The Taobao Village next to you
Innovation sits at the crossroads of different trends. Just think about the possibilities of combining nascent ‘small cities’ in emerging countries with community group buying.
The migration from rural communities to urban locations seems to be a global and irreversible phenomenon. If there is one country in which this is evident, it is China. Today China has 13 cities with over a 10 million population. There are literally scores of over 5 million. Every emerging market is following a similar pattern. Go check it for yourself here.
Community group buying is nothing new. I remember circa 2000 group buying a pram at Mercata.com for my daughter, who is now in university. For different reasons linked to competitors, consumers and suppliers, most of the group buying startups, did not survive the dot. com boom and bust cycle. The revival is probably linked to the exponential growth of social media (particularly group chat) and to the pervasiveness of smart phones.
Most of us are well familiar with the large Chinese e-marketplaces. Taobao, JD.com, Pinduoduo are successfully bringing the best of community group buying, ecommerce and marketplaces to large and smaller cities in China and will eventually will expand their business model to the rest of the world.
What we are normally not so familiar with, are the startups that are focusing on serving small cities. Some time ago, I was listening to a podcast about the challenges faced by Chen Ying, the founder and CEO of Shihuituan, a community group buy site that operates mainly in third tier cities and below in China, and I realized that most of the emerging markets could have their own Shihuituan even if Amazon, Jumia, Mercadolibre and the likes seem to monopolize all e-commerce.
This prompted my curiosity to search for startups in emerging markets that could support the following investment thesis, that I labeled as “The future of rural e-commerce“.
The criteria that I considered for selection were the following:
- Not an NGO but a #socent
- Not Alibaba, Shopify, Amazon, Flipkart, FB Marketplace, Mercadolibre, JIO, Jumia.
- Not basing its revenues on ads (OLX, Gumtree).
- Not Etsy, or handcraft sales equivalent. Sorry Gaatha and Someone Somewhere
- Targeting small towns and/or rural communities
- Focused on local clusters or just different business products and services being sold online.
- Secret sauce: aggregator (economies of scale, logistics) + localization (community leaders)
- Low risk of commoditization and competition on price only.
- Managed to overcome challenges such as illiteracy, lack of infrastructure (internet access).
- Operating in countries without hindrance from government. Government could help, but at minimum should not block (e.g. avoid possibility of being taxed to death).
After some research I came across Apperto (*). Apperto is a Latam app that I could characterize as a mix of Yelp and Groupon for relatively small cities. They are currently operating in small cities in Argentina and Mexico and have been inspired by Shihuituan.
Are you aware about any other startup creating “The future of rural e-commerce“? (please leave a comment).
(*) I am an investor in Apperto.