Social commerce companies Flipkart Shopsy and Dealshare are gradually reducing dependency on reseller-led commerce and group-buying respectively. Experts believe these models have inherent scaling challenges that have made it tough for companies to solely depend on these models in India. In group-buying, buyers form a group of 10 (or more) to get significant discount on the bulk purchase.
Bengaluru-based Dealshare, which has been offering this feature since its inception in late-2018, believes that India does not have the digital savviness required for the success of such a social commerce model. Sharing an anecdote, Dealshare co-founder, Sourjyendu Medda, said, “Sometimes, users in India fail to grasp concepts like using the same link as their group to earn group incentives. They will use a different link to make the purchase and will then wonder why they did not get the incentives or discount.”
He added that group-buying doesn’t work on digital platform in India. Medda believes that the bigger gambit is social commerce and group-buying is just a means to do social commerce or virality.
Mrigank Gutgutia, Partner, Redseer Strategy Consultants, added, “Group-buying like transactions are not so common in India. So, while there was a group-buying component in some companies’ business model, over a period of time the share of group-buying has come down. We could argue that traditional group-buying concept in India is yet to be proven at scale.” Group-buying was pioneered by a Chinese company Pinduoduo, which went on to become a huge success. However, Medda noted that now group-buying accounts for only 10 per cent of the total demand generation of Pinduoduo.
In a reseller model, 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. Started in 2021 as a social commerce platform, Flipkart Shopsy said that it is now getting a majority of its new users directly through its app instead of its initial reseller-led commerce model.
Speaking to businessline, Adarsh Menon, Senior Vice-President and Head - New Businesses, Flipkart, said, “We are not wedded to the reseller model anymore. Instead, we are very much focused on bringing the next 200 million customers online. We have learnt that while Shopsy customers are new to ecommerce, they are not new to the Internet. Many of them are comfortable in using the technology and do not need a reseller.”
An early mover in the reseller-led commerce space, Meesho too shifted focus from just reseller-led commerce in 2021 and is enabling pure-play e-commerce where customers can directly buy items from Meesho. Talking about the challenges in the reseller model, Gutgutia said, “It is difficult to control the overall user experience because the user experience is dependent on the behavior of the reseller. Second, the reseller can only serve a limited amount of customers and so to get more customers you need to add more and more resellers. As the number of resellers grow, the challenge is then to manage them.”
He added that the cost and effort of running the reseller business are pretty high and the whole model is quite complicated. Further, it becomes tough to scale across India, because there might be no reseller in a region and then there is no way to scale in that area.