Indian Urban Mass — The Next Frontier?


In my previous blog, I wrote about what products/services are online in India. In it, I referred to the Indian Urban Mass as coined by Goldman Sachs in their detailed report on India. It is a very insightful report and I’m including a couple of images from that report in this blog.

At this moment in time, India has north of 300M smartphone users as per various publications (here’s one report by the Economic Times). With the launch of Reliance Jio, and subsequent mobile data price wars, the average price of data in India is one of the lowest in the world. What this means is there are 300M+ people in India capable of transacting online.

But, when you actually look at the transaction data across the various businesses described in the blog above, there are only about 60M+ people transacting online. One of the major reasons for this is the income levels across India. Majority of people transacting online belong to the top 4 categories of people in the Income Pyramid — Movers&Shakers, Govt/SOE Employees, Urban white collar/SME owners and the Educated Urban mass — which add up to about 60M.


Don’t get me wrong, these 60M people are transacting quite actively on the internet. If we look across startups in India, some of the best in class startups which started around 2015 are able to get to a scale (in terms of # of transactions/day or GMV) in half the time than a startup that started around 2011–12. This is mainly because of the increasing comfort of the higher end of the Indian consumer to transact online — thanks to the first generation of Indian startups such as Flipkart, Myntra, BookMyShow, Ola, etc. to name a few.

Having said that, the 60M transacting users is still a small fraction — 1/5th of the smartphone users. And that bring me to the reason for this blog — the importance of the Urban Mass in India. The Urban Mass, comprising of the Educated Urban Mass and the Urban blue collar/migrant workers account for about 130M people in 2015 and projected to grow to 165M by 2020. Their average income is projected to grow from $3200 (2015) to about $4800 (2020). This is projected to add about $400B in aggregate earning pool.


If you look at most of the online services in India, only a few of them currently cater to this Urban Mass population. As an example, very few services in India, like Flipkart, PayTM or Ola serve north of 50 cities in India. But if you look at many of the other online services in India that are listed in my previous blog, they are focused on probably 20 cities or lesser in India. In comparison, many of the online services in China serve 300 cities.

Over the next 5–10 years, the Urban Mass with their increasing income and widely prevalent internet connectivity are going to consume/demand more of these online services. There will be a class of products/services that will cater and scale to this Urban Mass. But, there are probably going to be a new set of companies created who are more focused on this Urban Mass.

Any predictions on which products/services will be unique to the Urban Mass — in the top 20 cities or the broader population in the next 100+ cities? This could be across categories such as communication, commerce, entertainment, health, education or any other sector.

Note: Blog also posted here

What’s On(line) India — 2017?

This is an update on a blog from 2011 titled What’s On(line) India? I wrote that blog about a year after I moved back from US and compared the online services that were available in India to the ones in the US. I had identified a few areas where the services had just launched in India and a few more where we did not have an equivalent service in India.

I was curious to check how things have changed in India and so did a refresh of that table.



Some observations:

Most categories popular in the US are all available in India and with reasonably good options

There are a few categories (particularly in O2O) that were non-existent (or very early) in 2011 that have quickly evolved in both US and in India and have got to reasonable scale. These categories are highlighted in green.

The categories that are driven by subscriptions or purely digital revenue (e.g. Movie rentals) are still early in India — particularly since subscription businesses are yet to catch the Indian consumers favor.

Most of these products/services are still getting traction mostly from the top of the Indian consumption pyramid

With the growing smartphone penetration and growing income levels, we can expect some of these products/services to trickle down to the next layer of Indian consumption — what Goldman Sachs calls the Urban Mass


The above list is by no means exhaustive. Curious to hear what products/services you would love to order from your mobile or your computer that you are not able to yet in India.

Note: Blog also posted here

Rise of the Indian marketplaces, and what the future holds

marketplace

Increased connectivity and the spread of smartphones over the past decade have completely transformed Indian commerce. As more and more Indians get access to online services, they become accustomed to buying online – from books and tickets to smartphones, TVs, electronics and increasingly grocery and daily goods.

Over time, the dominant business model of e-commerce players has settled on the marketplace model. While inventory driven e-commerce may often grapple with issues of warehousing or product sourcing, marketplaces have on balance less initial constraints to deal with. More than a dozen startups of the annual Unicorn list published this year by WSJ, had business models that would align themselves to marketplaces. The distinct nature of marketplaces is such that there are push-and-pull factors between buyers and sellers that lead to virtuous cycles – the buyers and sellers on the platform keep providing value to each other thereby bringing scale to the venture.

