D2C Will Grow As Businesses Want To Take Charge Of Their Destinies: Gupshup’s Beerud Sheth

Believe it or not, there was a phase when an Indian social media company had 45 Mn users in the country compared to Facebook’s 11 Mn in India at the time. That was 2011, and the internet penetration in India was 10.1%. The connection was painfully slow at times. It was the continuously buffering kind, the unmistakable signature of the 2G era. 

The Indian social media company — called Gupshup — had come out with a group SMS service in 2008 that allowed people to send bulk messages for free. Students often used it to share jokes with their peers. NGOs used it to stay connected with their members. Social activists leveraged it to gather demonstrators during Anna Hazare’s anti-corruption campaigns. 

Then it came under regulatory stress because of its monetisation model (Gupshup used to insert advertisements at the end of the messages) and eventually pivoted to enterprise messaging in 2011. 

Since then, it has launched a plethora of services such as TeamChat for intra-organisational communication in 2014, bot builder tools and omnichannel messaging APIs in 2016 and integrated its APIs with WhatsApp for Business in 2018 for customers like Citibank, Kotak Mahindra Bank, IndusInd Bank, ICICI Bank and DishTV. APIs are software layers that facilitate communication between different apps and websites. For example, an API makes it possible to sign up for an app or website with a Google or a Facebook account.

Gupshup claims that its APIs enable more than 100,000 developers and businesses to build messaging and conversational experiences and help deliver 6 Bn+ messages per month across 30+ messaging channels. It recently raised $100 Mn from Tiger Global Management, propelling the company’s valuation to $1.4 Bn.

After the unicorn funding round, the 16-year-old company has bigger and bolder aims. For instance, it wants to be at the forefront of conversational commerce. Simply put, it is all about users chatting with a brand’s bot on a messaging platform like WhatsApp and placing an order. Gupshup aims to change the current trend of visiting multiple ecommerce sites/apps and searching for what ones to buy. It is also keen to ride the D2C (direct-to-consumer) wave as businesses seek to take back control from marketplaces like Amazon, Flipkart, Swiggy and Zomato.

The first industry vertical it is focussing on is the food and beverage segment, with chains like Hyatt, Holiday Inn, Radisson, The Coffee Bean & Tea Leaf, Jamie’s Pizzeria, London Bubble Co and Tea Junction having signed up for its direct ordering tools.

We sat down with Gupshup’s cofounder and CEO Beerud Sheth (he will be a speaker at the Inc42 D2C Summit to be held on July 17 and 18) for a chat on the road ahead for Gupshup, its IPO plans, the future of conversational commerce and its discoverability problem, the funding binge witnessed by the Indian startup ecosystem and the long-term impact of current D2C wave. Here are the edited excerpts from the conversation.

Inc42: Not many tech companies from 2005 have made it to 2021. What will be Gupshup’s road map from here, now that you have the unicorn tag as well?

Beerud Sheth: We are one of the largest providers of tools and platforms for businesses, and we are now investing a lot in R&D. We are scaling up our teams — doubled its strength only recently. We are also looking at M&A opportunities. The company is hiring a lot of sales and marketing people globally, growing its international exposure and leveraging it within India. In about five or 10 years, we will certainly be a much, much bigger company. 

Inc42: Is there an IPO on the cards?

Sheth: Well, we discussed it with investment bankers (during the unicorn fundraise) and also explored the public listing opportunity with potential investors at the time. But this funding round happened very quickly, and we decided to go for it. We thought, let us grow the business even more before we go public. So that has, in a way, delayed our IPO plans a little. We can execute much faster now as we have a lot more capital at our disposal. Of course, the listing won’t happen this year, but we will be heading in that direction after that. But I don’t want to set a time frame for it.

Inc42: Why did you choose the restaurant industry as the point of entry into conversational commerce (an intersection of messaging apps and shopping)?

Sheth: We think conversational commerce is a huge trend, and it will only grow stronger. I would like to draw an analogy between this trend and what we saw in the ’90s when every business thought of building a website that would be the digital storefront. Now conversational commerce (and the kind of interactive experiences we have there) has emerged as the new digital storefront. Every business is going to build it because that’s where the users are. 

We chose the restaurant industry as the first vertical to build the conversational ordering experience because food is the most high-frequency ecommerce segment, and many people use it. We are trying to establish that conversational commerce is a really big deal. Also, the restaurant industry was among the sectors that were most affected during the Covid-19 pandemic. In fact, they had to transition from a dining experience to takeaways and deliveries almost overnight. They have also realised when people eventually return to dine-ins, they will still want it to be touchless and safe. As restaurants were eager to adapt themselves and adopt new solutions to modify their business behaviours, this sector seemed like a good fit.

Inc42: The biggest disadvantage of any order-direct commerce is the lack of discoverability. Again, in a marketplace model, consumers can choose from any number of products and brands. But when it comes to conversational commerce, they have to more or less decide beforehand what to buy and from whom to order it. Can you get that problem fixed?

