India’s social commerce startups are dodging Amazon, Flipkart

Lockdown or not, Navjot Kaur gets up every day and greets her online audience from her living room. The 30-year-old fitness trainer works as an influencer on Indian livestream commerce platform BulBul, helping sell health products to hundreds of viewers in smaller Indian towns.

Kaur is part of a growing digital army helping India’s social commerce apps sidestep competition from major players such as US-based Amazon and Walmart-backed Flipkart. Both ecommerce giants offer steep discounts to gain scale and market share, burning cash from their deep pockets. But for India’s social commerce startups, this is not an option.

Most of India’s social influencers come from the country’s smaller towns and villages.

For example, Kaur hails from Ghaziabad, a Tier 2 city some 35 kilometers away from New Delhi, the capital city. She does two to three 30-minute live sessions and another two pre-recorded videos per day according to her contract with BulBul, which is named after a local songbird. She’s paid about US$13.25 per video, and her latest sale was for hand sanitizers.

Photo credit: BulBul

In the video, Kaur was helping sell Vettol, a hand sanitizer brand. The resemblance to UK-based Reckitt Benckiser’s Dettol is not a coincidence. A 500-milliliter bottle of Vettol costs US$3.32, around 60% less than an equivalent bottle of Dettol, BulBul co-founder Sachin Bhatia tells Tech in Asia.

This helps achieve net margins of around 10% after accounting for cost of goods sold and delivery charges, he says. BulBul sources its products directly from smaller and newer brands to keep unit costs profitable, says Bhatia.

The China Model

Bhatia’s startup is modeled on one of three major business models prevalent in China’s social commerce industry. These are content sharing, membership, and team purchasing, according to a report from Fung Business Intelligence.

To sell merchandise, for instance, rival and market leader Meesho depends on its members while BulBul relies on content creators. User-generated content is also seen as an effective way to increase engagement and customer reach.

The number of mobile phone and internet users surged after Jio, a unit of local conglomerate Reliance, introduced cheap mobile internet plans, says Anshul Sushil, CEO of communication technology firm Wizikey. Expectations are for India to mimic China’s explosive growth in social commerce, he says. In fact, investments into Indian social commerce startups more than doubled in 2019 from a year earlier, according to research firm Venture Intelligence.

Meesho leads the pack, having raised the most capital in a series D funding round in August 2019. South Africa’s Naspers led the round, with Facebook and existing investors SAIF Partners, Sequoia, Shunwei Capital, RPS and Venture Highway participating.

Naspers invested in Meesho through its international investment arm Prosus Ventures because it fits into the group’s strategy of backing firms catering to a “big societal need” in a high-growth market, Ashutosh Sharma, Prosus’ head of India, tells Tech in Asia in an email reply. As the world copes with the continued spread of Covid-19, Sharma hopes that social distancing will add a fillip to social commerce, pointing to new categories such as groceries that Meesho is expanding into.

Overcoming challenges

Despite gaining traction, Meesho’s social commerce business is struggling just like other startups hit by the pandemic. The startup charges a commission from suppliers, acting as a middle man between manufacturers and the end customer. It has reportedly fired 150 staff across India, citing “cost-cutting” measures. Meesho didn’t respond to *Tech in Asia’s* request for comments.