Billion-Dollar Question: Is India the next big market for social commerce?

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Trell Co-founder and CEO Pulkit Agrawal deconstructs the growth of social commerce in India, explaining just why this sector is set to become the next frontier of the Indian ecommerce landscape.

Ecommerce has grown to become a colossal industry in India. The fact that industry titans Amazon and Flipkart have long-dominated the scene has not stopped startups from making a move to capture market share. In fact, of the nine startups to join India’s unicorn club last year, three – Nykaa, FirstCry and Cars24 – were ecommerce companies. Now, an undercurrent has taken root in this vibrant ecommerce ecosystem, in the form of social commerce.

Social commerce is an ecommerce model where products and services are sold via social media networks. It’s been lauded for helping to put sellers and buyers directly in touch, making the online sales process more human-centric, and giving sellers more control over the conversion process. Estimated to be worth US$89.4 billion last year, the social commerce market is expected to grow by over 30% over the next seven years.

This phenomenon is not precisely the new kid on the block. Facebook tapped into social commerce as early as 2007 with Marketplace, and has since tested and launched several other social commerce properties.

However, social commerce had its real debut only in 2020, as the overall ecommerce sector gained traction amidst the global pandemic. And India, with one of the biggest Internet-using populations globally, is one of its biggest hotspots.

Bringing social media and ecommerce together

A 2020 report by Sequoia India and Bain & Co. predicts that social commerce will grow to twice the current ecommerce market in India in the next decade, calling social commerce the “next frontier” of Indian ecommerce.

The trend has been in the making for a while, Pulkit Agrawal, Co-founder and CEO of Bengaluru-based lifestyle social commerce platform Trell, tells Jumpstart.

“Social [media] comes with a lot of network effects, and once it starts growing, it [explodes],” he says.

With a professional background in software development, Agrawal explains how he witnessed the evolution of communication on the Internet from its earlier, less affordable and accessible days in the 2010s, to its large scale deployment today.

With this shift came a boom in content creation and consumption, he says, but also with a problem. Indian audiences couldn’t relate to much of online content at the time. Search engine results, which are still being optimized for relevance and relatability, often threw up results that were better suited to a Western searcher.

“That was a moment when we said, ‘Let’s start a platform wherein we could bridge this gap, enable people to share relevant content, and be able to discover and get inspired by their lifestyle interests to [pursue] them in the real world,” Agrawal says. He eventually co-founded Trell in 2016.

The co-founders spent the first one and a half years building a community on existing social networks to try and understand whether this content problem was big enough to scale. In six months, Trell had 300,000 followers across multiple Instagram handles, a clear indication that Indian users were looking out for curated lifestyle content. It’s been onward and upward for the company since, with the latest funding milestone being an $11 million Series A fundraise closed last year.

Agrawal and his team soon learned that there was what he calls a “white space” with regard to social networks for identity-based careers. Content creators and influencers, who often identify themselves foodies or fashionistas, have more or less adapted their online outreach and campaigning for existing social media networks, but don’t quite have a dedicated platform for the personalized, influencer-oriented social engagement that they need.

The team also discovered another long-standing reality of the social media landscape in India – that while most users are more comfortable communicating in their regional languages and dialects (of which there are close to 20,000), social media in India largely caters to English-speaking communities.

Based on these two key insights, Agrawal and his co-founders steered Trell toward becoming a community lifestyle blogging platform. They then shifted gears to something that was on the books right from Trell’s launch – enabling commerce atop the social media community that they had built.

“Now, we have a huge community which is growing, sharing content, establishing networks, relationships and trust. What this enables is a huge opportunity wherein the people who are subject matter experts, or lifestyle experts, have the ability to essentially educate you about various products and services, hence helping you in making a lot of lifestyle choices,” Agrawal says.

“Once we started realizing this is happening on the platform we opened up the social commerce aspect,” he adds. “We launched it three months back and we have been kind of doing phenomenally well since then.”

The many faces of social commerce in India

It’s easy to understand social commerce as a form of online buying and selling that takes place on social media. But that understanding can be somewhat one dimensional.

Agrawal explains that in India right now, the social commerce landscape consists of four main business models. One is reselling, where sellers act as intermediaries between manufacturers or brands and customers, using social channels to sell. One of the most resounding successes of this model is Y Combinator-backed Meesho.

Then there’s the group buying model, which Agrawal refers to as C2M, or Consumer to Manufacturer. A group of users wanting to buy many of the same things – say the inhabitants of a certain building wanting to buy groceries in bulk online – may combine their shopping lists and order from a local grocer via a social channel such as WhatsApp.

