[The Outline By Inc42 Plus] Indian Ecommerce Goes Social + Vernacular

Dear Reader,

More often than not, the parts of India outside the metro and Tier 1 cities have been an afterthought for the country’s tech ecosystem. The playbook has evolved among these lines — first, build for the metros, look for validation in the top 10 cities and then slowly venture into Tier 2, 3 and beyond. And that is when you spray a bit of regional flavour on your product, offering the UI in Indic languages or creating a lite version for low-end devices.

But a new breed of startups are turning that cliche on its head by building for ‘Bharat’ right away. And their first stop is ecommerce. 

These are India’s new-fangled social commerce platforms  — a term that has lately become a catch-all phrase to describe a wide range of businesses:

• Such as DealShare and Mall91, which offer group purchases 
• Or Meesho and Glowroad, which allow individuals to turn into entrepreneurs or sellers in their social circles
• Or the likes of BulBul, Trell and SimSim (recently acquired by YouTube) that leverage videos and influencers for online selling

While the first of those three models is based on the thesis that only bulk purchases can justify the high cost of delivering to the interiors of India, the other two are based on the simple proposition of bypassing the cost of listing on marketplaces or advertising on Facebook and Google to reach the consumer.

But one might ask what is in it for the consumer?

According to a report by Sequoia and Bain, over 400 Mn Indians have never transacted online despite being on the internet. The primary factor is their inability to understand or trust ecommerce platforms that do not communicate with them in a language they are comfortable with. 

The likes of BulBul, Trell and SimSim are trying to solve this problem through their regional language content-to-commerce platforms. The basic idea is to onboard Indian language content creators who can engage consumers to buy products in segments like beauty, food and electronics. Once these influencers acquire a robust following, they can monetise this reach by tying up with more brands who sell in those categories. 

Others are taking a different approach. Short video platform Chingari is leveraging artificial intelligence and machine learning to allow users to buy the clothes, cosmetic products and electronics being used by its content creators. These products are scanned and mapped against Amazon’s database and users can instantly place an order for these products while watching the video. This is in addition to partnering with brands for campaigns where creators from smaller towns are paid for engaging content. 

Unlocking A Vernacular Influencer Category

The rush to leverage regional language content for ecommerce means an ever-growing demand for creators in Indian languages. After all, that’s the basic promise of social commerce. Despite the target market being Tier 2/3 and beyond, almost 60% of influencers deployed by brands are from Delhi, Mumbai, Bengaluru and Kolkata, according to digital marketing company Social Beat. 

Ramya Ramachandran, founder & CEO of influencer marketing agency Whoppl, believes it’s a matter of maturity. “The vernacular influencer market is still quite unstructured compared to the urban English market. While there are a few vernacular influencers who have millions of followers and a team to manage and negotiate deals, most of them are still new to the game,” she said. 

This is also why payouts to ‘vernacular’ influencers are lower than their English language counterparts. Although rates may vary based on region, brand, category and content type, Ramachandran says that an Indian language influencer with 2 Mn followers got INR 80,000 for a recent campaign, whereas an English language content creator with a similar following pocketed as much as INR 4 Lakh for the same campaign.

Another way influencers earn is through affiliate marketing. When a product is sold through coupon codes or referral links. Here, the creator might get a 5%-7% cut on the sale. 

But these avenues of earning extra income are still not enough to attract more regional content creators to build a base of millions of followers. 

Given this, well-funded startups in this space are using cash to lure influencers that have the talent to attract a massive following. Trell, which boomed in the wake of the TikTok ban in 2020, is one such platform. Cofounder and CEO Pulkit Agrawal told us, “We are looking for specific types of lifestyle-related content and not lip-syncing clips like TikTok. That is why we have started a creator-grooming team which identifies people with great storytelling skills and helps them find the right content fit for themselves.” 

The ghost of TikTok still hangs heavy on the short video space. Such was the popularity of the Chinese short video app in India that it even became a central figure in Bollywood movies, such as in 2019’s ‘Bala’, where actor Yami Gautam portrays the role of a song-and-dance TikTok star who bags beauty endorsements. 

Where did those TikTok stars go? Most have migrated to either Instagram or YouTube, while a few were wooed by Indian short video apps through retainers. So are brands also following them to those big tech platforms? 

Decoding The Psyche Of Brands

Shudeep Majumdar, cofounder and CEO of Delhi-based influencer marketing company Zefmo Media, believes brands have been shy about homegrown social platforms despite the exodus from TikTok. Most of the agency’s clients continue to gravitate to Facebook, Instagram, YouTube and Twitter for regional language content because of their greater reach and their more robust native analytics tools to measure reach, engagement and demographics metrics, which many Indian short video apps do not yet offer. 

