a16z Podcast | E-commerce, Payments, & More in India's Evolving Retail Landscape

Hi everyone. Welcome to the A6 and Z podcast. I'm Sonal. On today's episode, we're covering e commerce marketplace, businesses, payments, the challenges of payments internationally, the challenges of logistics, the tension between holding inventory or not, why that matters and more interestingly, how things are playing out internationally versus in the US especially when it comes to things like fashion curation, discovery and more. Joining us for that conversation, we have two special guests today, Kunal Ball and Rohit Bansal, the the co founders of India's snapdeal, which is one of the largest marketplace e commerce businesses in India. And we also have a 16Z deal and investing team partner Anihooriharan who covers all things consumer from marketplaces to social. For us, just to give people context, because I think in the US most people are probably most used to Amazon. What's the most popular product or category that's sold and transacted on Snapdeal?

I would say women's fashion.

That's very different from what Amazon was.

Well, yeah, because I don't like buying clothes on Amazon.

Yeah.

So I think in Amazon in the early days it was primarily books and then they expanded it to other electronics devices, apparel and fashion and accessories is still a big category, but it is not, it was not the number one launchpad for Amazon. So it's very interesting to see how, you know, being a marketplace in India, fashion is quite popular.

I think there's a structural reason for that in India. India's retail market is about $600 billion, going to a trillion dollars in the next three years.

You're talking dollars like in US dollars.

US dollars overall market will be 1 trillion. Out of which only 7% is organized. 93% of India's retail is small businesses, many of whom don't have distribution because.

They'Re just local players.

They're local players. There are no large chains that they can sell their products through. So for a lot of people, when they want to buy, get a lot of selection at great value, they go online.

So one of the interesting themes here to me, and I'm thinking about what played out with WeChat in China, is that what made the transaction model so popular is that WeChat was essentially providing a way for small business owners to create a storefront, like essentially build a website without having to build a website. So it's part of the limitation here that regular small and medium sized businesses in India, the local businesses, besides the fact that they lack distribution, they just don't have the skill set or the access to be able to build their own website and just automatically, because you could have a website on the Internet that would potentially gain that distribution over time.

In India, actually the problem's far more acute both on the supply as well as the demand side. Because as Kunal was mentioning, only 7 odd percent of our overall retail is organized.

And what do you mean by organized?

Organized means run by large store chains, companies, et cetera, et cetera.

A good comparison there is in US and fashion we tend to buy a lot of brands. And in India you don't have many brands. Most of the purchase is actually local brands. You go to the nearest mom and pop store.

Ah, right. That's good context.

When you look at the Indian market, it's actually very different from the US market in many different ways. First of all, for example, there are no organized stores like in the us Like a department store, y small town will have many, many organized stores where you'll get different brands, et cetera, et cetera, et cetera. So as a consumer you have access to far more selection of products. Secondly also on the supply side, the penetration of brands into what people buy is immensely high in the us Whereas when you look at a market like India, especially in things like women's fashion, home products, et cetera, there are very few brands and people still rely on local companies to buy all these products. Which means, at least when we were working on building a marketplace in acutely fragmented, both on the supply as well as the demand side, consumers could not get access to what they wanted to buy. I myself grew up in a pretty small town in India and I remember, you know, even to buy something, something like shirts, you had to travel six hours away to a bigger, bigger city and buy shirts. That's how acute the problem is on consumer side in India. As a result, on the supply side as well, because there's no organized retail, people don't have access to one channel of distribution. Even when you're making a great product, you spend 80 to 90% of your energy just distributing that product city by city by city. Which is a problem that marketplaces are solving in India.

And it's very similar to China, don't you agree? Because China has also huge, you know, a very small percentage of organized retail and majority is unorganized. And Alibaba sort of did that with Taobao and Tmall where they helped sort of people almost say leap. Instead of going from unorganized to organized, they actually went directly to a marketplace model that really helped bring a lot of the innovation online.

Yeah, absolutely. I Think the Indian market is evolving much more similarly to the Chinese market than the US market. The US went very quickly from C2C to B2C. In India we've gone straight to B2C. But marketplace models as compared to the first party inventory ownership model.

And what's the reason for that?

I think it's when you have such a fragmented supply side where no single brand accounts for a very large percentage of sales in any category, then automatically you need to have theoretically infinite assortment. Because if you want to offer broad selection, you can't offer it across 10 brands. You will need to have literally thousands of brands across each category. None of those are really big brands. They're more like labels. But if you don't know what's going to sell, how do you buy it in advance?

I'm actually fascinated by this from a design perspective, because how do you then design for discovery? Or is it very utilitarian? Here are T shirts, here are pants, here are. Is there a sense of excitement? Because when I think of buyers, my guess would be that there are functional buyers and then aspirational buyers. People who are trying to buy because they're seeking a vision for an image of themselves. How do you optimize for these different scenarios? Because I can't even imagine a scenario like this where you can't search by brand. For example, like how do you even look online? How do people decide, discover things?

It's very interesting. Just going to the background of the question is one of the things that we feel has evolved in the world is that for the longest time we feel there was a strong belief that the only way to create good experiences for users is by owning inventory. We think of these two as different problems. Owning inventory is one part of the problem. Creating a great user experience is another part of the problem. To let you search for a brand that you want to buy doesn't mean you need to own the inventory of that brand. You need to know that the person is searching for that brand and you need to know that you have the assortment for that brand. And as a result, as marketplaces have matured, and what our viewpoint on marketplaces is, is that you can have a situation of having extremely fragmented and distributed supply, but still create a layer of marketplace and experience on top of it to make the user experience very seamless. It's almost like the new marketplaces are doing in the world. In spite of the fact that they have very, very distributed supply, they still take ownership of the consumer experience and make sure it's superlative.

