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Devina \n Joshi, Financial Express\n <\/i><\/p>\n
Devina \n Joshi, Financial Express
\n <\/i><\/p>\n
Mumbai, \n 8 September 2015 <\/i><\/p>\n
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E-commerce, \n as we know it, is old news. Hyperlocal is the hot new buzzword \n in retail hallways, going by the recent spate of well-funded launches \n in this space. There is already a wide range of services on offer, \n from grocery delivery to home, office and personal care services. \n Hyperlocals, services-based or inventory-based, are largely an \n urban India phenomenon. Services are hyperlocal by their very \n nature, driven by locality or communities. When moving into a \n new city, for example, people would like to stabilise as quickly \n as possible and here, such services step in.
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To put the whole picture in context, the Indian retail industry \n is worth $500-600 billion. Of this, grocery items account for \n about 67% of the revenue. However, in case of fast moving consume \n goods (FMCG) and grocery, modern retail formats account for less \n than 10% of the total sale. E-commerce or hyperlocals are obviously \n a tiny part of the pie just yet. Most companies, therefore, are \n still at a stage where they have to prove their business models \n and change consumer behaviour.
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While on-demand grocery delivery—the model that players \n such as Grofers ride on—has immense potential in this space, \n other high potential categories include delivery of services (such \n as supplying peons\/delivery boys, specialised laundry services, \n plumbers or electricians), price comparisons, food ordering apps, \n etc.
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Hyperlocal startups in India<\/b>
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It is a no-brainer that an aggregation model, since it is asset-light, \n is less capital-intensive than the inventory-led one. Moreover, \n it is easier to scale up such a model. The new generation of hyperlocal \n start-ups is coupling aggregation with logistics\/delivery, thus \n controlling even the last mile.
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Take Zopper, a product-based hyperlocal which started off as \n a price comparison website for electronics but now is a platform \n for purchasing products from offline stores. It counts on faster \n delivery through tie-ups with local shops near a buyer. “City \n by city, we need to bring more merchants on board, and all they \n have to do is download an app and their product can be listed \n on Zopper,” says Neeraj Jain, CEO, Zopper. The company’s \n margins vary from 2-8%.
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Home services start-up Taskbob, founded by Aseem Khare, charges \n a 20% commission from its servicemen. Product price comparison \n website MySmartPrice works on commission too, while providing \n a free six-month on-board period to offline sellers, where they \n can use the platform for gaining traction. The revenue model of \n BookMeIn, another home services company, includes a monthly subscription \n fee for a SaaS-backed system given to service providers to manage \n their business. Further, it gets revenues on leads\/bookings done \n by customers on the website, along with revenues through ads of \n service providers. So what’s working in their favour?
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A fertile environment<\/b>
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\n Indian retail is still dominated by brick-and-mortar stores, which, \n oddly, is an opportunity in disguise for hyperlocal players. Unlike \n non-hyperlocal e-commerce, these start-ups are not really competing \n with offline retailers, but are partnering them instead.
\n Hyperlocal business models spell instant, on-demand delivery as \n they cater to needs of a more immediate nature. The gratification \n is far more accelerated – the entire transaction can be completed \n in an hour sometimes. Customers also tend to trust hyperlocals \n more than non-hyperlocal e-commerce websites, as the stores they \n buy from through online platforms have a physical presence, making \n it possible to attend to any grievances quickly. Further, the \n start-up can tap into existing infrastructure, acting as a bridge \n between existing retailers and the consumer.
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“Due to the convenience factor, by being able to tap \n into consumption opportunities that might have otherwise been \n missed, the aggregator can actually drive new demand to the retailer \n in the short term,” says retail consultant Devangshu Dutta, \n chief executive, Third Eyesight.<\/b>
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Within hyperlocals, services have higher margins of around 20% \n as opposed to product based models which earn 2-10% margins or \n even non-hyperlocal e-commerce companies, which operate on 3-7% \n margins, depending on the category.
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This is because there is virtually no warehousing, inventory \n management or logistics involved in a services hyperlocal. Within \n services, food-ordering apps have an added advantage of the frequency \n of purchase as opposed to, say, e-commerce products. “The \n category is a high-repeat one as opposed to home repair for example,” \n says Saurabh Kochhar, co-founder and CEO, India, and chief business \n officer, global, Foodpanda.<\/p>\n
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A word of caution<\/b>
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While it ensures higher margins, replication of a services model \n is much more difficult. Training of people in services is very \n difficult as each individual has to be available wherever the \n customer is located. “Second, when a product delivery happens, \n I need local people to deliver it but if a person is coming to \n give a service, he represents your brand and should know how to \n handle a customer,” says Alagu Balaraman, partner and MD, \n Indian operations, CGN Global India, a supply chain management \n consulting firm.
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Third, as the services industry is rather fragmented, it is difficult \n to form partnerships with associations or groups of such service \n providers, as specialists are spread out across the country. Fourth, \n creating a need for services might be difficult as people may \n already have their own local set-up in place. “But that mindset \n is changing, with a large group of urban people who don’t \n have the time or patience and need professional services,” \n he says.
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The biggest learning will be the capability to scale. A hyperlocal \n that focuses on a single ‘locality’ will find it difficult \n to get the scale needed to create an economically viable model. \n Being able to identify a widespread but local need, and having \n a model that adapts to each new market will be crucial.<\/p>\n