12th April 2016

GOI-USAID Partnership to Support FinancialInclusion through Expanded PaymentsAcceptance Networks and Other Efforts

Snapdeal – Janalakshmi Assisted E-commercePilot Project Insights from learning visit

www.cashlesscatalyst.org

A. Background

In November 2015, Janalakshmi and Snapdeal launched an assisted e-commerce pilot in Bengaluru, Karnataka. As a part of this pilot, Janalakshmi agents would serve as sales, payment and distribution points for Snapdeal products in their larger community. 8 merchants were initially selected to be Jana agents; this group consisted of mobile recharge stores, kirana stores and fancy stores. The pilot encountered initial operational and technical issues. Consequently, in February 2016, the pilot was relaunched with a new set of 7 merchants in the Neelasandra and Ejipura areas of Bangalore. The merchants selected for this pilot were a mix of different types – ‘Fancy store’, Stores selling ‘Household items’, Women’s clothes, Mobile phones, Mobile/DTH recharge, stationery, medicines (see appendix for details), generating revenues between INR 35,000 to INR 60,000 a month. This note captures some insights from a Learning visit done by a Dalberg team on behalf of the Partnership.

B. Methodology and objectives

The learning visit was focused on understanding:

■ The size and nature of the demand for e-commerce in these localities ■ The customers’ experience in using the channel and their post purchase perception■ The merchants’ experience from attracting sales to completing the transaction digitally ■ Whether e-commerce has made merchants more amendable to accepting digital payments

The methodology involved a mix of interviews with different stakeholders:

1) Agent interviews: The team spoke with six of the seven agents in the new pilot. The agent interviews primarily focused on capturing their assessment of the demand in the area, and their experience with various parts of the assisted e-commerce service (e.g., selling, ordering, payment, delivery, returns and cancellations).

2) Customer interviews: The customer interviews primarily focused on capturing the customer experience with the various parts of the assisted e-commerce model.

3) The Jana Mitra Co-ordinator: The Jana Mitra Co-ordinator (JMC) is a Janalakshmi field staff member who manages the agent network for a particular locality. Janalakshmi had appointed a dedicated JMC for the assisted e-commerce pilot. The JMC served as the go-to person for agents, visiting them on a near daily basis, helping trouble-shoot issues and educating agents about deals and discounts they can pitch to the customers. 4) Competitor interview: In addition to these core interviews, we also conducted an interview with a merchant who was an agent for ShopX, a competing assisted e-commerce service operating in the same locality. ShopX uses its own wallet and e-commerce portal featuring a wide range of products curated specifically for the low-income customer segment. The objective of the interview was to compare their experience and perceptions with that of the agents in the Snapdeal pilot and to develop a broader perspective on the assisted e-commerce model.

C. Highlights and recommendations

Key highlights

■ There is considerable variance in performance by retailer. 1-2 merchants have been outperformers, others have lagged.

■ Merchant response suggested that demand varies by the area of the pilot, and varies depending on the level of income and digital/smartphone penetration in the agent’s vicinity. Localities with a larger number of smart phone owners who had previous experience with e-commerce were not overly keen to access the assisted channel.

■ The variance in performance by merchants may also be attributed to the inherent selling skills and agility of merchants. One merchant has been far and away the most successful,because he has been able to tap into demand among the low-income migrants in his community who were far lower in terms of digital literacy and smart phone use. Incidentally he was also a more proactive and savvy salesperson

■ Problems with returns and cancellations have been a key pain-point and have affected merchant and consumer experience and likely uptake.

■ Customers who have successfully received good quality products on time are happy with the experience. Customers waiting for refunds or dissatisfied with the quality/functioning product related issues are predictably unhappy. Merchants who managed to service customer successfully saw a number of repeat customers

■ Merchants generally seemed to want to continue as Snapdeal agents. They do not perceive the opportunity cost of the business to be too high and seemed comfortable using the digital platform to order and pay.

■ The pilot seems to have improved the merchants’ comfort with technology, it may be too soon to draw inferences on the pilot’s ability to drive broader digital payment adoption, especially as the assisted e-commerce business remains a small part of their overall revenue. Merchants still prefer to receive cash from customers as opposed to receiving payments digitally, despite their own increase comfort with using the platform.