Of course, lately bigger consumer brands have realised that content in Indian languages is more effective in driving sales in the hinterlands. “The cost of deploying vernacular influencers on an average is 20%-30% lower than English, so the returns on investment for such creators is up to 1.5 times better than English-only creators.” 

But one front that legacy brands are yet to catch up on is understanding that investing in content is not just about seeing a directly proportional impact on the bottom line.  

For instance, Kaushik Mukherjee, cofounder and COO of D2C beauty brand SUGAR Cosmetics, believes that it is not wise to use influencers as an affiliate marketing channel. In essence, it’s not all about sales. “When you are trying to get into a new region or attract an audience that has not been introduced to your product like a Tier 2 or 3 market, the best way to approach influencer marketing is for user education and community building,” he added.

The diversity of influencers also plays a crucial role in creating context and credibility for a D2C product. Unlike the big FMCG labels, where ‘model’ celebs who might be slim or fair-skinned endorse all things glam, D2C brands are attuned to the evolution of audience preferences for authentic reviews. 

For instance, for consumers in India’s smaller towns — whether it is Munnar (Kerala), Asansol (West Bengal) or Bina-Etawa (Madhya Pradesh) — content from influencers that adheres to the local cultural needs will always be more relevant than generic pan-India advertisements.

But smaller, local brands are yet to discover this upside. According to Sumit Ghosh, founder and CEO of Chingari, that will happen eventually. “Currently, Chingari has just over 33 Mn monthly active users. The hyperlocal bit is possible only when we have 200-300 MAUs.” 

For context, YouTube was reported to have crossed 325 MAUs in October India last year and TikTok had more than 85 Mn MAUs in India in December 2019. In other words, there’s a long way to go before these social commerce apps can completely bank on the Indian language influencer base. 

Nykaa Readies For IPO At $4 Bn Valuation

One of the first successful content-to-commerce efforts in India was Nykaa as it built an army of content creators offering beauty tutorials online. Within a decade of starting that journey, it is now planning to go public at a valuation of more than $4 Bn.

As a mandatory process before filing the DRHP, the startup has already converted itself into a public company and is looking to size its public offering between $500 Mn and $700 Mn. 

Although a lot of startups and brands have used influencer marketing to grow their visibility, new rules on disclosure floated by regulatory body Advertising Standards Council of India (ASCI) might prove to be a hurdle for the sector, say experts.

For instance, ASCI is reportedly mulling to send a notice to cricketer Virat Kohli for not adhering to influencer marketing guidelines. The Indian team captain had earlier reposted a print ad for Lovely Professional University on his social media account, but it did not contain any disclaimers about it being a promotional post. 

Many pointed out that Kohli should have used the ‘paid promotion’ tag as it was akin to ad — for context, Kohli has a massive following of 228 Mn fans across Instagram, Facebook, and Twitter.

The Omnichannel Conundrum Amid Pandemic

Ecommerce platforms like Nykaa, Purplle, and D2C brands like SUGAR were at a critical juncture in their journeys when the pandemic hit last year. They were all eyeing a retail expansion to venture into the Tier 2, 3 and beyond geographies.

Many D2C beauty brands have a captive audience base and thrive on repeat purchases made by loyal customers, as discussed in our 17th edition of 30 Startups To Watch. But to scale up further, they need to attract new customers through an offline presence. And here lies the catch — they cannot rely only on online content to make inroads here. 

Physical stores have a widely diverse customer base, and brands may fail to highlight their USPs or cater to their target customers in the brick-and-mortar space. The transition from online content to offline purchases is not so simple. For instance, if a social media user consumes a lot of content on climate change and sustainability, it is easy to coax them into buying organic beauty products with relevant advertising. But for a niche brand to know which physical stores in Tier 2 or Tier 3 cities will attract the same audience is an expensive and tricky business, experts told Inc42.

However, there seems to be a silver lining thanks to the pandemic. “While entering Tier 2 and 3 geographies, we realised that for a premium metro-centered brand, offline retail was the best channel to establish a presence. But with Covid-19, we are seeing a shift towards online, with only 25% of our sales coming from offline, compared to 50% in pre-Covid times,” SUGAR Cosmetics co-founder and CEO Vineeta Singh said last year.

More interestingly, SUGAR got there by getting in-shop assistants to try different shades of lipsticks and send pictures to prospective customers, not just to advise these customers but also to assist them in buying these products online. Kind of like what an influencer does. So the way forward in the retail space could be taking a page out of their online playbooks. 

Until next time,

Deepsekhar