Community buying picks up in rural India

While 10-minute grocery delivery has become a trend in metros, tier 2 and beyond cities are witnessing the rise of community buying in grocery delivery.

Earlier this year, companies such as Flipkart, Meesho, and Udaan began entering the space. Even the food delivery major, Swiggy, seems to be working towards a community-buying vertical called Swiggy Bazaar, for which hiring posts were put out in October.

Broadly, there are two models of community grocery buying being implemented in India – reseller-led and Pinduoduo. Chinese company Pinduoduo pioneered the community-buying model wherein any customer can initiate a team purchase and invite friends and family through social networks to join. Post the formation of teams, products can be bought at a discounted price. A similar model is being implemented in India by Y Combinator-backed Gobillion and Tiger Global-backed DealShare.

Reseller-led model

However, majority of companies offering community buying in India are operating under a reseller-led model, where resellers act as conduits between the app and the end-users and earn a margin on each product sale along with getting discounted products for their network. The order is then delivered to community leaders/resellers and they distribute it among their network.

“We believe this model can solve challenges such as small ticket buying, assisted buying, instant delivery etc. Our platform allows anyone to register as a community leader and place orders for their network.Our efforts are now focused on ensuring that we build a good coverage across all key cities and have local community leaders join us,” Prakash Sikaria, Senior Vice President - Growth, Flipkart, told BusinessLine .

Shopsy claims to have over 2.5 lakh sellers, 51 lakh users and is said to be on track to clock 100 million users by 2022 and enable over 25 million entrepreneurs by 2023.

CityMall’s co-founder and CEO, Angad Kikla, noted end users in small towns and rural India want a platform thatthey can trust on and just another “app” cannot solve this problem.

“It requires significant investment and thought to build this layer of trust. Another important requirement to get people from Bharat to purchase online is guidance. Our community leaders regularly speak and engage with their consumers, guiding them to make the right purchases and decisions,” Kikla added. The company claims to have over 25,000 monthly active community leaders.

Reducing costs

Most community-buying companies are offering up to 50 per cent discount on grocery products. Gobillion’s founder and CEO, Roshan Farhan, noted that the customer acquisition cost (CAT) is significantly less for group buying companies as compared to traditional e-commerce companies. “Typically, we spend around ₹50 to acquire a single customer at Gobillion today as opposed to other e-commerce players, spending around ₹300 to ₹400 per customer acquisition. The reason our CAT is so low is that actual customers are referring the platform to others,” said Farhan.

He said because the demand is being aggregated, the last-mile logistics cost of the company is also brought down.

Instead of using a two-wheeler for last-mile deliveries, the company can aggregate demand for a locality and send a tempo. This helps reduce the last mile cost and the unit economics of the model also becomes much more sustainable. Another aspect is sourcing directly from the manufacturers and keeping a limited assortment of SKUs.

B2B e-commerce company Udaan’s Price Company counts sourcing abilities as one of its competitive advantages. It claims to have built scale across supply chain and logistics, warehouse etc, with presence in over 1,000 cities covering more than 12,000 PIN codes.

“Udaan operates one of the largest logistics and supply chain networks with over 200 warehouses spread over 10 million sq ft space across the country delivering over 8,000-9,000 tonnes of products every day. Given the scale of our operations and the transaction volumes, our costs have reduced substantially due to economies of scale, and we are able to offer better prices and margins to our retailers and kirana store owners. As we expand our community grocery e-commerce to these towns and cities, we get additional scale which in turn helps us reduce ouroverall costs,” said Ankit Agarwal, Business Head, Price Company.

A joint report by Bain and Company and Sequoia India has projected social commerce to become a $16-20 billion opportunity by 2025, increasing to $60-70 billion by 2030.

The report noted that India is still in the early stages, with only 8 per cent Indians (about 105 million) shopping online, and average spend at of the users is about $286 per year, much lower than other markets.

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