Recommendations

■ Improved targeting of catchment areas: Customers in many of the current pilot geographies seem to already have e-commerce access and high smart phone usage. Snapdeal and Janalakshmi could use their internal data to target poorer or more rural geographies which not only have lower digital access but also face issues such as lack of courier addresses and other typical e-commerce inhibiters. The variance in sakes in the pilot clearly suggests that the demand is likely to be higher in these localities.

■ Better and more consistent handling of operational issues like returns and cancellations: Returns and cancellations are a significant pain-point for the merchants and customers who have experienced them. Setting concrete and clear expectations of return timelines and procedures, and streamlining the process would help strengthen trust in the channel.

■ Experiment with a lower-touch model: Even though initial training and on-boarding is important, it appears that some agents quickly develop the technical capability to run the initiative with limited support and supervision. There may be value in focusing efforts to identify these “top sellers” or the “Prakashs of the assisted e-commerce world” to enable scale-up. This can be tested by rolling-out the initiative to a wider catchment area and bringing a substantially larger number of merchants on-board with room for high attrition rates. Subsequently the best performing agents self-select, thereby forming a cohort of agile and proactive sellers who can run the business at the minimum cost to serve the channel. The JMC could potentially play a more reactive role and offer trouble shooting or other allied services as and when needed. He could also manage a larger number of agents as opposed to his current agent portfolio of 7. This would make the model more sustainable on a lower sales per merchant basis.

D. Detailed notes from the field

1 The demand for assisted e-commerce is not homogenous in these communities and varies depending on the level of income and digital/smartphone penetration in the agent’s vicinity

■ Since the launch of the second version of the model, the average sales per merchant per week has gone up to INR 1,569 from INR 141, and the average number of orders per merchant per week has increased to 1.2 from 0.33.

■ However one agent (Prakash) accounts for 43% of the GSV (see Figure 2), making about 2-3 sales per week at an average selling price of INR1680. Prakash attributes his success to his ability to tap into the unmet demand among the migrant and low-income customers in his community who do not have smart phones or internet access. Another (Zubair) has experienced some demand among older people and housewives who do not have access to smart phones.

“Many migrant workers from North East and Nepal come to the store, I tell them about Snapdeal and ask them about what product they want to buy, I also ask what their budget is and suggest products for them to buy.”

-Prakash Merchant

■ Other, less successful agents (Anuradha, Vicky, and Dhana Shekar) cite the lack of overt demand, saying that customers have some access to online e-commerce anyway. Moreover, other usual demand drivers for assisted e-commerce, such as serviceable address or someone at home to receive delivery, do not seem to be major issues in this area. These merchants say they have struggled to explain the additional value proposition of the assisted model over traditional e-commerce.

Naveen Krishna DhanaShekarA meenAnuradha Rajendran MohammedP rakash

Num

ber of orders per week

Gros

s se

lling

valu

e(GS

V, IN

R)

0

5000

10000

1388

56748442

10119 10381

14901

36981

0.0

0.5

1.0

1.5

2.0

2.5

3.0

15000

20000

25000

30000

35000

40000

Prakash and Zuber operated out of digitally

under-penetrated areas, with low smart phone and internet access

■ None of the merchants had the standees outside of the store. They quoted reasons like “it keeps falling off” or “it fell on a child” or “I opened my shop late”. There is probably scope for some improvement in the design of the standee, especially as agents believe that attractive displays and advertising could accelerate the demand for the channel. 5 out of the 6 agents interviewed mentioned that adverts in the local newspaper and even leaflets could help accelerate demand and consequently foot fall. The store with ShopX had a lot more marketing and promotion paraphernalia to attract customers.

ShopX browsing tablet on the wall for customers to browse products and promotional materials present

0

2000

Mobile&Mobile

Accessories

ElectronicM en’sShoe

Men’saccessories

Women’sFashion

KitchenwareB eauty&Personal

care

Automobile Children’sclothes

Children’stoys&

Sationary

Children’saccessories

6000

4000

8000

48000 Number of items sold

Num

ber of items sold

Gros

s se

lling

valu

e(GS

V)

GSV46577

11366

9032

60544797

1246

2043

954840 250 199

4

8

6

10

12

10000

2

0

“If they see the standee they ask us about it, but mostly I tell the customers about Snapdeal myself- almost every customer who comes to the store I tell them about Snapdeal”

