Market research reports the e-commerce space to have grown considerably over the past few years. Between 2013 and 2016, e-commerce’s share of total retail sales increased from 11.7 percent to 15.6 percent in the US, 8.3 percent to 13.8 percent in China, and from 0.6 to 1.1 percent in India, according to eMarketer and Forrester Research.
However, despite the continuous growth of online retail, offline stores still dominate in terms of market share. The lack of buyer experience is perhaps the biggest weakness of e-commerce, say experts.
Now, the concept of O2O or Online-to-Offline is gaining traction, bringing together advantages from both the online and offline business models.
Addressing gaps in both online and offline experience
36-year-old Sachin Garg, who has worked in eBay, News America Marketing and Dick’s Sporting Goods in the US and has 17 years of experience, says that, seen separately, there are shortcomings in both the offline and online models. However, if both were to come together, it gives rise to an incredible solution on the ground.
The model, in which traceability of products gives a lot of confidence to buyers, is a hit in China.
Sachin shares the experience of one of his close friends, who wanted to order a jumpsuit of a specific brand from a well-known e-commerce portal. Due to availability issues, however, her order kept getting deferred. Later, she bought the same product from a store in the city. However, she had to walk up to the store during her office hours, which, of course, was an inconvenience.
So, Sachin came upon the idea of offering convenience to consumers who are short on time, but wish their products to be delivered to them as quickly as possible, preferably from the same shop that they know or the nearest one.
In June 2016, Sachin Garg, along with his 38-year-old co-founder Sachin Goel, who has over 17 years of experience and worked with companies like Polaris, DHL, Toshiba and Canon, launched Mallfort, an O2O platform that delivers optics, clothing, electronics and baby products from nearby stores. Many reputed retail stores such Red Chief and KBM Electronics have joined the platform and more are adding to the list.
“92 percent of the retail sector is unorganised, and they don’t have any technology to support their business or connect with customers. Mallfort aims to not only sell their products, but also provide a seamless in-store experience to customers,” says Sachin Garg.
Inside the platform
The platform helps users buy from many of the shops in close proximity and even return products if not satisfied.
So, for instance, if a user wants to buy a mobile phone from the nearest shop in Delhi, he or she can go to the ‘all stores’ option on the platform, select the state and area and click on ’locate’. This will pull up a list of all nearby stores. The customer can go to stores and picked the products or if he/she does not have to take the time to walk down to the store, but can still get the product within two hours.
Building a platform
It was in October last year that the duo decided to start the company in India, and invested $100,000 as initial capital, which went into product building, marketing and team creation.
However, platform building was an arduous task as they were confronted by difficulties at every step. They faced problems in picking the right talent to accomplish business objectives, but managed to collect good workers over time, growing to a team of 25 people today.
Talking about the operational difficulties, Sachin Garg says that enabling small-time retailers to convert to a B2C marketplace was definitely a big challenge.
“We saw that leading PoS companies did not have any open mechanism to integrate with their system, and were not very keen on the same. We really did a lot of hard work to get a few of them onboard to work on online transactions processing,” says Sachin Garg.
On existing challenges, he says that to acclimatise to changing marketing and business strategies, “we need to be in-sync with the change”.
Onboarding of small businesses and establishing an effective last-mile delivery supply chain is often a complicated task, he explains. He however goes on to add that every category works differently, and implementing every business category the way it should work is test of their skill.
According to the founders, they have a hold over more than 300 retailers in Delhi/NCR and 35,000 registered users, with a range of 125,000 products on offer. They claim to be processing about 1,000 orders a month.
Mallfort has been a turnaround for stores as well. “One store was holding 33 percent of their stock in older products with markdown prices. After joining us, it delivered 60 percent of such products within a small span of time, and improved customer experience as well,” says Sachin Garg.
In terms of revenue, they charge a commission on each and every sale, and along with that, they sell advertisements and promotional services.
“We are growing at 170 percent month-on-month and will soon clock revenues of Rs 5 crore,” says Sachin Garg, proudly.
Market and competitors
Internationally, O2O, according to experts, is a $40 billion market, with various entrants vying for supremacy in the space.
Zopper and Fynd are two such businesses and are Mallfort’s chief competitors in the segment.
In April 2013, a few months before rebranding, Zopper, then known as Reviews42, raised an undisclosed amount in Series A funding from Nirvana Venture Advisors and Rahul Khanna (Managing Director of Canaan India, who invested in his personal capacity), as well as a few other undisclosed individual investors. During July 2014, the company raised a further $5 million in Series B funding from Tiger Global Management and Nirvana Venture Advisors.
According to recent studies, buyers prefer buying more from offline stores because they miss the touch and feel experience of the items online. At the same time, buyers can access more information online than they can at a physical store. Considering that O2O offers customers the best of both worlds, the growth opportunity is immense.