Danish Ahmed does not believe that brick-and-mortar stores need to see the internet as an adversary. At a time when e-commerce seems to be luring customers with discounts and deals, especially in the metros, he says that the internet can be the biggest ally of offline retailers. And he is on his way to prove that with Shopsity, the startup that he founded last year.
"Online-to-offline is going to be a billion-dollar space, probably larger than e-commerce," says Ahmed, who had co-founded e-commerce platform Yebhi.com earlier. "We have seen its success in Zomato, but retail is a much larger industry. Fashion alone is a $100 billion industry in India."
Shopsity, run by Shopsity Singapore Pte. Ltd, connects offline retailers to customers, allowing users to discover local fashion, jewellery and home dÃ©cor stores. Users can block an item on Shopsity website or app, and pick it up at the store by paying the merchant directly.
According to Ahmed, customers, too, are confounded by the number of e-commerce stores that have mushroomed, and find it difficult to choose between the competing sites. That nudges them back to the brick-and-mortar store, and that is where Shopsity can make a difference.
"E-commerce is more relevant in smaller cities compared to metros and tier-I cities," he says.
Finding the perfect business model
One year after it started operations in Delhi-NCR, Shopsity claims to have started making operational profits.
According to Ahmed, moving to a subscription-based model in January helped. Earlier it was charging retailers a commission on each transaction confirmed over Shopsity, but that model turned out to be dependent on too many variables. Now retailers pay Rs 40,000-1 lakh in subscription fees per year for listing on the ShopSity platform along with access to various marketing tools.
There are subscription packages for shorter periods, too, which are invariably picked up by retailers trying out the site for the first time. The marketing tools are used by retailers to acquire customers through SMS or hyperlocal mobile ad campaigns.
"We do not do any marketing campaigns, unlike most e-commerce players who spend crores of rupees on marketing and discounts. Our customer acquisition cost is minus Rs 38," Ahmed added.
Retailers, too, are happy with the model. Deepak Sharma, owner, Promenade Footwear, a shoe store in Noida, says the best part is that he does not need to share the margins with Shopsity. "For one year, no matter how many customers I get through the platform, it's my decision whether to sell at MRP or give a discount," he says.
With the change in its business model and 500 stores from Delhi NCR on its platform, Shopsity claims it made an operational profit of Rs 35-40 lakh in the last three months. "We are hopeful of closing financial year 2016-17 with Rs 5 crore revenue," says Ahmed.
Surekha, Chawla Sarees, JK Furniture, Apna Bazaar, Khadim's, Libaas are some of the retailers on Shopsity's platform. It recently entered Lucknow and Jaipur and has already got 10 retailers in each city.
Why retailers prefer online-to-offline
According to Ahmed, retailers aren't too happy with the deals they sign with e-retailers. The return policy is skewed against them, with retailers having to bear the cost of logistics. Again, while their products get sold at the top selling e-stores, the offline retailers remain virtually anonymous.
Agrees Himanshi Kapoor, whose apparel store, Barriki, has been on the Shopsity platform since January 2016. "I joined Shopsity because the model was different from other e-commerce sites. Moreover, I wanted people to visit my store and this platform gives me that kind of exposure."
Kapoor has bought a Rs 57,000 subscription package from Shopsity, and with the increasing number of customers trooping into her store, she says she has "already got Rs 40,000-42,000 worth of business back".
On the drawing board
Shopsity is looking to perfect its business model in Delhi-NCR first, and then move to other metros. "Lucknow and Jaipur are more like a pilot but our focus is Delhi NCR currently. We want to first establish ourselves very strongly here before we move out, just like Zomato did," says Ahmed.
The company says it is adding about 100-150 stores per month, and aims to reach 10, 000 stores in Delhi NCR by the end of 2016. According to Ahmed, the total number of transactions conducted through the Shopsity platform till now is about 2000. The Singapore-based company is also looking to ramp up its sales team and take the total headcount from 46 to 100 in the next 12 months.
Last year, Shopsity raised seed funding from Sandeep Aggarwal, founder and former CEO of ShopClues, and Teruhide Sato, founder of Netprice (now Beenos). It is now planning to raise $3 million in Series A round of funding and has initiated talks with investors for this.
Even as Shopsity draws up its expansion plans, there are a few competitors such as Zakoopi, Ratale and others. Fashalot is another player in the online-to-offline space. While some of its potential rivals operate on a revenue share model, Ahmed says Shopsity has tried out both the models and it is subscriptions that work in the long run.