Sheth: Some solutions are already there, and more are expected down the road. But this discoverability issue has not been fully resolved yet. Search engines solve this problem in the web world, and app stores ensure discoverability in the app space. We need something similar for the conversational world as well. I will say that we are working hard to make it happen as it will help businesses identify who their customers are and what they want to be improved — the kind of data marketplaces restrict to a large extent.

For instance, industry data shows that 25-30% of a restaurant’s customers account for 60-70% of its revenue. If a food outlet can target those few but frequent visitors and build better customer engagement, it is bound to drive sales.

Inc42: Of course, businesses would like a direct order channel like conversational commerce. But what is in it for end customers who are ordering through channels like dukantech? 

Sheth: Yes, dukantech companies have a well-defined, structured approach throughout the ordering experience. But we think Gupshup offers a broader set of features across marketing, sales, payments, customer support and more. Besides, consultative selling works well for many products. One finds it really useful when purchasing jewellery, saree and a lot of fashion stuff/lifestyle items. As a consumer, you would like to ask if the product is available, what colour goes with it, what the seller recommends and more. It is not about buying something straight off the catalogue. 

Also, if I am a repeat customer, do I get some loyalty benefits? Think about it this way. When you go to your favourite restaurant or a favourite store, what is your perfect experience? The perfect experience is either the waiter or the salesperson knowing you by name, welcoming you, knowing your preference and then giving you recommendations. You may prefer to keep conversations short and tell them you want the ‘usual’, but you expect them to know what you want. That is the experience conversational commerce seeks to emulate.

Inc42: The direct-to-consumer (D2C) trend has been here for a few years now, and the pandemic has compelled more brands to adopt the digital way of doing business. But we still do not have enablers like Shopify. Why is it so? 

Sheth: I expect D2C brands to grow as businesses try to create direct engagement with their customers. The only reason why they don’t do it is either it’s technically impossible or very challenging. But all these problems will be resolved soon, and there will be a huge opportunity in enabling that. 

The only way to control your destiny is to have happy customers. And to ensure that you have happy customers, you need to create direct relationships with them. You have to know who they are, how they are doing, what they like and what they do not like. I mean, a feedback loop has to be established. While ecommerce marketplaces have grown tremendously in India, the moment for D2C platforms/tools to become just as capable and powerful has arrived now. Even if you look at the US, you will find that it took Shopify a while to gain a lot of traction. In fact, when a platform like Shopify adds new features, a merchant may not choose to adopt them immediately. So, it takes a bit longer to build traction. 

I think we don’t just see a D2C trend. The creator economy is also picking up. Today, content and product creators on Instagram and YouTube are directly reaching out to their followers in a bid to monetise their offerings. 

Inc42: Does that mean you are also planning to enter the creator ecosystem? There are companies like Gumroad in the US, but there is no similar business in India yet.

Sheth: I think it is a bit too early for that. But the influencer economy is pretty strong here. When TikTok was banned, many people were disappointed because they were making money through endorsements. And now they are doing it on Instagram. 

In the US, other monetisation models like subscription have also kicked in. Whether you have 1,000 fans or 10,000, you can monetise the ‘pool’ enough for a month’s earnings. I am sure it will also happen in India because we have people in remote areas who are very talented. Imagine having just 1,000 fans and each of them paying INR 10 a month. That comes to INR 10,000 a month. For somebody living in a remote area in India, that is a good amount.

Inc42: From being the world’s tech backend to a fast-emerging creator economy, the Indian startup ecosystem has come a long way since you started. Would you have done anything differently?

Sheth: The first rule of entrepreneurship is you cannot look backwards; you only have to look forward. You cannot have regrets. You cannot worry about what should have happened, what could have happened, what would I have done. Because every decision we make every day is in the context of what we know to be right and what we think is going to happen. If I go on worrying about what could have happened, I would go crazy or have a lot of regrets. I would be distracted and disappointed.

Inc42: We are perhaps seeing the first major funding boom when almost every startup has been able to raise money. Do you think new entrepreneurs should be cautious and not let it get inside their heads?

Sheth: Funding wise, this looks like a good phase. But I have also lived through bad phases. During the 2000 dot-com bubble burst, Wall Street suffered big time, and funding dried up all of a sudden. There was no investment for years. It happened again in 2008 due to the global recession. While those were extremely negative cycles, we are currently in the midst of an extremely positive cycle. 

But one should keep in mind that there could be external shocks around the corner. It also depends a lot on what the US Federal Reserve does. It depends on how the Covid-19 pandemic and the vaccination schemes pan out. Many rookie entrepreneurs may make the mistake of thinking, “Oh, wow, I got this and that valuation. Now, let me spend it all because my next valuation is going to be higher.” But there is no such guarantee. If you have not built a viable business, it may not sustain.