When it comes to Kirana stores, it has the strongest card in its suit. Walmart’s $16 billion acquisition of Flipkart. Walmart’s B2B commerce business in India, where it sells products directly to 100,000 retailers. This potentially gives PhonePe exposure to all those retailers to whom Walmart currently sells.
Not to just enable payment acceptance, but Zopper’s solution will help those retailers manage their inventory. Nigam did not comment on the synergies that Walmart will bring, saying it was too early to comment. But this is why the PoS plays a role even in Flipkart’s own hyperlocal journey.
Trying it multiple times
Something which the company has tried multiple times. First with Flipkart Nearby, a grocery delivery app in 2015. Then came FQuick, Flipkart’s logistics arm EKart’s hyperlocal initiative to deliver food and grocery. And now, it is looking to jumpstart its grocery segment.
This is a very different approach to what PhonePe’s competitor Paytm* is trying to build with its online to offline approach, where Paytm encourages its users to pick items offline but pay for them online.
“Paytm and PhonePe are at different stages of evolution. It makes sense for PhonePe to not go the online to offline route because it doesn’t have the kind of merchant coverage as Paytm does today,” says Satish Meena, a senior forecast analyst at market research company Forrester.
But at the heart of the matter is this. Selling a billing PoS with a payment solution to merchants is going to be a tough task for PhonePe. Zopper used to charge merchants a total of Rs 15,000 upfront for the solution. But Nigam says they may subsidize the cost to the merchant or charge a monthly fee to ease the burden.
Where is the solution?
Ultimately, Lalit Bhise of Mobisy, a software solution maker for retailers, says, PhonePe will be of value to the merchant only if it is able to increase sales or decrease costs. An amount like $16 billion in funding to Flipkart does give PhonePe an edge to pull this off. Still, as mentioned before, Zopper had to sell its business for a reason, and that reason doesn’t disappear with a new owner.
Zopper started as an app for reviewing products from jeans to handbags in 2011. It then pivoted into a hyperlocal commerce business. One where users could order online from a range of offline retailers. The idea then was to compete with the likes of Flipkart and do what the online retailer couldn’t do.
“Offline commerce could not solve for instant gratification and save on logistics cost,” says Neeraj Jain, co-founder of Zopper. It was an idea that Tiger Global, Flipkart co-founder Binny Bansal, Blume Ventures invested $20 million in. But soon, Zopper found that only a few sellers were updating their inventory on its platform. “Only our top 15-20% of the retailers constantly updated the availability of products. The others didn’t as they didn’t get meaningful business,” says Jain.
The best way to solve that, Jain thought, was to install a piece of software that would capture the inventory information through a PoS. So they acquired Easy PoS for $5 million in 2016. And just to be sure, they increased the value of their platform by extending the warranty period of products sold through them.
Hyperlocal commerce business
But the company couldn’t sustain the hyperlocal commerce business. It was trending negative on unit economics. By the end of 2016, it shuttered the business. But without the hyperlocal lynchpin, the two other businesses, Warranty, and PoS began looking like adopted siblings.
“When we looked to raise subsequent rounds, people showed interest in one of the two businesses but never both together,” says Jain.
Moreover, Jain had a bigger problem. And that was growing his PoS business. He realized he can never get the scale of a consumer business. “PoS is still not a necessity for a retailer. Appreciation for that kind of technology is still not there, as it is not something he can’t do without. Only the top 10-15% of retailers realize they need to organize this business. It is still a push sale,” he says.