To borrow the great spiritual leader Dalai Lama’s words, “When you lose, don’t lose the lesson.”
Even our failures have much wisdom to impart, sometimes more than our victories. In case of startups, defeats or roadblocks play an important role – either they are turning points in their stories or complete full stops depending on the circumstances.
If they are turning points, they lead to pivots and sustainable business models in many cases. If they are full stops, they lead to a whole bag of learnings for the entrepreneur’s next venture. Defeat is not in accepting the fact what you tried to do could not be achieved, but rather in failing to harness the learnings from your loss in your way forward. It was with this line of thought that Annkur Agarwal, co-founder of Mumbai based price comparison service Pricebaba, came out with a post describing why Pricebaba failed to monetise.
Annkur says, “We wanted to make a business model around creating business for retailers and we managed to generate a lot of traction towards this. However, where we failed at was in monetising the business. Yet, we still believe that local search is very important though it is a tough model to execute.”
So ,what was it that stopped Pricebaba from monetising, despite having raised INR 2 Cr, onboarding over 2400 retailers in 15 cities, generating more than INR 300 Cr worth of inquiries, and getting more than 86 million visits on the portal? To understand this let’s take a quick look at how it started and on what assumptions the business was built.
How did it all begin?
Annkur started Pricebaba in 2012 along with Tirthesh J Ganatra, after Annkur moved out of running a tech blog OnlyGizmos. His friends were always asking him about where they can buy good quality mobile phones from. That is when, the duo decided to focus on entering this segment. In Annkur’s words, the business was built upon a few simple beliefs:
- We believed that people in India use the Internet to research products, but largely shop offline.
- Discovery of products locally is difficult and business directories do not go to the brand level, forget providing product/price level info.
- Online and offline prices are not at par. We strongly believed back then that offline is cheaper and there are fundamental reasons for it.
- There is still resistance in people to shop online. Buying a book online vs. buying a mobile online are very different levels of commitment.
- A lot of decision-making happens at the storefront after looking at multiple products and exchanging of used phones is easier done locally.
- Both online and offline retailers will co-exist for the foreseeable future. Retail in India would be fragmented between these channels and not dominated by one over the other.
So armed with these thoughts and funding from angel investors and 500 Startups (in November 2013), the startup went about its task of onboarding retailers and in due course providing them web logins. This process of getting retailers on board was a smooth one for the portal and launching a city was two weeks effort end-to-end. It included photographing , geo-tagging, verifying phone numbers and checking their tax registrations and so on.
Starting from Mumbai, Pune, Delhi, Gurgaon, Noida and Bangalore, by February 2015, it had moved to four new cities namely: Chennai, Hyderabad, Baroda and Surat, taking the total number of cities it was operational to 11. That time, it was serving around 3.5 Mn users per month, with more than 1500 shops having been listed on the site across the 11 cities.
Now for monetising an O2O business like Pricebaba, some of the ways were;
- Subscription package through online directories that sends leads to paid retailers.
- If part / full transaction money was being collected online, a cut could have been taken.
- A listing fee could have been charged to be listed i.e. become a paid directory with no listings.
- Charge a fee to promote a retailer over others.
So Pricebaba was open to all of these options except for taking transaction money at its end. This stemmed from their belief of solely being a RoPo (Research online Purchase offline) player. So becoming an e-commerce player by doing transactions did not fit their bill. Hence, they experimented with all the other options.
Annkur says, “We did charge a subscription fees to a good 9% of our retailers in Mumbai, which was some 35 odd people out of 400 or so. However, even with those paying, we just made INR10 lakh in revenue, which was hardly enough to run the business. We wanted to increase our subscription amount per retailer, but that didn’t happen.”
Roadblocks To Monetisation
Follow-up strength of local retailers
One major roadblock to the model was that local retailers did not have the bandwidth to reply or follow up with the consumer leads generated through the portal. Pricebaba tried to counter this by having an in-house team doing follow-ups on behalf of retailers and helping consumers place an inquiry. However it did not work commercially for a product like mobile phones where margins for both the retailer and the startup were very low.
