This Social Commerce Start-Up Is Creating a New Way To Shop For Bharat
Free Book Preview No BS Guide to Direct Response Social Media Marketing
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
The spectacular entry of Reliance Jio and the subsequent disruption in Internet data usage led to the creation of unimaginable possibilities. Millions of people were going to be able to access the Internet for the first time, and most of them were going to be mobile-first as well.
About four years later, the expected disruption has happened, and while content platforms such as TikTok have probably been the biggest gainers so far, online commerce is not too far behind. There’s the likes of Facebook-backed Meesho and Mumbai-based Shop101, which are helping businesses sell online, and then there are business-to-consumer companies such as DealShare.
Founded in 2018, Jaipur-headquartered DealShare is a social commerce platform that runs on an idea similar to China’s Pinduoduo—bringing together the best deals on several products to those in the middle- and low-income segment.
“Around 80 per cent of our consumers are first to e-commerce because of us,” says co-founder Sourjyendu Medda.
In September last year, DealShare—which is currently present in Rajasthan, Gujarat and Maharashtra—raised $8 million in Series A funding led by Matrix Partners India and Falcon Edge Capital.
The company was started by Medda, Vineet Rao and Sankar Bora. While Medda and Rao were friends in school, they met Bora through a common friend.
Between them, the trio have years of experience doing very different things. Rao was with Microsoft in the US for over a decade before DealShare happened, while Medda has worked in sales functions, heading teams at both Metro Cash and Carry as well as Raymonds. Bora was one of the early co-founders of online fashion store Myntra which was later acquired by Flipkart. Also part of the founding team is Rajat Shikhar, who joined a while later, who was the chief operating officer at Ola-owned Foodpanda.
“You need multiple experiences to make a business work,” Medda explains, adding how he had always had an itch to do something of his own. With DealShare, everything somehow came together perfectly. But it took time to arrive at the product that they now have out there.
In the early days, the company didn’t even have its own application. For the first couple of months, all the commerce that the company managed was through multiple WhatsApp groups. Starting with their employees, friends and acquaintances in Jaipur, they started with an initial base of 100-150 people, a number that has gone on to cross 20,000 since. In that period, the company would aggregate all orders in a week and deliver everything on the weekend.
“We did not start with an app because we felt that these guys might not know how to use one; we used to give them deals, and ask them to click a link, and the moment they clicked on it, the order would get captured at our end.”
Medda says work on the app, which currently has over 500,000 downloads on Google Play Store, started once they were confident that people were steadily coming online and were willing to buy if the experience was simple enough.
How It Works
On the app, which is now available in English, Hindi and Gujarati, there is no cart. It is a simple interface where a customer can scroll through a feed to browse through different products, with some categorization. If a customer likes something, she can order through a single click. The company has a cut-off time at night, and whatever each customer has ordered until then is clubbed together and sent the next day.
Initially, the company worked on a reverse model but now, with a lot more data at hand, things have changed slightly. At any given point of time, the platform has a maximum of 1,000 stockkeeping units (SKUs) across 200-250 categories. In smaller cities, the SKUs reduce to as little as 200. The products include household goods such as grocery, standard fashion and some standard electronics. The company is also trying to dabble into fresh produce but is going through a lot of experimentation.
“Ours is an antithesis of the selection model where we say that the consumer’s mind is not very complex, so don’t clutter his mind with too many choices,” says Medda.
On the supply side, more than 70 per cent of what the company sells comes from local manufacturers. The remaining 30 per cent are national level players. According to Medda, working with the local level players also helps them extend the kind of deals that has made them so popular among consumers.
“We start with 100-odd units and we measure the time at which that flies if it is at the top spot, and if we get the confidence, then we massify and take them at full scale. Since it is all local and backend-tied, we need to only carry 7-8 days of safety stock, rest remains with them; so the risk to our business is small and for them the benefit is that their spare capacities are getting utilized.”
Across the three states that the company operates, it works with around 200 vendors.
For a platform that caters to a very different audience compared with the likes of Flipkart and Amazon, it was also important that the logistical costs were taken care of. And while DealShare tried a lot of different things, including traditional methods, nothing really worked out to their liking. And so, they introduced something called ‘DealShare Dost’.
“A Dost is a micro entrepreneur in the sub locality, who belongs there, has been there for years and has access to manpower,” says Medda.
The start-up takes a certain amount as advance to de-risk itself and works on a variable mode wherein the earnings depends on deliveries they make or transacting customers they bring. In the bigger cities such as Jaipur, Ahmedabad and Mumbai, these partners only do deliveries but in smaller cities, some even provide warehousing services. Around 70 per cent of deliveries now happen through this model and the plan is to move the remaining 30 per cent as well.
“This model has become a big strength for us and potentially, this can be a different company altogether—a logistics company with us being the biggest use case.”
Going forward, Medda says the plan is to densify their network in each of the states that they are already present in. Typically, they take a straight route, which makes the front end management easier, Post the densification, the company plans to enter Karnataka, the National Capital Region and Punjab. By the end of this year, DealShare expects to be present in at least 100 cities.
Medda says the company had seen a 25 per cent month-on-month growth in gross merchandise volume over the last few months. Given their plans of scaling, he says they are in talks to raise new funds, which will help them grow at a faster rate.
“While we run very frugally and focus a lot on unit economics, we need a lot of investment because I think it is important for us to make it very, very sizable before we see any of the big players entering.”
Is there a path to profitability? Medda says Jaipur will be profitable on an earnings before interest, tax, depreciation and amortization basis this year.
Eventually, the idea is to create a platform and not remain on an inventory-based model, he says.
“The moment my suppliers become digitally savvy, and they can start listing their products and do business on my platform, that is when I will switch to a platform-based model.”