Before understanding the distinct nature of marketplace, it may be helpful to highlight some of the characteristics that markets must exhibit before they can be accessed using marketplace models. After all, not all offline services can be viably brought onto a marketplace platform. However, there are certain characteristics that take well to marketplaces such as:

  1. High frequency use: The service being provided is of high frequency, such as hailing taxis, ordering food or making restaurant reservations. If the purchase cycles are longer, brand recall and user engagement tend to get minimized thereby preventing the marketplace from gaining network effects and scale.
  1. Existing fragmentation of supply and demand: Fragmentation of value chains lead to hidden value that are either not being used or optimized. Further, it also means less friction for a new marketplace player to enter the market. Cumulatively there also appear to be greater advantages that sellers and buyers can receive from each other that they cannot by themselves.
  1. Network effects: Over time, the marketplace ought to be giving you value that is better than the one that you received in the beginning. In short, the more people that use the service, the better it should get at providing it. Network effects of this kind end up creating tremendous value for both buyers and sellers.

Beneath this view of marketplaces, a helpful distinction can further be made between different categories of marketplaces in this regard. In a sense, not all marketplaces are created equal. Indeed, based upon the service, marketplaces can be divided and sorted into three main categories: basic listings, curated marketplaces, and managed marketplaces. Some characteristics of these are listed below.

Basic listing: These are the plain vanilla listing platforms that basically allow anyone to sell products that they own. A prominent example of this model in the beginning was Ebay and Craigslist. Such platforms have no tabs on the pricing of goods placed on the company as well as they do not dictate the precise user experience (UX) for each good. Expectedly, the service level that a buyer would gain from each listing also varies.

Curated marketplaces: The key difference between this and the basic listings model is the added input that the marketplaces themselves provide to make sure the user experience is a somewhat standardized one. In such a model, there is a filter imposed to vet services/goods providers. In addition, there are mechanisms in place that manage the curation experience through ratings and so on. A large chunk of the marketplaces that have gained scale and have entered the billion+ valuations such as AirBnB, Etsy and Groupon can be bracketed under this rubric.

Managed marketplaces: The last category is that in which services are still provided by a third party. However, the environment, pricing as well as service experience and customer support are all guaranteed by the marketplace itself. TaxiforSure and Ola are perfect examples of how an effective marketplace can develop with buyers and sellers operating under a standardized user experience that in turn is coupled with an assurance provided by the marketplace regarding certain basic quality parameters.

Accel and marketplaces

At Accel, we have worked with many terrific entrepreneurs and helped them in building businesses that have had well executed marketplaces at the core. Globally, we have led the charge in helping build marketplaces that have redefined categories. In the US, Accel has been involved with marketplaces such as 99designs (design services), Etsy (handmade products), Groupon (daily deals) and Trulia (connecting home buyers, renters and sellers). Furthermore, in Europe, Accel has led efforts in startups such as Avito.ru (Russian classifieds), BlaBlaCar (ride sharing service), Deliveroo (food delivery) and Wallapop (a P2P second hand goods marketplace).

In India, our partnerships with entrepreneurs in the marketplace category have ranged from hugely successful e-commerce players such as Flipkart & Myntra to movie/event ticketing platform BookMyShow and taxi hailing service TaxiForSure and Ola. More recently, we have also backed innovative new companies across industries such as Capricoast (home furniture solutions), Coverfox (buying insurance online), Medigo (arranging medical tourism), Portea (healthcare at home), PropTiger (real estate transaction facilitator), Swiggy (food ordering and delivery), Vedantu (online tutoring for K12 students), UrbanClap (all your local services) and ZopNow (grocery ordering). All these startups connect service providers across various sectors while ensuring certain standardized quality that the Indian consumer now expects and demands.

Accel_Marketplace

In addition, marketplaces also have tremendous value in streamlining and improving the efficiency of business-to-business transactions. Power2SME is an example of a marketplace that functions in the B2B space. Through Power2SME, Small to Medium Enterprises (SMEs) get connected to suppliers of essential commodities and supplies that allows them to gain savings and ultimately scale their business more efficiently. Similarly, we have three other businesses in the B2B category that are still early in their evolution.

