Flipkart ventures into social commerce: What does it mean for the ecosystem in India?

E-commerce major Flipkart recently announced the launch of social commerce on its ‘value’ platform 2GUD. With the launch of this new influencer-led video shopping arm, Flipkart joins the group of budding startups like Meesho, Bulbul, DealShare, SimSim and GlowRoad. These platforms play primarily in areas like fashion trends, gadget reviews, beauty, etc. The move comes at a time when the Indian e-commerce scene is heating up with Internet giants like Facebook and Google investing in Reliance's Jio Platforms which Jio Mart is a part of.

The idea of social commerce is to drive discovery and transactions via recommendations from relevant influencers (read content creators). It aims to bring influencers and online commerce closer by creating a virtual experience of the look and feel of products.

For example, a fashion expert demonstrates how to carry a handbag, or how to match a pair of sunglasses with a dress, or how to match the hairdo with a certain outfit. The vertical videos in the app’s feed are accompanied by clickable links of relevant products that take a user to the seller’s website. One can share, tag and interact with these videos. Also, transactions can happen without getting off the platform.

Originally launched as a marketplace for refurbished goods in August 2018, 2GUD evolved into an independent ‘affordable’ platform offering products across 600-plus verticals. The platform has so far seen over a million downloads on Play Store.

Meesho and GlowRoad, which were launched in February 2017 and December 2015 respectively, have 10 million-plus downloads. Bulbul and SimSim have over a million downloads each, and both were launched around mid-2019.

The social commerce model is ‘buzzy’ right now, both in India and globally. Flipkart is the latest among major brands to try it out in India. Paytm added its social commerce feature MyStore a few months back.

Globally, TikTok is testing a format to connect advertisers to influencers. Instagram introduced the beta version of Checkout for select brands in the US. Google, too, is experimenting with Shoploop, its new video shopping app. Facebook has invested in Meesho, too.

The buzz around social commerce is being driven by the rise in user generated content on video first platforms like TikTok. This, in turn, is being backed by high smartphone penetration, pocket-friendly mobile data, micro influencers-cum-content creators and digital payments.

2GUD is targeting urban users across metros, Tier 1, 2 and 3 cities, who might be looking for a pocket-friendly deal. The demography also includes first-time e-commerce users. Flipkart is relying on more than a decade of experience with its 200 million Indian e-commerce shoppers for the success of its new venture.

“As a homegrown brand, the Flipkart Group across businesses today has its finger on the pulse of what Indian consumers want. Our understanding of the consumers’ purchasing patterns, interaction with content and commerce enables us to continually stay agile and innovate for some unique Indian requirements,” says Chanakya Gupta, head of 2GUD at Flipkart.

The Flipkart team, citing ‘industry reports’, claims that social commerce accounts for 15-20 per cent of the online retail market in India, and is expected to hit the $70 billion mark in 10 years. According to Statista, revenue from e-commerce in the country is expected to reach a projected market value of $71 billion by 2024, from this year’s $43.5 billion.

The model has already seen success in China, with business being conducted on social platforms like WeChat, Pinduoduo and XiaoHongShu. WPP’s whitepaper ‘Content, Conversation & Commerce’ from November 2019 says that the Chinese model is driven by content, customer voice, convenience, conversation and commerce.

China’s social commerce market is forecasted to reach CNY 2 trillion ($283.1 billion) this year, with more than 48 million users and a growth rate of over 60 per cent year-on-year.

However, experts say that despite the buzz, the model hasn’t really picked up pace in India. A major argument has been that users take to social media to consume content and connect. They don’t generally go there with the mindset of purchasing, or spending money. Could a major e-commerce player’s entry change things?

K Vaitheeswaran, e-commerce consultant and founder of Again Drinks and Indiaplaza (India's first e-commerce website), says that while a major e-commerce player investing in the space could surely drive popularity, a real impact could be expected from the Facebook-Reliance Jio Platforms tie up.

