Venture capitalists are rushing to enter what’s being termed as the new wave of e-commerce targeted at the next 100 million internet users.
Focused on the non-English speaking population and relying on videos and social platforms like Whatsapp, this breed of e-commerce startups is seen as being discovery-led, unlike search-led platforms such as Flipkart and Amazon.
Amid a raft of deal making, Sequoia Capital-backed BulBul.tv is in talks to raise $6-$7 million from Chinese alternative asset management firm CDH Investments, while SimSim is in discussions with Accel Partners and Shunwei Capital for a $5 million round, and Mall91 is looking to raise $8 million from Go Ventures, the investment arm of GoJek.
WMall, too, has raised $2 million from SAIF Partners and Venture Highway, and is in talks to close its next round of $8-$10 million.
Others like DealShare may mop up funds from Matrix Partners, Falcon Edge and Omidyaar Network, multiple people aware of the development told ET, requesting anonymity.
“Most of these startups raised their previous financing round just six months ago, but are back in the market,” said an investor who did not wish to be named.
What’s getting investors interested is the view that the next phase of e-commerce is going to be much more discovery-led as opposed to search-led like e-commerce 1.0.
“The next 500 million users coming online opens up a massive opportunity and there will be multiple ways to address their needs, just like China’s Pinduoduo and Xiaohongshu, which were able to scale very quickly despite the dominance of Alibaba,” said a venture capitalist who actively tracks the sector.
Transactions on these platforms are also growing rapidly, but with a lower average order value or AOV.
Unlike Rs 1,500 AOV on Flipkart and Amazon, these companies rack up around Rs 300-Rs 400 as AOV.
“So, the key challenge that needs to be solved is how to make delivery economics work,” said the investor cited earlier in the report.
Bulbulshop Shopping Network collaborates with influencers who create videos and content to sell products across categories like kitchen appliances, accessories, lifestyle goods, among others.
SimSim and Mall91 bank on a horizontal marketplace business model, connecting the user by creating a local language shopping portal to make the experience more social.
WMall is a social community based e-commerce platform where members create content around different products on the platform to enhance the buying experience for other members.
“We’re excited to see very strong demand from our users in this segment, particularly women. In the absence of modern trade and organised retail in tier two cities and lower, e-commerce has a much larger relevance for these users compared to the metro consumers,” said Harmin Shah, founder, WMall.
“None of the large horizontal e-commerce companies are currently positioned to become the go-to platform for these users,” he added.
When contacted, all the companies declined to comment on fundraising plans.
As the next billion Indian internet users get accustomed to life with technology, commerce experiences will be different due to various factors such as language, community, price points and logistics, investors point out.
“Existing models have a high cost of logistics, which makes it difficult to service low average transaction value in non-metros. This makes social or alternate commerce an interesting segment to look at today,” said Revante Bhate, a partner at Kalaari Capital’s Kstart.
According to a study conducted by B&C, Google and Omidyar Network, the next round of innovation in India needs to focus on targeting the unique needs of a 500 million population by re-engaging the users who have stopped using the internet and by making it attractive for newcomers.
Monetising the platform will not be easy, say industry experts.
Small businesses that focus on user-based business models in India find it hard to raise money. Also, large social media platforms can be a threat, like Facebook introducing commerce front-end tools will pose a challenge. Managing supply at scale, handling customer service issues and adhering to quality standards too would require operational skills.
“Bharat should see new models emerge which have not been seen before as the infrastructure support in the country isn’t comparable to China, let alone the US. This also makes it tough and hence we may see daring attempts by strong founders which may need some capital in the beginning to get to the right answers,” Bhate said.