporated by the platforms include staff accounts, Delivery partner integrations, Facebook Shop integration, and Store Consultants. The choice of product complexity depends on the specific business & monetisation strategy adopted by the player (more on this in the next section).
From the end-customer’s viewpoint, the experience is completely like that of an e-commerce website. Just add-to-cart all the products you need, add your details and checkout. For any custom requests, a customer can drop a WhatsApp or call the store owner directly. Once the order is placed, the specific platform helps with tracking the order as well.
How to Play This? Growth and Monetization
The core value differentiator of the Bharat store digitization ecosystem is that the platforms are natively designed for middle India and are fundamentally based on social commerce (chat, in this case). WhatsApp is thus, a key component of the product philosophy for the players in this domain. The rapid product-led adoption by offline stores for all these platforms is a great validation for the product-market fit. Dukaan, currently the highest-ranking app in the category, has crossed 4.3 Million Downloads in just over six months of operation.
While the product is finding serious adoption, the competitive landscape is increasingly heating up. At a sector level, as is the case with most B2B focused platforms, this may not be a winner-takes-all market. A continued razor-sharp focus on product leadership is crucial for both driving adoption and then retaining users. However, given that the entire market is expanding, it is very much a game of speed. Driving high-growth in user acquisition and locking-in users through tangible benefits and high switching costs (refers to the complexity of switching from one product to another) is key to sustainably driving market & revenue leadership, while also kickstarting the flywheel of organic word-of-mouth growth. The market players, in turn, are approaching such questions of growth and monetization in different ways.
Platforms like MyStore (by Khatabook) and OkShop (OkCredit) are most closely following the ecosystem strategy. Both companies are offering their products completely free of cost to both the store owners and the final consumers, and are thus, aiming to generate rapid growth in adoption on the back of a simple but effective product. Given that both products sit amidst an umbrella of other retailer-focused products by the respective parent companies, the intent is to cross-sell complementary products and then monetize the robust transactional data generated through the entire product suite. One way in which they can potentially monetize is by offering data-backed financial services like underwriting working capital loans to the retailers or even to the consumers. This is especially feasible once the OCEN protocol comes into play.
On the other end of the spectrum is monetization through subscriptions (a typical SaaS play). Bikayi, for example, offers tiered fixed-rate subscription plans with the basic plan being free (a Freemium model). The Free plan essentially incorporates all the features that the other products currently have and allows a store owner to list 1250 products, which is typically enough for a small Kirana store or a home-baker. In its premium plans, Bikayi incorporates a whole sleuth of add-on customisation features including Personalised consultations.
It is apparent that Bikayi is building a full-fledged e-commerce platform to support any business looking to tap the Bharat or Middle India market. For example, it’s offering can feasibly be scaled to support the operations of not only a retailer but an entire brand. Thus, given that the platform is feature-packed and supports scalability, the higher switching costs and up-selling should drive higher customer retention and expanding revenues. However, due to the complexity and the psychological tag of a paid product, a ground sales and support team may be important levers for growth. Bikayi is also leveraging explainer content to drive learnability and adoption and, has produced a large bank of video and written (vernacular) content.
Dukaan and Digital Showroom, which are also offered as free products, may still choose to go the ecosystem or data-backed or subscription-based monetization route. One way could be by adding a customer-facing portal (much like an Amazon) and charging retailers to for listing and advertising there.
Looking Ahead
The value proposition of a “Shopify for Bharat” is enticing and is finding takers among both customers and investors. Marquee investors like Y Combinator, Lightspeed Venture Partners, Matrix Partners India, Info edge Ventures Fund, and several big-name angels have invested across Dukaan, Bikayi and DotPe (Digital Showroom). And even with intensifying competition, it may well be a market of multiple consolidated winners monetising in their own different ways.
While the target market in India, especially “Bharat”, itself is unimaginably large ($1.2 Trillion 2021F Indian Retail Market), international expansion may also be on the cards. E-commerce platforms designed for the non-digitally native or digital immigrant population may fit just as well in other emerging markets, especially the adjacent markets in Asia. The social commerce principles may give such platforms an edge over the like of Shopify in these markets.
On the other hand, massive challenges and threats are imminent. First, providing tangible benefits to the store owners, which translates into an actual augmentation of revenues, is crucial for long-term success and retention. It is still questionable whether such platforms have been able to achieve such a goal but Bikayi’s ~125% MoM revenue growth numbers paint an optimistic picture. Second, given the high reliance of such platforms on WhatsApp, the introduction of commerce and business features by WhatsApp itself may throw a spanner in the works for these platforms. It is an open question how WhatsApp will play that game, and platform success such a case would largely depend on organisational agility. And finally, the threat from aggregator powers of Amazon and Jiomart cannot be discounted.
*We will be bringing you more first-hand insights and interviews from the companies in this issue in the subsequent weeks. Stay tuned.
Your Thoughts?
What do you think should be the ideal monetisation and growth strategy for platforms like Bikayi, Dukaan, and Digital Showroom?
Would you be willing to buy digitally from your local store?
Tell us your thoughts in the comments or by dropping us an email!
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Matan goes into detail about his journey, scaling up rapidly (they hired 170 people in a year!), startup culture, his relationship with his investors and board members, and lots more!
That's all for this edition! We hope you liked it and would love to get any feedback you may have. This newsletter is written and curated by Mishaal Nathani and Ashutosh Gehlot.
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