Cheap data will change the way India shops online. Here’s how.

Entertainment is just the beginning

While entertainment providers (Hotstar, YouTube, Netflix, Amazon Prime Video) have seen a significant jump in content consumed, the first real mobile-native experience to arise from cheap & fast data is live-streaming.

The way I see it, the recent emergence of platforms like Tiktok, Bigo, Helo, etc. demonstrates that the “next wave” of digital adopters in India (250–300mn Indians) are significantly time-rich as compared to their counterparts in global markets.

But, in many ways, I believe “entertainment” was the lowest-hanging fruit in the upcoming march of content.

This often requires reimagining existing solutions. Today, we’re talking about e-commerce; specifically, e-commerce enabled by content and assisted by human sellers.

The next frontiers of content

Cheap data enables high-bandwidth offerings. So the real question is how do we now get users to engage in higher value activities.

Why does e-commerce need to be different?

The e-commerce experience for the first-wave digital adopters (100mn Indians) has been fairly similar to what worked in foreign markets. This is because those consumers are fairly homogenous globally — they have shopped before in offline, urban retail (e.g. malls, global fashion brands, etc.) and modern e-commerce experiences built for them (e.g. Amazon, Flipkart) replicate this behaviour.

E.g. an “add to cart” button only makes sense to users that have wheeled a cart around a department store.

However, the next-wave users (250–300mn Indians) are online for the first time. Before smartphones, their only offline retail experiences are from their local marketplace with vendors they have known and trust personally.

Such interactions mitigate the concerns that are highlighted when modern e-commerce is imposed on next wave users.

Aside from trust, price, availability, etc., basic category knowledge — a prerequisite to making purchases — is often unformed. E.g. “How to measure shoe size” is a top search in the fashion category according to a Google & BCG 2017 report.

How can content help next wave users?

Digital commerce experiences targeting these users will have to apply analogues of offline retail which these users are more used to.

We believe 1. video-based, 2. real-time, interactive platforms that 3. enable middlemen (i.e. sellers, micro-influencers) will be central to this:

“Micro-influencers” We use this term to mean individuals within a language, micro-culture (sometimes geographic) and domain-specific category that can earn a supplementary income by building a brand online. E.g. personal gym trainers business selling supplements & protein bars, fashion-inclined housewives selling beauty products and clothes

1. In being video-based, such platforms help:

• Basic category education: For instance, many such users have never used face masks. Priming them to buy face masks is made easier if a community-influencer shares her skincare routine and showcases the way in which a range of products is used.
• Mitigate barriers created by language fragmentation: Time-rich, next-wave users prefer visual platforms where offerings are communicated more clearly, especially when supported by tonal voice cues.
• Mitigate digital complexity: Video can alleviate the reliance on multi-screen user flows. This makes such navigating platforms more intuitive to users that have never shopped online before.

2. In being interactive, such platforms help:

• Mimic the offline experience with vendors: Data speeds and streaming technology today enable rich interactions such as Q&As, bargaining and seller guidance.
• Enable “touch & feel” and subjective features: For instance, micro-influencers can hold up products to their bodies to show how sizing would correspond. They can communicate the subjective characteristics of a product by describing the touch of the material and demonstrating how it “falls”.

3. In enabling middlemen, such platforms help:

• Enable trust: Place individuals that are known (initially at a 1st/2nd degree) to the audience in a position of being sellers. With their reputation as collateral, the social trust inherent in offline transactions is replicated online.
• Enable curation: A micro-influencer building an audience starting with friends & family will be best placed to select products that cater to an audience they know well. As audiences grow, micro-influencers become known within their niches by effectively curating products that resonate with their audience.

The combination of the 3 factors above builds intimacy between micro-influencers and the audience. Rather than being purely transactional, the relationship around the purchase becomes aspirational.

What we're reading Digital India: Technology to transform a connected nation [McKinsey] I recommend, at the least, skimming through the full report [PDF here] for its graphics.

Other highlights include:

• Indians used 54 times as much data in 2018 than the did in mid-2016.
• Tier-2 Indian cities closing the digital divide by adopting digital at a faster rate than major cities.
• Small businesses are ahead of larger firms in accepting digital payments
• The Goods & Services Tax Network has brought together 10.3mn indirect tax paying businesses onto one digital platform for all transactions.
• Indians Are So Crazy About Mobile Video, They Use YouTube Like Google [WSJ]
• India: the Whatsapp Election [Financial Times]
• How India’s data labellers are powering the global AI race [Factor Daily]
• Spiced buttermilk? Coca-Cola turns to grandmas’ recipes in India [The Print]
• The Experience of Being a Limited Partner in Venture Capital
• Lyft vs Uber: A Tale of Two S-1’s [Benjamin Tseng]And this next one is off-topic for this newsletter but it showcases a couple of elements of great investing.
• Lil Nas X Added Billy Ray Cyrus to ‘Old Town Road.’ [NY Times]

• First, an arbitrage play: Lil Nas X submitted his record to the Country charts rather than Hip-Hop.
• Second, a value play: Billy Ray Cyrus legitimised it as a country singer.

Now, with "Old Town Road" at the top of the charts, both strategies see the artists with their first (pretty unusual) global number 1.

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