[Turning Point] Why ShopX is betting on the consumer to discover value through offline purchases

In September 2021, retail software venture ShopX introduced the ShopX app for consumers in one neighbourhood of Bengaluru, which it has since expanded to all parts of the city.

The purpose of the pilot: to help consumers find savings and cashbacks from shops and brands in their neighbourhoods.

The user sign-ups increased 10x in the four months, with the app touching 100,000 monthly active users in December. It currently has 230,000 users, 64 percent of whom engaged through the gamified activites on the app, according to the company.

"The journey we are supporting is of a person visiting a shop, and buying something," says Amit Sharma, Co-founder and CEO of 10i Commerce Services, which runs ShopX.

"The reality is most of India's retail economy is still about going to shops and picking up things," Amit says, adding that 94 percent of retail in India entails offline pickups.

It's a startling observation for a seven-year-old company that has already built a robust B2B technology platform to link shops with brands across retail categories.

Building the B2B platform

Founded in 2015, ShopX has scaled up its B2B platform that connected brands with 200,000 retailers in more than 500 towns in 24 states. It has active relationships with the top 20 brands in the country across consumer-electronics and FMCG categories, Amit says.

Between 2018 and 2020, its operational revenue grew at an astonishing compounded growth rate of 715 percent, simply by becoming a marketplace for retailers and electronics brands. It clocked Rs 2,963 crore in FY 2020.

But with the onset of the COVID-19 pandemic in March 2020, the core team at ShopX reflected on whether it really wanted to continue building a parallel supply chain and logistics system, which took it away from their main strength — technology.

"The level of friction in the ecosystem when you build a parallel supply chain is quite high," Amit says. "This is manifesting in the distributors’ revolt against eB2B players."

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During the first wave, FMCG companies like HUL scaled up their efforts to reach retailers directly through their app like Shikhar.

Distributors and wholesalers then feared that the direct connect between FMCG brands and retailers will sideline their role in the value chain, even as more consumers were shopping online than ever before.

"Brands are facing the dilemma that 90 percent of their business goes through distributors and wholesalers, while they work with ShopX and other companies," Amit explains. "They have to reconcile the margins, and the product mix between these channels (trade and digital)."

ShopX has cultivated deep relationships with brands whom they charged a commission, and retailers who were the users of its eB2B platform.

What founders Amit and Apoorva Jois proposed to their clients (FMCG and electronics brands) was a SaaS platform that would do three things.

One, the B2B technology platform would now be the place for brands to place their messaging and trade schemes to retailers, and customise it by region, depending on the goals and targets.

The brand could send a trade scheme with a video of the marketing-person attached to it on the eB2B platform, which can be viewed in real time by up to 10 lakh retailers.

This feature would help brands save time (four days to a week), and take decisions based on performance of schemes and loyalty programmes.

Two, the brands could use the B2B platform to deposit their incentives to retailers instantly. ShopX has developed the payments stack for that facility.

And three, the retailers can place their orders digitally on the ShopX platform, which would be assigned to the distributor by territory.

For the 250,000 retailers on ShopX, it makes sense to have one app with many brands, rather than the app of each brand across categories.

"Post COVID-19, every brand realises that they need a digitised eB2B supply chain. But their preferred path is to use their existing distributors and wholesalers, with the power of technology," Amit says, adding that the wholesalers and distributors are good and efficient with last-mile distribution to retailers.

ShopX charges the brands a subscription fee, with pay-per-use for any API-enabled features they need. The venture has thus moved from the transaction-based commission model to a SaaS-based pricing model.

At the backend, ShopX has assigned a lean team only for eB2B, and platformised the system to take the number of retailers from 200,000 to 2 million.

ShopX's shift to B2C

Even as the B2B platform scales, the founders and core leadership team trained their focus on the B2C business, which took off in September 2021.

Since the pandemic began, the number of online shoppers has shot up. India has 140 million online shoppers, according to consulting firm Bain & Co. A Kearney Research estimate pegs India's retail market to touch $1.4 trillion by 2026, but online retail is expected to be $140 billion at the most by then.

Players like Dunzo, Swiggy, Zepto, and BlinkIt (erstwhile Grofers) are doing last-mile delivery of orders, even as the first wave of ecommerce companies — Flipkart, Bigbasket, and Amazon— are doubling down on delivery of provisions, staples and groceries.

"There is a lot of action in warehousing-led quick commerce, and direct-to-consumer (D2C) home delivery," Amit admits.

Even in this competitive landscape, Amit says ShopX is looking at the opportunity for shops and kirana stores to have a digital storefront on its platform. They posit that India's value-driven consumers will shop from physical stores.

In early 2021, the core team at ShopX reflected if they could digitise the offline transactions, and have an offline checkout process that rewards consumers for every purchase they do, while providing sales and marketing benefits (from brands) to the small retailers.

So, the brands will transfer the cashbacks to retailers through ShopX, a percentage of which it keeps. The shop or brand can advertise the cashbacks on the ShopX app to attract customers to the shops and stores in their neighbourhoods.

"The D2C wave in India also has an offline component," Amit points out. Brands like Bewakoof are already on the ShopX app.

For the customer, the engagement on the app involves quizzes to win cashbacks from shops and brands in their vicinity. There is also an optional step to keep track of savings and offers through WhatsApp.

"We run the marketing programmes to onboard consumers who can log into the app, discover where value lies in the offline world across categories, and redeem that value by transacting using ShopX," Amit says.

The customer can locate the shop, call them, or see its microsite on the ShopX app. He visits the shop to buy for the cashback, which the retailer makes available.

For brands, it is an opportunity to plan their marketing programmes and incentives based on how each of the schemes are faring with end-customers.

"We understand offline retail really well," Amit says. "We want to build on our core competence and multi-year experience in the space, and carry on the mission of digitising millions of retailers."

ShopX continues to believe in the millions of shops driving retail in India.