– Ameen Merchant

“[Snapdeal/ Janalakshmi] should do more marketing. Maybe advertise on TV or papers that this service is available at merchants like me. I will get more customers that way. Otherwise, it is just me telling people who visit the shop”

– Zubair Khan Merchant

2 Customers who have successfully received good quality products on time are happy with the experience. Customers waiting for refunds or dissatisfied with the quality/functioning of product are predictably unhappy

■ Most customers who have received timely deliveries of well-functioning products are happy with the experience. Merchants operating out of digitally under-penetrated areas said that the customers who came to them were satisfied with the speed and efficiency

“I bought the dish TV for my brother and he is really happy with the product”

– Harisha Customer ■ Most of the customers know the merchant at a personal level and are therefore comfortable making the purchase digitally through them. They are also comfortable pre-paying for the product for this reason. Interestingly, in the ShopX model, where the merchant is generally selling to customers, he takes 50% of the amount upfront and the remaining on delivery. He takes this risk on his own because he feels customers may not be willing to completely prepay for the product.

“Ameen gave me a guarantee that I would receive the product on time and that it would be a good product. I trust him so I made the purchase”

– Kalimullah Customer

“I take this risk so that people can trust me enough to make purchases with me. Even if there is a refund, I pay them immediately and don’t want to receive the money from ShopX”

– Rafiq ShopX merchant

■ Most of the customers who were interviewed were the ones who had faced issues with returns and cancellations, and predictably had a few negative reviews. One customer (Altaf) said that his refund took longer than a week while another customer (Naveen) said that hisorder kept getting cancelled. A third customer (Kalimullah) received a DVD player that did not work. Merchants said that these incidents were a “nuisance” and become very “frustrating” for both the merchant and the customer. In the ShopX model, the merchant claimed to pay the refund amount out of his own pocket immediately to the customer, he said that this ensured that the customer would not be hesitant about placing more orders from fear of having to wait for the money in-case of any refund.

“I booked the same T-shirt twice for the customer and it showed booked, after one hour I got a message that the order was not completed and my money was already deducted, this is very frustrating”

– Dhanashekar Merchant

Typical customer purchase cycle

3 Merchants generally want to continue as Snapdeal agents. They do not perceive the opportunity cost of the business to be too high and are comfortable using the digital platform to order and pay

■ Even though the sales have been concentrated with only one or two agents, all of them wanted to continue as Snapdeal agents. This is because the opportunity cost of running the e-commerce business is rather low for these agents despite the iterative nature of the transaction cycle (which may include the customer taking more than a day to make a purchase decision whilst spending over 30 minutes in the store). This is probably because most of these agents run mobile repair or fancy items stores which do not see a constant traffic of customers throughout the day unlike typical Kirana stores. Footfall is sporadic at these stores and a customer spending 10-15 minutes going through the Snapdeal portal to decide on a product is not perceived as a “pain”. Moreover, since they are often selling to friends and neighbors, merchants do not perceive this interaction with their close ones to be “effort intensive.”

“They will see a product and go back, then they will ask people or check prices in other shops, they come back if they think it is a good deal”

– Prakash Merchant

■ Merchants were comfortable with the stages of the e-commerce process. None of them had any trouble with the ordering and payment process. Most of the merchants had been using smart phones before the pilot and were moderately tech savvy. The initial training imparted to them on using the tablet for placing orders and making payments has further added to their comfort in carrying out the transaction.

■ Critically, merchants are comfortable pre-paying. This is because they need to maintain a balance in their wallet in any case for their phone recharge business and are visited by a Jana distributor almost every other day. In addition, in some cases customers placed the order with the merchants and gave them the money, and the merchant topped up their wallet and placed the order later in the day. This illustrates the trust that merchants enjoy from their customers.

“I like doing this service, I am comfortable using the tablet and making the order, it is of no trouble to me at all”

- Vicky, Merchant

■ Merchants are happy with the commissions they are earning from the products and see it as a good addition to their income. They are cognizant that a single larger transaction will give them a bigger absolute commission as compared to the many recharges or other transactions they do.

“Even though the margin is smaller, the commission amount is higher so it is good money… so it is good being a merchant” – Prakash Merchant

■ Merchants, however did complain of slow internet speeds and loss in customer interest.

