WhatsApp, social commerce, Meesho, social commerce platforms, startups, DealShare, softbank vision fund 2, Trell, Apps,  told ET, launched a social commerce platform, acquired video shopping app, acquired, trained 5,000 influencers

Social commerce startups have raked in $554 million this year as of July 16, a 7x increase from last year and the highest ever since 2015, according to data sourced from Venture Intelligence.

Social commerce will unlock tier 2 and tier 3 markets and reach low-margin categories in fast-moving consumer goods and groceries, which large e-commerce platforms have not done so far, helping boost the overall e-commerce industry, experts and investors who view the sector as an extension of e-commerce told ET.

The success of e-commerce amid the Covid-19 pandemic has dispelled any doubts investors may have had about the social commerce sector doing well, said Sourjyendu Medda, cofounder of DealShare, which recently closed a $144 million round led by New York-based venture fund Tiger Global.

“Their (Tiger Global’s) thesis about social commerce being the growth engine of e-commerce in the country and about e-commerce being the sunshine sector is very, very high,” Medda said.

Apart from increased digitisation and adoption across demographics, social commerce has become more structured in recent years, experts said.

The sector has benefited from a range of tools around discovery and logistics efficiency that has made servicing low-margin categories possible, they added.

“Social commerce is expanding India’s e-commerce sector beyond the customers of current marketplaces which are able to solve for structured categories and what we term as India 1.0 users very well,” said Akarsh Shrivastava, vice president of Elevation Capital, which has backed social commerce unicorn Meesho and CityMall.

“Overall, while traditional e-commerce will continue to scale well, models which are social-led will significantly expand the reach,” Shrivastava added.

When Meesho first sought to raise funds in 2016, investors laughed at the idea of putting money in a platform that enabled people to sell through social media networks WhatsApp and Facebook, cofounder and chief executive Vidit Aatrey told ET in a recent interview.

Cut to 2021, and the company has raised $300 million led by SoftBank Vision Fund 2 at a valuation of $2.1 billion.

“The next wave of growth is coming beyond tier 1 and the first 100 million consumers and social commerce models are enabling that. I think this is driving most of the interest in the sector,” Aatrey said, adding that close to 80% of orders are now coming from tier 2 and beyond cities.

Earlier this month, Walmart-owned Flipkart launched a social commerce platform, Shopsy, for individuals and small businesses to become resellers of goods on their networks through platforms such as WhatsApp.

Experts said e-commerce companies will – with customers already acquired – look to build up strong social commerce channels to expand reach.

Along with the entry of large e-commerce players, further consolidation and funding are on the horizon for the social commerce sector, said Ankur Pahwa, partner and national leader, e-commerce and consumer internet, EY India.

“Beyond a certain point in size and scale, you will need some of these markets to be able to add to the consumer base,” Pahwa said, referring to the entry of e-commerce players.

WhatsApp, social commerce, Meesho, social commerce platforms, startups, DealShare, softbank vision fund 2, Trell, Apps,  told ET, launched a social commerce platform, acquired video shopping app, acquired, trained 5,000 influencers

ETtech

Graphic: Rahul Awasthi

Apart from a funding spree, the sector has in recent months seen some consolidation too.

Google’s YouTube acquired video shopping app simsim earlier this week and Shop101 was acquired by mobile ad services platform InMobi recently.

Trust is key

In India, the reseller model – where community influencers curate and sell products in their respective communities — has found the most success.

Startups are providing incentives and spending significant resources to train these micro-influencers to drive sales.

For instance, Trell has trained 5,000 influencers and gives minimum earnings guarantee to some influencers to ensure stickiness.

“Given the stage of development of social commerce, resellers will still continue to grow in relevance, though there will be alternate models like live-streaming that grow in parallel,” said Radhika Sridharan, a partner in Bain & Company India and the lead author of a report –The Future of Commerce – The Rise of Social Commerce — released last year.

Amit Aggarwal, vice president, Elevation Capital said influencer-led models align closely with the rise of the creator economy and “newer models to leverage resellers even more deeply to generate demand and offer curated selections to their customers” will emerge in future.

DealShare has over 30,000 resellers that are paid 1% to 2% for demand generation and an additional 5% for last-mile delivery, the company said.

Next Steps

Messaging and social apps are considered as a fulcrum to social commerce platforms, as platforms and their resellers use them to drive sales.

Investors and experts said the future could look a bit different as social commerce platforms continue to scale up.

“Social commerce in India is still evolving, with most social commerce still transacted through Facebook and WhatsApp by individual sellers and buyers. This ecosystem will, however, evolve and become more standardised and begin to resemble organised platform e-commerce in India as social commerce scales,” Sridharan of Bain & Co said.

Elevation’s Shrivastava said platforms that solve for discovery for these sellers in a scalable manner, enable trust markers like chatbots and videos, hold great potential.

“I think this is really the year in which you will see social commerce reaching some sort of an escape velocity to start scaling rapidly. In general, the adoption, and the acceptance of commerce, is very high. And I think people have bought on to the value that this creates,” Pahwa of EY India said.


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