Despite fast growth in the e-commerce space, online is still a miniscule portion of the offline retail market.
Therefore ‘digital offline’ or assisted e-commerce is the new model being experimented by online companies to reach out to that substantial lot of customers reluctant to transact online, without burning cash on customer acquisition.
Nandan Nilekani-backed ShopX has already tied up with 45,000 retailers in 230 towns in the south and west of the country. The target is to get 10 lakh retailers on board in three to five years, as it becomes a pan-India operator.
Amazon had launched its ‘Udaan’ project some time ago, intending to work with mom and pop stores. Just Buy Live, Storeking and Shotang are some of the experiments happening in this space.
“There are 30 to 40 million active e-commerce users in India,” said Amit Sharma, CEO and co-founder, ShopX.
“There are also 400 million strong middle class who use Whatsapp or Facebook, but are not comfortable buying things or making payments online. The nearby retailer or mom and pop store in the locality provides the trust needed in transacting online,” Sharma said.
Assisted e-commerce pr­ovi­des the rural population a large selection of products and retailers a new stream of revenue, an Amazon spokes­person had said while launc­hing its Udaan project.
The model helps companies rectify some of the common mistakes committed by the e-commerce industry, which have led to mounting losses. ShopX does not plan to spend much on advertisement campaign. According to Sharma, the customer acquisition is minimal for the company, as the retailer does the marketing and acquires customers for the company.
ShopX does not pay for acquiring customers; inste­ad it charges a minimal fee while getting the retailer on-board. “We don’t burn mon­ey on every transaction. Our investment is on technology, people and infrastructure like fulfilment centr­es,” Sharma said.
ShopX has ra­i­sed $10 million from stra­t­egic inve­s­to­rs, including Nandan Nile­kani. It is looking for a right institutional investor as it exp­ands the network pan-India. Of the 45,000 retaile­rs, around 5,000 have cros­sed the threshold of 10 per cent sales and profits coming through ShopX app.
“We use our data and algorithms to understand the right products and categories that have demand in an area. Though we have a 10-lakh retailer target, for the next six months we are focusing on strengthening our cluster performance,” he said.
To strengthen retailers, it adopts a cluster-by-cluster approach in assessing the demand. The retailers will also be serviced well by engaging them with more information on products and categories.Unlike typical e-commerce business, ShopX is witnessing 25 to 30 per cent of sales happening in FMCG products.
Consumer electronics, mobile phones and computer peripherals account for 50 per cent and 10 to 15 per cent comes from lifestyle pr­o­ducts. Telecom and mobile shops account for 45 per cent of stores, 30-35 per cent are grocery stores and the remaining are miscellaneous outlets ranging from beauty parlours to pan shops.
The firm has five fulfilment centres and a person in-charge of managing the supply chain and last mile delivery in each town. It gets products from the local stockists. “This model of assisted e-commerce needs a lot of activation at the ground level. Training the intermediary or the offline retailer is very essential in this case. Scalability will become an issue if the retailer is not trained properly and this also needs manpower. but the opportunity is hum­u­ngous as it brings millions of retail outlets into the digit­al channel,” said Harish Bij­o­or, brand expert and fou­n­d­er of Harish Bijoor Consults.
In the past, some online players, including Lenskart, Caratlane, Healthkart.com and Stylediamonds, had attempted to extend their pre­s­ence by launching physical stores. While this improves the trust in brand and pr­o­vides much needed “touch and feel” in certain catego­ries, investment on physical stores nullifies the edge of having a virtual business.