The state of Local Commerce in India

Local Commerce seems to be the rage the world over ever since Foursquare and Groupon started making news and Google and Facebook started falling over themselves in a bid to get to the market with their Places app. All of eBay, Amazon, Yahoo and many others have tried to buy Groupon, while Yahoo and Google got into a bidding war over Yelp and Yahoo (again) tried its best to get Foursquare but had to settle for Koprol.

All the excitement in Silicon Valley notwithstanding, the state of local commerce in India seems anything but promising. There have been various waves of local commerce, without much success at monetization. If I were to simply mention the top 3 waves that swept the local commerce space:

1. Local classifieds: This started sometime earlier this decade with several companies jumping into the business. None of them took off in a big way as the internet adoption was still for more traditional purposes and less for seeking local information. Sulekha was one of those that stayed on over time but that wasn’t purely because of how its classifieds business fared.

2. Maps and local search: Maps, local search, driving directions, the works… This wave started sometime in 2006-07 and every new kid on the block seemed to offer local search (remember Guruji and the Sequoia funding hullabaloo?) or maps (Too many to count really). Interestingly, very few of them succeeded in monetizing, many shut shop and the market leaders in both these categories (Justdial and MapMyIndia respectively) are more content businesses than technology.

3. Group buying, LBS, Checkins (Social, mobile etc.): Yes, lot of buzzwords there but that’s the wave we seem to be in the middle of right now. Group buying is the rage at the moment. LBS hasn’t really kicked off in as big a way as it has in the US or China.

The past has something to teach for sure. It’s interesting to note the following from these 3 waves:

1. In most models, content is king: Look at the companies that are doing well. Justdial, MapMyIndia, and to some extent, Sulekha are companies that have succeeded in aggregating content. This is the key to sustainable advantage here because local data doesn’t exist reliably in any public source and the

2. Aggregation-based models, though sustainable, aren’t quick wins: Let’s face it! Local data is a lot more organized in the West, address data (and hence map browsing and searching) is a lot more structured in the West. While aggregation of data is a great business opportunity in India, doing so is very expensive. This is one of the reasons that the only local commerce model that has kicked off in a big way in India is one that doesn’t depend on having a comprehensive local database: group buying. The problem with an aggregation model is that it becomes useful to the user only when the data available is comprehensive and that can be very expensive.

3. Category focus helps: There might be a lot of local businesses out there but the monetizable few are restricted to a handful of categories. Group buying is again benefiting from this since the costs are focused on categories that bring in the revenues. As a general local search player, you need to put money aggregating information (banks, hospitals etc.) which, though useful, is not monetizable. Burrp is an example of another category-focused play which did well briefly.

4. Better phones + better maps = LBS: Various players have attempted some form of LBS over SMS but it just doesn’t work the way it does with a GPS handset. As map data improves and penetration of GPS-enabled handsets increases, this may be an interesting space to watch out for.

5. Get closer to purchase intent: Models are moving from lead generation to actual sales. The closer a website moves the consumer to the sale, the greater the value proposition it can offer to the SMB.

Most of the above waves have ended with a few survivors living on but they have never really justified the potential that the local commerce market may have. It remains to be seen what happens in the coming months with better technology and data infrastructure and whether LBS, in-store technologies etc. will find a home among Indian users.

Author: Sangeet Paul Choudary