“If Reliance Jio starts promoting WhatsApp ordering in a significant manner and succeeds, it could bring about major change in the ecosystem. WhatsApp is the most popular of social platforms in India, with over 400 million users. Flipkart’s entry will make some difference, but the reality is customer habits are hard to change. It will only take off when customers start transacting on such platforms,” he adds.

Facebook and Google announced investments worth Rs 43,574 crore and Rs 33,737 crore in Jio Platforms respectively.

Venture capitalist and head of digital marketing firm Pinstorm Mahesh Murthy considers this a defensive move by Flipkart to retain its second position, or at least be among the top three in the future.

“The Indian e-commerce duopoly of Amazon and Flipkart is likely to turn into the duopoly of JioMart and Amazon. It is an attempt to create green shoots where Amazon and Jio aren’t there yet, but soon will be. Social media in India is primarily controlled by the Google-Facebook duo, and both of them are now part of Jio. Flipkart could be left on the sidelines.”

With Amazon’s large user-retailer base, coupled with extraordinary logistics and JioMart’s expansion plans, the major e-commerce touch points are being occupied quickly.

Murthy maintains that Flipkart’s move won’t make any real immediate impact as the penetration of social platforms in India is still lower than that of markets like the US and China. “Despite the high reach, e-commerce in the US is 27 per cent of retail, and social contributes to four per cent of e-commerce. Despite the huge amount of effort, social is barely one per cent of the entire retail pie.”

Patrick Xu, CEO of WPP China, mentions in the WPP report that shopping habits (in China) differ from the rest of the world due to the tremendous reach of e-commerce and deep penetration of social media. It is one of the key reasons behind the model’s success in the country.

Also, despite being a market of over 200 million e-commerce users, the social platforms have downloads of five million to 10 million in India. Almost all the platforms are still positioned as work/earn-from-home type services. The logistics and delivery is still fragile. Moreover, even mainstream e-commerce players are still trying to build the trust of shopping online.

Although Flipkart has been key in building e-commerce habits and trust in India, with services like cash-on-delivery, no-cost-EMI, etc., 2GUD has been launched as an independent platform without attaching the Flipkart name. It is likely to stay that way for now. “The two platforms will continue to focus on offering shopping experience to a diverse set of consumers in their own unique ways,” says 2GUD’s Gupta.

Murthy explains that there is significant reputational risk since social commerce is still at a nascent stage and is laden with issues of credibility due to delivery issues, fraudulent players, unsatisfied customers, etc. Social commerce platforms might have sellers and seller tools, but people will buy only if there is something that established names like Amazon don’t offer.

“Flipkart understands that and has created a new brand, instead of launching something like ‘Flipkart Social’. They don’t want anything to befall the Flipkart brand. They might attach the brand name if and when social commerce gains reputation and credibility.”

Murthy adds that the concept that influencers can directly sell is flawed. He shares the example (from 2019) of Arii, a US-based fashion influencer on Instagram. Arii, despite having a follower base of 2.6 million, failed to sell 36 T-shirts.

“Over that, the true influencers are missing on the new social commerce platforms. If Instagram Reels picks up in TikTok’s absence due to the ban, there could be JioMart angle to it. Also, influencers earn differently.”

On the contrary, Gupta, in an official Flipkart blog, stated that consumers have a higher affinity to buying products that are recommended by their favourite influencers. “We believe that our network of influencers will play a key role in driving their audience to 2GUD and assist them in their buying decisions on the platform.”

Social commerce influencers earn from commission in case they aren’t selling their own products.

Sanjay Vasudeva, founder and CEO of BuzzOne Influencer Marketing, a marketplace for brands and influencers, explains that social media influencers work with brands directly. They don’t work even on a cost per view basis, let alone cost per sale.

“In the social commerce model, they’d earn only a small share of the revenue and that, too, only in the case of a purchase. The revenue earned this way would be much lesser than the standard earning per video/post. It is, in a way, a performance metric, which has never worked in influencer marketing. Key e-commerce platforms have tried it in the past, where the influencer earns a commission in case of a purchase, but it hasn’t worked,” Vasudeva signs off.