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E-tailers in India face a dilemma: Only a fraction of the nation's 450 million internet users spend money online. (Illustrations by Parvati Pillai)
Cover Story

Beyond Amazon's reach, India's women lead an e-commerce revolution

A new breed of startups battle for the country's next 100 million consumers

NEW DELHI -- Sapna Wadhwa runs her business from the comfort of her bedroom, working out of her apartment in a middle-class district of Delhi. In early October, in the days leading up to the big Hindu festival of Diwali, she was selling tunics and satin comforters in Delhi, cotton and silk blend saris in the western city of Jaipur and lightweight silk women's tunics and matching pants in the tech hubs of Bangalore and Hyderabad. Mostly, she sells through Facebook Marketplace, the social media giant's commerce platform.

Dressed in jeans and a pink shirt with black polka dots, her hair tied up high in a ponytail, Wadhwa scrolls through an app on her phone to show the products she has on offer. "Festival season is always good for me," she said. "Everyone shops."

Wadhwa is one of the nearly 2.5 million resellers working with Meesho, a 4-year-old e-commerce company that connects small, local manufacturers of clothing, accessories and homeware to individuals -- usually women -- who then act as agents to sell the products through their own social networks. Commissions from those sales have given Wadhwa money to pamper her husband and their three children. For Meesho, the model opens up a new, and underserved, set of consumers: women.

Over the past couple of years, a phenomenal number of Indians have come online for the first time, due to an explosion in cheap data and affordable smartphones. There are now 450 million active internet users in the country, according to the Internet and Mobile Association of India, an industry body. Only China has more.

E-commerce services have sprung up to track this runaway growth in access. Indian consumers bought goods worth about $3 billion in late September, when online giants Amazon.com and Walmart-owned Flipkart ran festive sales for a period of six days, according to RedSeer Management Consulting, which tracks the space.

In reality, the actual market for e-commerce is quite concentrated. Around a third of active internet users -- 135 million people -- bought goods online at least once last year, according to RedSeer, and they were mainly male, living in larger cities, and buying electronics. The rest of India's online population remains untapped by e-commerce -- a huge opportunity, but one that is far from easy to access.

"The question in everyone's mind is: What will it take to bring the next 100 million or so shoppers online?" said Mrigank Gutgutia, a director at RedSeer.

Unequal access

Meesho's co-founders Vidit Aatrey and Sanjeev Barnwal met at engineering college, and launched their first e-commerce venture, FashNear, in mid-2015. The company built an app that let users find fashion deals in their vicinity. By the end of the year, they had abandoned that in favor of a different product: another app that allowed bricks-and-mortar stores to take their inventory online and sell through social channels. They called it Meesho: a mashup of meri, Hindi for "my," and the English word "shop."

Within six months, they realized that many of their sellers were not who they had expected. "We saw that a lot of the users were women who said they were running WhatsApp boutiques," said Aatrey. "We discovered the behavior because of the app and saw this pattern being repeated, and realized it was a huge opportunity."

This opportunity stems from a structural inequality in Indian society. Women in India are often discouraged from taking up office jobs by a complex mix of social norms, including an expectation to prioritize family needs over their careers, a lack of safety in public spaces, and, in some parts of the country, a sense of dishonor for a family if a woman works. India's female labor force participation rate remains abysmally low at 20.8% in 2018; one of the worst in the world, and in line with Saudi Arabia and Pakistan, according to figures from the International Labor Organization.

This has led many women to find a way to work from home to earn some money, running salons, or making or sourcing clothing to sell to friends and family. Social media has expanded these informal networks, increasing the reach of these micro-entrepreneurs and giving them new channels to access customers.

"Even when they're not in the labor force, this is a way to earn extra income, make friends, expand [their networks] outside home and local community," said Dev Khare, a partner at venture capital fund Lightspeed India Partners. The company has invested in one e-commerce startup called EkAnek Networks, whose app, Foxy, connects beauty professionals, consumers and influencers. "Women are limited in what they're allowed to do. This is an upcoming class of behavior which is solving an Indian reality."

Aatrey and Barnwal leaned into this existing market, pivoting their business and launching Meesho in its current form in early 2017. Today, it has nearly 2.5 million resellers, and their app operates in eight languages. The company, which works with around 25,000 suppliers across 1,000 cities, has a lofty target of bringing on board 20 million by next year, and Aatrey is sure that the business can scale.

"The great thing about this business is it does well in large and small cities, because the state of women is so universal in India," he said.

Meesho, along with other, similar services such as Shop101, GlowRoad and Simsim, operates platforms that connect local manufacturers with resellers across the country. The manufacturers send their catalogs to the resellers, who select products from them, which they then share in their own social circles through messaging app WhatsApp and its parent Facebook. Once a product is purchased, Meesho picks it up from the manufacturer and delivers it to the consumer, who typically pays for it in cash. The profit margin on the product is split between the reseller, the e-commerce company and the manufacturer.

