Startups are adopting a quasi e-commerce model to reach customers

At Nisha Textiles, a 1,200-sqft two-storeyed apparel store in Cherupuzha, a small town in Kannur district of north Kerala, a queue of customers waits for a turn to shop on a device in a kiosk. The kiosk has a catalogue of products, such as gadgets and apparel, which are not available in the town but the tech-savvy shopkeeper will order for them online.

"At first, people check out the kiosk as they are curious. Then they realize that a lot of products are easily available," says Rahul V S, the 28-year-old shop owner. The kiosk in his four-decade-old shop is powered by StoreKing, a startup that enables shopkeepers in small towns help their customers buy products they normally would not have access to. These kiosks remove hurdles to online shopping such as no internet access, slow connections, lack of netbanking or inability to use the internet.

The kiosk in Nisha Textiles is one of 4,000 installed in south India by Bengaluru-based StoreKing. The shopkeeper helps customers select products listed in local languages. Once the customer pays, StoreKing dispatches the package to the retailer in two or three days. The customer gets a text message and comes to the store to collect the package. The shopkeeper is paid a commission by StoreKing.

The model taps into the network and trust that local retailers have built over the years. In Andhra Pradesh and Telangana, iPay is a major player with more than 3,900 retailers in its network. In the north, eDabba has more than 800 retailers.Firms like Novopay and Suvidhaa enable small-town customers to recharge and pay utility bills online or do banking services like money transfers.

At Nisha Textiles, about 25 people go through the catalogue at the kiosk every day and usually two end up buying products. "Most Indians will always need assistance to buy products online," says StoreKing co-founder Sridhar Gundaiah, who previously worked with several startups. He and his partner Govardhan Krishnappa started the company in 2012 with $6 million from Luxembourg-based venture capital fund Mangrove Capital.

"In a country of 125 crore people, just four crore buy from e-commerce players. How many will learn English, how many will operate email ids and download apps on their phones?" he asks.

The firms use software that makes the product catalogue available offline and there is no loading delay on account of a slow 2G connection, while updates are done continuously over the slow connection. "Around 70% to 80% of retail sales in India takes place in tier 3 cities or smaller towns and it is a huge opportunity. Providing the e-commerce experience to them is a great equalizer for the small town population," says Ravi Gururaj, chairman of Nasscom Product Council.


StoreKing, which started with small towns of Karnataka, is expanding to Andhra Pradesh, Kerala, Goa and Tamil Nadu this year. Gundaiah, 31, follows an inventory model so that customers get products in under two days. He uses VRL Logistics, a transportation firm with a fleet of buses and trucks, to reach the districts from where the startup utilizes the services of local distributors like those of HUL and P&G for intra-district distribution.

StoreKing has 150 employees of which 75 are feet-on-the-ground distributors and salesmen who work to increase the number of retail outlets. Sooraj PP, sales manager who enlists retailers in the two northern districts of Kerala, gets 10 to 20 requests every day from retailers. Sooraj, 30, was earlier the distributor for Reliance Communications for the same area. "We are signing up five to six shops every day and mobile retailers show the maximum interest," he says. StoreKing ships more than 8,000 products a day and Gundaiah plans to achieve $10 billion in sales by 2020. He plans to have one lakh retail out lets in the next 18 months with new capi tal infusion expected soon. The firm's average order size is Rs 1,200.

The firms don't offer discounts as there is no competition and they make profits on every single transaction. The players take about Rs 10,000 as a deposit from the shops for the kiosks or tablets. All the products are shipped only after payment. "Our business runs on trust relationship and the assistance provided by the shopkeeper," says Krishna Lakamsani, founder and CEO of iPay Lakamsani, a Harvard alumnus worked in a startup and founded one in the US before returning to India. Founded in Janu ary 2013, iPay is boot strapped with 80% of the money spent on developing the software, which is patented.

The Hyderabad-based venture works with the same sellers as e-commerce play ers, and uses the same logistics firms to reach the shops from where the customers pick up the products. Most retailers with iPay ship 1.5 products a day with the aver age order size being Rs 650.

There are more than one crore retai shops in India and the potential appears huge on paper, but the players might be entering one another's strongholds soon iPay is planning to expand into other southern and western states, as is StoreK ing. "This is a long process. It depends on how fast these players can grow before the arrival of the bigger e-commerce players Execution without burning much capita will remain the key," says Mohan Kumar partner, Norwest Venture Partners.

E-commerce firms are increasingly recognizing the importance of smal shopkeepers. Snapdeal CEO and founder Kunal Bahl recently said his company would soon tie-up with retailers. TOI has reliably learnt that most of them are looking at partnerships with players like StoreKing, iPay and eDabba. "We wil soon announce a partnership with an e commerce firm," says Manoj Kumar, CEO and cofounder of eDabba, which has pres ence in eight states.

Looks like the corner store might play kingmaker in the e-commerce battle.

PAYING THEIR WAY

Companies like Novopay and Suvidhaa focus completely on payment services like bus and train ticketing, recharges, money transfer and other financial services. Novopay has a network of 8,000 retailers in 13 states. "There are several interesting models and the agile companies will transform themselves. Bank branch growth is expensive and lot of people are excluded from the system," says Srikanth Nadhamuni, chairman of Novopay, a partner firm of Khosla Labs' India arm, which is headed by Nadhamuni.