Ecommerce via videos and livestreams is another way to do it, although Agrawal disagrees with counting this as social commerce – he believes this, unlike other social commerce models, lacks a point of social connection. While livestreams may be conducted by influencers, Agrawal says that because the influencers are often just acting as salespeople, livestreams lack the element of community present in other kinds of social commerce.

“At the end of the day, you don’t know the person who is selling to you. There is no relationship which you’re establishing with them. […] There is no community,” Agrawal notes.

And finally, there is the influencer-led commerce model, on which companies such as Trell have placed their bets.

What’s common between all of these models are two aspects that are core to the future of social commerce: discovery and trust.

To be able to shop via social channels, one has to be able to find products online. This is where social outreach and advertising come into play to aid in the discovery process. Social media companies are responding to this need as well, making their platforms more business-friendly and collecting copious (and questionable) amounts of user data while doing it.

Secondly, there’s the question of trust. As discoverability increases for ecommerce businesses, so has ecommerce fraud in India. Recently, over 100,000 malicious websites have been circulated online, including via social commerce apps, according to Cyber Peace Foundation.

This extends well into the ecommerce sphere. Google recently had to pay EUR 1.1 million in fines for misleading hotel reviews on the search engine. An entire business has popped up, selling fake reviews to sellers on online marketplaces such as Amazon.

Agrawal believes that social commerce can solve the issue of trust because of its community-first nature. People are buying from sellers, resellers, or influencers that they’ve known, followed and interacted with, and whom they trust.

He makes a fair point, but it’s not entirely foolproof because unwitting buyers could still be misled. This is especially true if the community has only recently been formed, or as Agrawal points out, in the case of video commerce as well.

In order to build a truly robust industry, the onus thus shifts onto social commerce players (as it does on other ecommerce players) to figure out a sturdy buyer protection framework. The company to figure this out will gain a huge lead on the competition, even as the social commerce pie continues to grow.

It’s still evolving

When social media first arrived in the late 1990s to early 2000s, no one quite knew where it would lead. Users mostly saw social networking as a harmless way to stay connected with friends and family online in real-time.

Then Facebook burst onto the scene, and since then, there’s been no looking back. Countless business models and monetization avenues have emerged – some dubious, many successful.

Ecommerce has a similar history of evolution, one that started with books being sold online, and now encompasses the online sale of everything from baby food and consumer hardware to doctor consultations, and even legal and illegal substances.

With both its parent industries seeing meteoric adoption in the past few years, perhaps social commerce is poised to see similar growth.

“Social commerce 2.0 will look like a very personalized and educated way of buying from the Internet as a consumer,” Agrawal says.

Its key value proposition lies in enabling consumers to make informed purchase decisions by educating them about products and services, and doing it in a language and format of communication they are most comfortable with, he adds.

Further, Agrawal says it’s an avenue for gig workers and micro-entrepreneurs to really monetize their online presence and expertise through a ‘one-to-many’ selling model. Agrawal sees this as a further enabler for the growth of the social commerce ecosystem.

Global change in social media use and buying patterns

The social commerce model is most popular in China, the biggest and fastest growing ecommerce market (with $672 billion in annual online sales in 2020, twice that of the U.S.) worldwide.

A report by the Asia Pacific Foundation of Canada documents the reasons for social commerce’s resounding success in China. The industry emerged out of a saturated ecommerce market with well-developed infrastructure and widespread adoption. Since ecommerce and social media had already become normalized, social commerce emerged as a fresh and compelling new way to shop.

This, the report notes, is because social platforms in China, such as WeChat, are multifunctional. They have already built out the infrastructure for an end-to-end online shopping journey, from discovery to payments and fulfillment, making these thriving online communities perfect microcosms for testing out new ecommerce opportunities.

The report adds that social commerce arrived at a timely moment in China – the same time as when millennial culture began dominating the country.

With many other kinds of parallels drawn between China and India, as two massive markets with high degrees of Internet penetration, the opportunity is massive. Startups have already started making headway in the social commerce space in India, and competition is slowly building up as these companies, even at a local level, race to capture their share.

Agrawal says that what will help set companies apart is a hyper-focus on what the consumer wants, innovation to make that happen, and the ability to scale the benefits up to thousands of people through the network effect of social media.

“At a very fundamental level, social networks have a very different DNA from commerce DNA. But somebody who is able to really mutate out of it will emerge as a winner in the market,” he says.

For a company like Trell, which has only recently launched its social commerce features, this means more competition. But Agrawal’s take on this is short and confident: “the more the merrier.”

Header image courtesy of Trell

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