This model of selling on social media is new to India, but is already well-established in China. Companies such as Yunji -- which listed on the Nasdaq in May -- along with peers Beidian and Global Scanner are successful, multilevel revenue-sharing platforms that sell on WeChat, the Tencent Holdings-owned Chinese messaging app. The only difference is that there, to become a store owner, an individual has to first purchase a gift bag -- an entry ticket for the new seller to open his or her own store. Existing store owners are offered cash rewards and commissions to recruit more users to sell. So far, that model has not been replicated in India, where the platforms are not charging resellers to join.

The structure has helped startups to overcome one of the biggest challenges in opening up new markets for e-commerce: trust. Potential shoppers worry that what they see online is not necessarily what they will get; that making payments online may not be safe; or, if they have any complaints and need to exchange or return a product -- the after-sale service, if it exists -- may not be reliable. On Meesho, though, the reseller is usually someone potential buyers know, or were introduced to through their own social circle.

Some of the companies moving into this emerging space have pushed the potential of social networking further, bringing on "influencers" to help sell their products.

One, Simsim, is a throwback to the home shopping networks of an earlier era. Sellers, who are also predominantly female, highlight the features of products on short videos which are distributed on the companies' apps and on social media.

Some of the sellers already have significant followings. Pooja Chaudhary, a seller on Simsim, runs a salon in Moradabad, a city of around a million people in the northern state of Uttar Pradesh, roughly 180 km from Delhi. Her YouTube tutorials on makeup, hair and skin care have attracted an audience of 320,000 subscribers. Since April, she has been selling hair and skin care products and costume jewelry through the platform.

Chaudhary is a bubbly 36-year-old. She shoots her videos with her smartphone, placed on a tripod to avoid a shaky image. She always begins with a singsong, "Hello, friends," and then lays out her pitch, in a fairly straightforward way, predominantly in Hindi. She said that she joined Simsim as it gives her another chance to "show my talent. ... It's my name and my store."

Simsim, which was set up in September 2018 and launched operations this January, spotted Chaudhary on YouTube and approached her directly.

Using video salespeople was a way to replicate the experience of shopping in bricks-and-mortar stores, where an owner understands customers' preferences and is able to walk potential buyers through the stock, according to Amit Bagaria, one of Simsim's three co-founders.

"A key element of shopping offline is that there's tons of human interaction, which makes shopping very easy," Bagaria said. "That got us thinking if there was a way we can mirror this online."

Before they set up Simsim, Bagaria and his co-founders Saurabh Vashishtha and Kunal Suri were well-versed in Indian e-commerce. Bagaria previously worked at companies Paytm and Flipkart; Vashishtha had also worked at Paytm, while Suri had worked at food delivery startup FoodPanda. They took inspiration from Tmall and Taobao, online marketplaces owned by the Chinese e-commerce giant Alibaba Group Holding, which act as a platform for sellers who have the freedom to figure out their own customer base.

Recognizing that the next wave of internet users will come from all over India, Bagaria and his co-founders realized it was best to keep their sellers local, so that each could tailor their sales to their respective communities. They have around 500 so far, across 50 cities -- each of whom has her own store on their app -- and have an aim of reaching 100,000 in the next couple of years. They share the product catalog with the sellers, who choose the products they want to pitch in their videos. The influencer gets a commission on products sold -- as does Simsim. At times, the influencers also get a commission to bring on new sellers and customers.

Simsim has signed up influencers across India, including a teacher in the town of Budge Budge in eastern India who comes home by noon and makes her videos at night after her daughter goes to bed; another is an engineer with a Master of Business Administration and works from home in the tiny town of Zirakpur in the northern state of Punjab. Both towns have a population of less than 100,000 each.

"Local influencers help build better authenticity, trust factor and [create] a much deeper impact," said Ankur Pahwa, a partner at consultancy EY India who covers e-commerce and the consumer internet. When they pitch products with video, it leads to "better engagement amongst consumers" in the smaller cities, he added.

Money talks

The potential scale of the business has started to attract venture capital. Meesho has raised $190 million, including a reported $25 million from Facebook in June, which it used to bring on manufacturers and resellers and to improve its technology. Shop101 has raised a reported $16 million and GlowRoad $24 million. Simsim has raised $7.25 million so far from Good Capital, Accel India and Shunwei Capital, among others.

"The reach with Simsim [because of video] is colossal," said Rohan Malhotra, founding partner at Good Capital. Although it is too early to say which platforms will ultimately break out, the opportunity to find new ways to link consumers with products is huge, he said. "Everyone is trying to address the new people who have come online for whom search is inherently broken."

There have already been casualties, as the sector's players jostle for growth: Bangalore-based Wooplr, which had raised $14 million from investors, shut down in May. Requests for comment sent to its co-founder Arjun Zacharia remained unanswered at the time of publication.

This growth has also led to occasional problems for resellers, as the platforms become more crowded and attract the attention of scammers.

