Social commerce will see more players scale down to sustain: Flipkart’s Prakash Sikaria

Between December and the end of the JFM 2022 quarter, Shopsy grew 3.5X times. In January, February and March quarter, Shopsy recorded about 40-60 per cent month-on-month growth in the number of orders. The app downloads are around 40-45 million. 

I think the first phase of Shopsy was to enable a unique selection which we continue to do. Now we are getting into a phase where we are bringing a lot of social features to the app. So you will see a lot of gamification and engagement features being added to the platform.

On the other side, we also want to continue to push on making this business more sustainable. So you will see a lot of push on monetisation and pricing. Further, helping sellers and brands to engage the customers would be the other dimension that will be investing towards.

The segment that Shopsy plays in is the hyper value segment, and then it is layered with social commerce. One of the challenges in this segment is it’s very hard to make the business sustainable and profitable. On the demand side, it’s very competitive with players trying to get the attention of the customers, and also from a logistics cost perspective, it is an expensive business.

What we have been able to do is, we are very efficient on marketing expenses. Today, Shopsy would be a fraction of customer acquisition cost when compared to the competition. Further, we have been investing heavily on the supply chain side over the last six-nine months. We are leveraging Flipkart for the supply chain and making it far more efficient. Our supply chain cost will be one of the lowest in the industry. These factors allow us to play this out in the long term and continue to win the market. 

After a particular scale consolidation is difficult. If you see in e-commerce as well, Shopclues and Snapdeal went a particular way as the competition heated up and I think that is how the social commerce market will also settle. There will be market leaders and others will significantly scale down to make the ends meet or make sustainability work. We are already seeing some early trends of that with Shopee shutting down, and also seeing other players trying to slow the growth momentum to figure out the sustainability of their business.

Any reseller-led channel that is self-serving becomes a direct customer channel. For example, if I’m not putting an artificial threshold, then you can buy for yourself or you can buy for someone else. So there is no way for the platform to say that you buy this and you don’t buy it.

This is a natural progression that every reseller-led platform goes through. On Flipkart Shopsy, there is a good balance between resellers and direct customers, who are coming and buying from the platform. Almost half of the demand on Flipkart Shopsy today comes from direct customers.

India is a value economy and in any value economy, the consumption trend is to prefer food, clothes and then look for other amenities. Grocery is one of the largest retail markets in India and it also has a very high repeat rate.

You will see grocery and fashion as two big categories where all this hyper competition will be happening. I think fashion to a certain extent got settled in the last five years. But in grocery still, no one has emerged as a clear market leader. Everyone is fighting to become the market leader because it is the largest (70 per cent) in the retail market.