The future of marketplaces

The broader ecosystem of connectivity that has led to the emergence of the new Internet economy also has other components ranging from the tremendous smartphone penetration to social media engagement among India’s younger demographics.

There is, therefore, a huge opportunity to remake the first generation of Internet marketplaces (across industries) and make them more responsive to the needs of the young Indian mobile consumer. In particular, the demands of the smartphones would place greater emphasis on the User Interface (UI) and User Experience (UX) of the product so that it meets the experiential demands of the discerning Indian consumer. The emphasis that mobile products place has shifted from being transactional — getting the best value for a particular good to being experiential – enjoy using the medium that allows me to get a particular service. In the current scenario, the feel and user friendliness of the medium of availing the service is almost as important as the service itself.

Through YourStory’s ‘The Marketplace’ campaign, we hope to engage with a whole new set of startups that are using innovative marketplace models to disrupt traditional and first-generation Internet businesses in India and to touch millions of Indian consumers and businesses in the years to come.

If you are building one, then apply now! – http://themarketplace.yourstory.com/2015/

Note: YourStory published this blog here.

image credit – shutterstock

Global or Indian MBA?

I often get this question. In fact, today I spoke to a candidate who is deciding between a top global B-School and a great Indian B-School.  This is a very personal call and so there are no general rules. But, I want to share some of the questions I would suggest people in similar situations consider, instead of just focusing on the short-term issues such as school rankings and cost.

The key to answering the global vs. local MBA question, in my mind, is to answer where you want to live and work long-term. If you plan to work in India long-term then it probably makes more sense to go with a good Indian B-school. The following are the main reasons for suggesting this:

  • Local Network: This is the top most reason for picking a local MBA. You will have an outstanding network of classmates, alumni and faculty upon graduation that is local and easily accessible. If you take ISB or IIM, there are thousands of alumni at various levels of the corporate ladder across different industries in India. Compare that to a global MBA, which would probably at best have hundreds of alums in India.
  • Job prospects: Ability to find work upon graduation is greatly influenced by the geography where you graduate. I would say, it is much easier to find a good job in any field in an Indian company right after graduation if you do an Indian MBA (and similarly for an US MBA if you want to stick around in the US). But one other aspect to consider is that you don’t have any visa issues to worry about if you are native to the geography. I know a few MBA graduates from top schools in the US who compromised on their jobs (picking jobs that sponsor visas vs. what they really wanted to do) or returned to India due to compulsion (especially during the past recession when many US companies did not want to process visas). If you are particularly interested in working in the startup space it becomes all the more important since most US startups will not process visas.

But, you would be losing out on the following benefits of going to a global B-school

  • Global network: There is no denying that if you go to a global top B-school you are going to network with the crème de la crème from all over the globe. It is definitely an outstanding experience (that I can personally vouch for being an MIT Sloan MBA).
  • Global job prospects: You will be able to work anywhere in the globe upon graduation (within the limits of the visa issues mentioned above) and on the medium to long-term.  This also helps in adding a global perspective to your thinking.

Other questions that come up:

  • Cost/ROI: I think, this balances out in the mid-term, as long as you plan to stay in the geography where you graduate. An ISB MBA (at the high-end in India from cost perspective) will put you down about US $50K (all costs included). Most top US MBA schools would probably set you back $150K ($100K tuition + $50K living). Granted you would probably make north of $100K if you work in the US post MBA as opposed to $30-40K in India, but still the payback periods (4-5 yrs) are roughly equal given the amount you get paid is at the same ratio as the costs (3:1 for US:India).
  • Two-year vs. one-year MBA: The internship opportunity that a two-year MBA offers is very critical for most people going through an MBA program (particularly those that are switching careers). Even if you are going through an one-year MBA program, try your level best to work in some internship experience (at least part-time) into your program.
  • Work experience: I think this is another important aspect to consider. IIMs in particular are more tuned towards people with <2 years of work experience for the regular MBA program (and not the executive MBAs). If the pedagogy methods are more towards case studies, its important for the candidates to have enough work experience to draw from. From that point of view, schools that take people with more work experience will have a better chance of higher quality case discussions in class. Based on my experience at MIT Sloan where average work experience of >5 years, my classmates used to draw from their work experience which was very insightful (Hat tip: Thanks to Akshay Bhushan for flagging this).

Those are some of my quick observations on this question. Would love to hear from others who have either gone through this process or in the decision-making process. What did I miss?

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