Wadhwa, now 34, was an early seller on Meesho, joining the platform in January 2017. After getting a degree in commerce from Delhi University, she married at 21 and had her first of three children a year later. She and her husband live with his parents, two brothers, their wives and their children on two floors. The men run a garment shop, a family business, while the women take care of the kids and the home, and the family patriarch, her father-in-law, controls the purse strings; a fairly run-of-the-mill setup in India.

Wadhwa was itching to work, but she knew it had to be from home. She started out by selling Oriflame cosmetics; when that did not work, she switched to selling tunics for women, sourcing from a cousin in the business. That was often difficult, she said, as she was not always paid on time, and had issues with returns from customers. Joining Meesho solved many of those problems.

"I've seen a lot of change in my life since I started working with Meesho," Wadhwa said. She now earns about $60 a week on average, income that goes up in the festive season.

As the number of resellers has grown, the marketplace has become more crowded, which has pushed down commissions. Wadhwa said that in the early days she could pull in upward of $200 per week in the festive season; this season, that has fallen to just $85. Meesho has also reduced its weekly bonuses for hitting sales targets.

"There's too much competition now," she said. "If a manufacturer is offering a product at 598 rupees, some women will price it at 600 rupees. I won't even bother with those products. There's no sense in it."

Between this and recent technical issues, which have seen her listings put under review and sales fall, Wadhwa has considered leaving the platform. She has stayed, however, as the business requires no financial investment -- and even a reduced income is better than none.

"I don't have to depend on my husband or in-laws for anything," she said. On the contrary, she funds the needs of her husband and their children so he can save the salary he receives from his father. Last year on his birthday she gifted him a $200 phone, her first expensive gift to him in their nearly 13 years of marriage.

"The biggest benefit is that I can handle customers from home. My in-laws have no reason to complain at all," she said.

There have also been issues with fake orders. Namrata Gunjal, a reseller in Mumbai who joined Meesho a few months ago, said that she had been targeted by someone who asked her to use Google Pay to settle an order for 20 tunics. It was only at the last minute that she realized he had, in fact, turned the transaction around so that she would be paying him. When she confronted him on it, he tried to pay with a credit card in someone else's name. She abandoned the deal. Gunjal said that she gets a lot of fake buyers through Facebook Marketplace, and now tends to avoid the site.

Asked for comment, Google pointed the Nikkei Asian Review to a blog post from July, which highlighted the various security measures the company had undertaken in India to secure transactions over Google Pay, including notifications and text messaging alerts to clarify the direction that money flows in a transaction. Facebook Marketplace, when presented with several sellers' complaints, said that the cases were difficult to investigate with the details available, but that listings were "proactively" reviewed for compliance with the site's commerce policies before publication.

Meesho's Aatrey said that competition is the natural consequence of the company's growth, but said that resellers are now, on average, selling more products than they were a few years ago; and, while margins have fallen, overall income had increased. He added that scams are "very common in all unorganized commerce. People try to cheat, but we train most of our resellers to manage these situations, and this isn't a very big problem today."

Despite the teething problems in the industry, bringing more women into e-commerce is having knock-on effects. Pooja Sharma, a reseller in Noida, a satellite city on the outskirts of the Indian capital, told Nikkei that everyone in the residential complex she lives in with her husband and daughter knows her as "the woman who does online business. ... I never introduce myself as a housewife, but as a businesswoman," she said.

Sharma, 31, left her job as a teacher after she got married. "I tried very hard to work online from home but didn't earn anything," she said. Then in January 2017, a friend told her about Meesho, and she joined the service. She is both a buyer and a seller on the platform. Sharma points to some of the things in her apartment -- the curtain for the kitchen door, a microwave, the red-and-black plaid shirt that she is wearing -- all were bought through Meesho.

"The transition from seller to buyer is a common one. ... As women are able to independently earn an income, they suddenly have a disposable income of their own"

The transition from seller to buyer is a common one, Aatrey said. As women are able to independently earn an income, they suddenly have a disposable income of their own.

Companies are evolving specifically to serve this market. EkAnek, which received funding from Lightspeed India, curates beauty products for women, and pitches to them using influencers and experts. Priyanka Gill, founder and chief executive of content commerce startup Luxeva, launched POPxo -- an online community for women -- in 2014. POPxo offers articles and videos about fashion, lifestyle, relationships, as well as sponsored content by brands. In December 2018, Gill launched POPxo Shop, where she converts the most popular content on her site to products that she sells in her online and offline stores.

"The current form of e-commerce was about getting the logistics in place and throwing marketing dollars at consumers to induce sales," said Gill. "That's a bottomless pit, and you end up losing money on each transaction. We're looking at building brand and [products] through content and influencers."

For instance, if a phrase such as "squeeze the day" becomes popular on her website, she takes it and sources water bottles from local manufacturers with that slogan printed on it. The company takes a similar approach in selling T-shirts, wallets and skin care products.

Using influencers and building communities around products in this way has enabled the company to access this emerging customer segment at the ground floor.

"Male engineers replicating male shopping, that's e-commerce today," said Gill. "The entire journey of female shopping is very content-led, and we're trying to put women back in shopping. It's a huge opportunity."

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