Community Group Buying Model in the Grocery Vertical for the ‘Bharat’- A Profitable Move ?

Shalmoli Sarkar — Wed, 12 Jan 2022 08:35:17 +0000

The value-conscious behaviour of Indian consumers has largely been capitalised by retail apps like Meesho, Udaan, and DealShare, etc. that has fuelled the growth of community group buying or loosely known as social commerce India.
These community group buying apps have tasted success by expanding the ambit of online shopping to the consumers of tier-II cities and beyond and providing affordable products. Witnessing the immense popularity, the food aggregator app Swiggy is introducing the community group buying model in the grocery vertical by the name Swiggy Bazaar. Following the same suit, online grocery platform BigBasket has recently revealed the ongoing testing of a group buying model for delivering groceries in Tier-IV towns.
This puts a question if this community group-buying model is a profitable move in the grocery vertical for the food businesses, although it is poised to become a $16-20 billion opportunity by 2025 and $60-70 billion by 2030 according to a joint report by Bain and Company and Sequoia India.

The two models of community group-buying

Presently, in India, there are two kinds of community buying models being implemented namely: reseller-led and the Pinduoduo model. Let us analyse if these models in grocery have remained profitable.

The Pinduoduo model: Pinduoduo is China’s largest online grocer that has pioneered the community buying model. In this model, a buyer can initiate a team purchase and invite friends and relatives through social networks to enjoy lower prices. The buyer is eligible for attractive discounts after a purchasing team of certain members is formed with the size decided by the merchant. Pinduoduo’s model has been emulated by DealShare in India, whose revenue according to Fintrackr had grown over 18 times in 2020 to become Rs 58.71 crore from Rs 2.96 crore in 2019. Towns from tier-II and tier-III cities have embraced online grocery shopping through its platform like never before.

The reseller-led model: The majority of community buying in India is based on a reseller-led model where the resellers act as middlemen between the app and the end-user and with every sale they earn a margin. The orders are then delivered to community leaders or resellers who then distribute them among the network.

This reseller-led model has been profitable for Otipy- a social commerce platform for fresh groceries that clocks daily orders of more than 5000 from over 1lakh consumers, since its launch in 2020. Its resellers consist of women and small neighbourhood stores that sell fruits and vegetables from farmers to their communities through WhatsApp groups.

Lower customer acquisition costs-appealing to investors

The low cost of customer acquisition is luring investors to invest in community group buying business models. The use of social media platforms having a significant user base and trust-based influencers brings down the cost. These businesses spend a minimum of Rs 50 to acquire a single customer as compared to Rs 300 to Rs 400 in conventional e-commerce. This reduces the expenses of a business to a huge extent and appears to be a lucrative opportunity giving a good return of investment for investors.
According to Fintrackr, DealShare’s total expenses in 2020 stood at a negligible Rs 4.3 lakh against a revenue of Rs 58.75 crore.

‘‘

Community group-buying is poised to become a $16-20 billion opportunity by 2025 and $60-70 billion by 2030 according to a joint report by Bain and Company and Sequoia India.

What lies ahead for the community group buying model in grocery?

Not just limited to low prices and heavy discounts, the community buying model can be a good revenue churner for resellers in the small cities who are looking for alternate sources of income in turn bringing in more customers. The resellers on the Otipy platform on average earn a commission of Rs 2500-3000 and the top 20 percent of them make more than Rs 15000 per month. Besides, increasing smartphone usage and cheaper data plans, the community buying model in India will thrive on trust and establish a quick and direct interaction between buyers and sellers replicating the experience of traditional offline commerce also open to negotiation.

The post Community Group Buying Model in the Grocery Vertical for the ‘Bharat’- A Profitable Move ? appeared first on Dutch Uncles.

Social Commerce Platform Poshmark’s Expansion Plan

Anju Nambiar — Mon, 09 Aug 2021 05:35:08 +0000

Poshmark’s Indian CEO is bringing the company to India after making a mark in markets like the United States, Canada and Australia. Luxury goods like Louis Vuitton designer handbags, Michael Kors wallets, and Nike’s cost millions of rupees. They are usually made from pure leather and studded with precious stones. Purchasing a brand-new item is expensive and not a sustainable approach. However, if we foster a culture of trading refurbished luxury goods and encourage sales of second-hand items, the environmental footprint will reduce while promoting entrepreneurship among sellers.

About Poshmark

Poshmark is a Consumer Tech start-up headquartered in the United States. With Manish Chandra as the CEO, the company’s roots are in India, and they are now coming back home to set into motion their expansion plans for the Indian market. Poshmark is a social shopping marketplace that specialises in second-hand clothing, bags, etc. in categories like fashion, home décor, and beauty.

Returning to homebased

The company is returning to its home country or their domestic market as part of their expansion plan. Since the CEO has his roots deeply embedded in India, he is bringing his company to his home country owing to the strong focus on sustainability among Indian consumers. Poshmark believes that the value that they bring and the sustainable lifestyle they are fostering through their marketplace is a great product-market fit for the Indian market.

How Poshmark’s entry is a gamechanger for the Indian online fashion ecosystem

Poshmark’s entry will herald a new indirect competition against domestic marketplaces for pre-owned goods like Quikr, Ola, as well as e-commerce firms like Ajio, Myntra, and Snapdeal. This will bring about a change in their stance directing it towards value e-commerce.

Why are they expanding in India?

Poshmark is expanding in India to get a piece of the massive social commerce potential in the country valued at $2 B. The industry is set to touch $20 Billion within a span of 5 years and will be estimated at $70 B by 2030. Social commerce in India will be 2x larger than the present e-commerce market in India within the next 10 years.

Market opportunities for MSMEs

The social commerce start-up list is growing in India. The market opportunity for social commerce in India’s e-commerce industry is expected to reach $140 B by 2025. The opportunity is huge for start-ups especially in Tier 2 and 3 markets. Investors are also currently very confident of funding this sector.

‘‘

Poshmark is a social shopping marketplace that specialises in second-hand clothing, bags, etc. in categories like fashion, home décor and beauty.

Decoding Poshmark’s Expansion Strategy

Poshmark has been consistently focused on expanding to new markets. They are headed to markets where the e-commerce opportunity is booming, and that place is definitely India. To support its global expansion, Poshmark has upgraded its leadership team as well which demonstrates to start-ups and small businesses that expansion to new markets needs to be backed by solid, dedicated leadership. Their expansion strategy has been clearly centred around tapping into a populous market. E-commerce start-ups need to target such populous and fast-growing markets with a consumer base in the millions.

Poshmark chose India as its first step towards global expansion since India has a massive internet user base comprising of 622 million active users. This is a goldmine for e-commerce and social commerce start-ups. The community of shoppers and sellers in India is very diverse which is a very lucrative opportunity for social commerce start-ups. Depending on your social commerce business model, pick a market that will gel well in terms of the cultural and business perspective.

The post Social Commerce Platform Poshmark’s Expansion Plan appeared first on Dutch Uncles.

community group buying – Dutch Uncles