Problems in tracking conversions
One major problem in monetisation was the trouble faced in tracking conversions of enquiries through the portal and thereby charging a subscription amount. From the number of inquiries sent to a store from the portal, the total conversion rate wasn’t very high and even the ones that converted were hard to measure. A lot of this conversion depended again on how aggressively and promptly the retailer followed up on the inquiry and its price competitiveness. Additionally, conversion issues were also faced from the consumer’s side. For instance, when a consumer sees a nearby store and the price mentioned next to it, there was no incentive for him to place an inquiry to that store via an online portal.
Low number of paid subscribers
Most of the retailers started out as free customers, hence making them pay at a later stage was very tough. Additionally, Pricebaba let free and paid retailers co-exist on the portal, with the only benefit for its paying customers being priority listing and thereby redirection of more leads to them. Pricebaba’s approach was to get more and more data online till it got enough organic traffic to start making a dent in the retailers’ businesses (and charge them). However instead it ended up with cultivating a habit of no pay, with no major push for following up with leads. The realisation dawned much later that most local unorganised retailers aren’t in a position to follow-up and convert business inquiries sent to them.
Consumer mindset of online shopping being a lottery
Another major deterrent was the consumer mindset that online shopping is only more discounts and incentives, something that has been propagated by the rampant discounting model followed by the big ecommerce players. Annkur says, “ Consumers have been made to believe that online shopping is like a lottery- they only come online for best deals and more discounts.” Hence consumers who came to the portal would call every retailer asking for further discounts. Bigger ecommerce players have set unrealistic expectations in the minds of consumers which led to many small retailers getting harassed with calls for more discounts.
Not focussing on repeat users by exploring more categories
Annkur says, “We didn’t realise how necessary multi-category would be for repeat users. With just one category (mobile phones), our users had no reason to come back to us more than once a year. While we always wanted to go multi-category and were advised for the same repeatedly, somewhere (resource constraint aside) we didn’t prioritise it enough in a race to prove the model with one category first. Also, going multi-category with the RoPo model was far harder than mapping inventories from ecommerce sites.” Thus having only one category on the site meant lesser incentive for repeat users.
The Learnings And The Road Ahead
Looking back, Annkur believes that even though the business model was a tough one to execute, Pricebaba did a fabulous job collecting all that data. It’s a different story that they could not monetise it. However he is sure of one thing-the startup would not be indulging in charity again with what they have harnessed!
Nevertheless, they still fully believe in the power of local search for improving the shopping experience for consumers. Therefore as a course correcting step, Pricebaba has done away with the local retailers and is now experimenting with only retail chains. The idea behind this experiment is simple- retail chains with their call centres in place are much better equipped to handle follow up queries-something that the local stores were never able to do.
Additionally, to increase use case and to tackle the problem of conversions, it is making its search engine even more robust. This in turn is being done to attract people to do better research before they go to the online players to make a choice. Annkur says, “ Our filters are much more accurate than other online marketplaces, we provide an integrated search solution to the consumer, we give him more options, and most important, we are a neutral platform-so we give him the best research fodder to make a purchase decision.”
No wonder, Pricebaba is now sending a lot of business to biggies such as Flipkart, Amazon, etc. This in turn has also helped it track conversions better and with an accuracy of almost 90%. The technology driven platforms of online players makes it possible to reduce leakages, thus boding well for the overall conversion rate for Pricebaba. On product and analytics side, the portal is using CleverTap (earlier Wizrocket) for saving user preferences, conversion tracking, user surveys, targeted emails and notifications.
Similarly, to tackle the problem of repeat users, Pricebaba is introducing one new category every month and plans to add 10 more categories this year. Laptops are the first ones to be added to the portal.
In the end, Annkur believes that O2O is a story that might look easier on paper and difficult to execute on ground yet both online and offline retailers will co-exist for the foreseeable future. Retail in India would be fragmented between these channels and not dominated by just local or online mediums. Local retail is powerful, holds tremendous value and has a strong connect with consumers. Having learnt from their failure to monetise, the 25-member is now gung-ho on trying a new approach towards it.
He aptly sums this feeling up when he says, “We are a very powerful team working on a tough problem that accommodates our learnings from running Pricebaba all along. Survived by our user traction and revenues (yay), we are just getting started in our journey to create an impact.” With 90 Mn users on the site, and the confidence that comes from sending around INR 60 crore worth of leads to local retailers in a single month, Annkur may not be very far off from what he believes in.