“The speed always goes to 2G. It sometimes take 15-20 minutes for the portal to load and the customer gets very bored”

- Vicky Merchant

■ Returns and cancellations have been an issue, and they stick in the agent’s mind. For instance, in one case the merchant mentioned that the refunded amount went to the FreeCharge account, rather than his Jana Wallet. He had to contact the JMC to ask what to do. Moreover agents find it problematic if the refund amount is not returned on time. Customers get anxious and wary of the e-commerce channel in-case of such issues. One agent (Dhana sekhar) mentioned that he was facing trouble with ordering goods from the past few weeks. He said that the order got automatically cancelled after an hour of receiving confirmation. He had to then wait for the money to be refunded which took longer than usual and created a lot of discomfort for his customers and him.

“The customer comes to the store every day to ask about the refund, I don’t like that, I don’t have any answer to give him”

– Zubair Merchant

Status of different orders post relaunch

46

3 4

CancelledDelivered Returned

4 It is too soon to determine the merchants’ readiness to adopt digital payments outside of the pilot

■ The second version of the pilot is only 1.5 months old making it difficult to draw any concrete conclusions on the impact of the model on the general digital behavior of merchants.However almost all merchants mentioned that they would still prefer to receive cash from customers for the products as opposed to a direct transfer to the wallet. This is to be expected, given the low volume of sales. Interviews also revealed that merchants were wary about receiving money digitally from customers. They were scared that “problems could arise” and they would have to go “chasing the customer” for the money

“Cash and carry, dosti pyari. Business’ only rule. I don’t want to deal with the hassle of digital payments and chase after customers” – Rafiq ShopX Merchant

■ Moreover these merchants deal with very small ticket size transactions and do not see a point in using digital transactions. One agent (Anuradha) mentioned that she had to pay her wholesalers in cash and it would make no sense accepting digital payments

■ Only one agent (Vicky) said that he would be comfortable if customers transferred money directly to the Jana wallet, however he did not see that happening in the near future

E. AppendixMerchant profiles (including ShopX merchant)

Name Prakash Dhana Shekar Ameen Anuradha Zuber Khan Vicky

Main business

jewellery, toys)

Household items, women’s clothes

Mobile phones and repair

Medical Mobile phones and repair

Assisted businesses –

How long have they had the store

2 months 2 years 7 months 5 months 1.5 years 1 year 1 year plus

Number of employees

None None None None Brother

Father and son None

How long have they been a Jana agent

2 months 6 months 7 months 5 months 7 months 6 months N/A

Type of Jana services they

Phone recharge (also does directly with some MNOs), DTH

Phone recharge, DTH

Phone recharge

(also does directly with some MNOs)

Phone recharge Phone recharge (also does directly with some MNOs), DTH

Phone recharge (also does directly with some MNOs), DTH

N/A

with Jana No Loan No No No No Trying to appoint

as an agent

Mostly women, Mostly women Mostly men Men, women Both men and Mostly men Both men and

Customer profiles

JMC profile

Name Kalimullah (M) Naveen (M) Harisha (M) Altaf (M)

Name of agent Ameen Dhanashekar Reddy Zuber

25 years 28 years 30 years 26 years

Carpenter -ordinator at Jana

Peon at local college

Family Parents and wife Parents , wife and two kids Parents and wife Parents and three elder brothers

Banking behaviour

Bank account Yes (Not a frequent user) Yes Yes Yes (Not a frequent user)

Use a debit/credit card Owns a debit card but does not use it

Only debit card Only debit card at ATMs Owns a debit card but does not use it

Technology savviness

Type of phone they have Smart phone (no data) Smart phone No smart phone Smart phone (no data)

Internet at home/ phone No Internet on phone No No

Experience with e-commerce

Previous experience with e-commerce

No previous experience, tried Snapdeal as he is friends with the merchant.

through the merchant as they are cousins (always

friends and acquaintances , always COD

Used assisted e-commerce in the past (Flipkart)

Name Reddy Shekhar G

Number of years with Janalakshmi

6 months

Manages the agent network for Snapdeal

Role in the Snapdeal-Janalakshmi pilot Manages the agent network, trouble shoots for agents, meets agents daily and tracks progress

agents

-commerce