In July last year, Shweta Upadhyay, a resident of a northern Indian city, was looking to buy a smart TV for her mother. She couldn’t have it both ways.
The closest offer she got was from Reliance Digital, a chain of electronics stores run by India’s largest conglomerate, Reliance Industries.
“When I asked the store manager to lower the price offered by Flipkart, he quoted the new price which was still a few thousand rupees more expensive. But I bought it because I had to wait a few days after ordering from Flipkart,” said Upadhyay. CASIA.
Although Upadhyay makes her purchases there and then, other consumers in India have developed a habit of browsing stores to see how products look and feel, then buying online, saving a little money in the process.
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Kushnud Khan, co-founder of Bengaluru-based B2B e-commerce startup Arzou, is looking to buck a trend he’s created in India—offering consumers the speed of shopping in stores and prices that match discounts offered at online marketplaces.
“We are arming offline sellers with tools that will give them a fighting chance against deep-pocketed online sellers,” Khan said. CASIA In an interview.
Interestingly, when Flipkart started selling larger items in 2016, it was Khan who built it from scratch. By him three times–During his year at Flipkart, Khan said, he learned a lot about how online shopping platforms—with big discounts and exclusive tie-ups with manufacturers—pull customers away from physical stores.
I was a part of something that affected offline retailers, one of the major business communities in India. At Flipkart, I started the electronic products category, which is huge for devices and grew it from zero to $500 million by the time I left in 2017,” said Khan.
Arzoo’s other co-founder Rishi Raj Rathore is also an alumnus of Flipkart. Was responsible for last mile delivery for Flipkart grocery vertical.
Together, Khan and Rathore Arzuon launched the retail stores in 2018 with a huge number of SKUs—a little over 5,000—far more than the 300 to 500 products they could stock in their own stores. The company has partnered with manufacturers of white goods such as washing machines, refrigerators, televisions and air conditioners so customers can shop on the Arzu app without having to store them in their own stores.
Offline sellers can only sell what fits in their stores, Khan said. In comparison, online marketplaces build warehouses that span millions of square feet and can create exclusive deals with manufacturers.
“Since e-commerce has grown so big in India, there is no level playing field in the retail sector. Due to capital and space constraints, the neighborhood store cannot buy in bulk. We enable them through virtual inventory,” Khan said.
Physical store managers use this virtual inventory to find products that their own stores do not carry. Arzooo will deliver the item within two to four days. This lead time is similar to Amazon and Flipkart.
Khan argued that consumers who buy electronics prefer to make the purchase after seeing the products they are after. What’s more, he said, with the ongoing buzz between brick-and-mortar retailers and online marketplaces and the government’s changing e-commerce rules, former first-in-class device manufacturers now offer huge prices online from Arzuon.
“Working with major and some smaller white goods manufacturers, our customers are now at par with what Amazon and Flipkart offer in terms of product selection and pricing.”
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Over the past three years, several offline retailers—the All India Merchants’ Confederation, the All India Mobile Retailers’ Association and the All India Consumer Goods Distributors’ Federation—have filed official complaints with the Indian government in response to predatory pricing from abroad. Ownership of e-commerce companies. This forced the government to change the country’s laws regarding foreign direct investment in 2019.
The rules now prevent foreign-funded online marketplaces from influencing the price of products on the platforms. However, Amazon and Flipkart found a way around the rules. Amazon has adjusted its stake in Cloudtail, a subsidiary of one of its largest sellers, to comply with rules that say marketplaces cannot own a majority stake in entities that sell on their platforms. Still, big discounts are available on both Flipkart and Amazon, which local retailers say are cutting prices without them.
Brick and mortar stores must contend with these market conditions as online marketplaces continue to offer predatory prices. “Often, store owners use the platform to challenge products. For example, a customer comes to their store to buy a washing machine. The store manager tries to sell that customer an upgraded washing machine model from our app, which is not available in the store.
More than 15,000 physical stores currently use Arzoo’s app to find electronics, and the company says GMV generates $120 million in annual revenue. It has raised a total of $15 million so far from investors such as US-based 3Lines Venture Capital, Jabbar Internet and Zoom Video founder Eric Yuan.
Like other Indian tech startups that have digitized retail stores and eventually become lenders, Arzooo plans to do the same. The company will soon launch a “buy now, pay later” option for sellers and is working on offering short-term loans. BNPL has started a pilot in Bengaluru and will expand the program to dealers in other regions in the next quarter.
This article is part of KrASIA’s “Startup Stories” series, where KrASIA writers talk to founders of tech companies in South and Southeast Asia.