But how do you still solve for the discovery aspect of things? Is that even a problem in this scenario? I'm just trying to get a little bit more context. How are people finding what they need and buying what they need? Walk us through a little bit about what that is like.

It varies by different categories. Because we are a horizontal marketplace, let's.

Focus on fashion only because that's the most popular one and it's something people immediately relate to.

We've seen very different behaviors when it comes to buying fashion. Many consumers, I'm not going to stereotype which type of consumers. A certain set of consumers, they know what they want to buy. Exactly. So they'll go in, they'll search for a specific type of product or a specific brand. They know their size and they're just, you know, it's almost like you, you start with a, you know, you start by looking at the marketplace. You already know what you want to buy and you're narrowing, narrowing, narrowing to get to what you eventually already know what you want to buy. Whereas there's a certain other type of users who want to discover because they don't already know what they're looking for, but they want to come explore and then find new things. And these are different buying experiences. They'll come to the come to the platform. We have a visual search and visual shopping experience as well. These are florals, solids. You click on one of them, you'll see more florals and as a result, you almost go on a discovery path depending on what you're interested in.

I also think the purchase behavior of the consumer matters here, which is quite different from the US So I grew up in India and had the benefit of seeing how I used to shop for Salvars or suits, right. And you go to the most reliable nearest mom and pop store and it's seasonal trend and you look for the best designs. But you know, I grew up in Coimbatore and even though it is sort of, you know, a big textile hub, you don't get, you know, didn't have the luxury of getting all the varieties. So, you know, we would travel to Gujarat on vacation, for example, Gagras from there or buy Punjabi suits. But I think today marketplaces like yours have really enabled even tier 2 and tier 3 cities anywhere in India to sort of access that fashion. And you can use the seller ratings to sort of understand the reliability.

And talking about Gujarat, that's one of the largest sari manufacturing, which is an ethnic Indian clothing. It's one of the largest sari manufacturing hubs. In India?

Yes.

My parents are from what's known as the sari capital of the world in Gujarat.

I think the amazing thing is the amount of efficiency that e commerce marketplaces are introducing in an otherwise very, very inefficient supply chain in India. Indian supply chains have been ravaged by middlemen historically. As a result, products become more expensive than they should, and the core manufacturer doesn't make enough money. So to take an example of a sari that's made in Gujarat, it'll typically be made for about five to six dollars. It'll be for about $30. In a market in Delhi, that same sari is sold on Snapdeal for about $12, including free shipping across the country. And only the four people who need to benefit out of that transaction benefit, which is the manufacturer, the person who shipped it, the person who sold it, and the person who bought it.

And the person who bought it. That's great. So before we switch to talking about the supply chain and the logistics aspect, I just want to still zone in a little bit more on the discovery aspect. One of the things that I find fascinating in India is this recent emergence of concept stores, where you have, as an alternative to the single mom and pop store that supplies things, you have essentially the equivalent of a department store, but it's much more like a boutique in the US where they're aggregating local and indie brands. And it's kind of fascinating because you get to see, like, this wonderful texture of, like, beautiful design that's curated from a particular point of view. How do you guys solve the curation problem? Is it even something you have to worry about because you're not trying to actively curate and letting the marketplace curate itself? I think this is the problem Amazon would have on the fashion side is that as a fashion buyer, an aspirational buyer especially, I seek a curated experience. So I kind of want to understand what you guys are doing there.

I think in India, the journey is still evolving. A lot of consumers are still maybe at the stage where if they get a good product, they're happy enough. But you're right. I think the next level of E commerce buyers are expecting more and more and are aspirational. And our view of solving the curation problem, merchants in themselves solve the curation problem. Many times over a period of time, you start following a certain merchant. A merchant's not necessarily a brand. Only a merchant's a person who's a seller. He could be or she could be selling seven different brands. And over a period of time, as a Consumer, you start buying from a shop, you start liking the way their assortment, their selection of products.

That's what happens actually on ebay and Etsy in the US you follow like a store that sellers.

So that's one way of curation. The second way of curation is where consumers and influencers know many of the trends so they'll select different. So we have this concept of collections where consumers and influencers can come create a collection of different looks, different products which over a period of time, you know, people can follow those collections, they can share those collections.

Do you have any famous people do that? Designers or like. I'm thinking of someone like Pernia Qureshi, someone like that coming in to like curate a point of view. Or is it just really active users that are doing that?

Right now it's largely active users who are doing that.

I do think there is also a slight nuance. The reason why I'm, I mean Amazon US is still not even though fashion is still pretty big, but it's a different story. And India is also going back to the earlier point of unorganized retail. I think here we look for brands, right? And so that is also this reliance of the brand chooses how they want to distribute. There's also this trend of mono brands growing in the US and they setting up their own stores with Prada, Gucci, you know, the high end retailers are already doing that and the high end.

Retailers are doing that in India too.

True.

But I think because you have fewer brands already to begin with in India and 90% plus is largely unorganized retail, the marketplaces do have that benefit of, you know, making that more accessible versus you know, the consumer landscape and the purchase behavior in the US is different.

And some of these brands would have less than five stores in all of India, which is as imaginable, very small for the population.

The largest fashion brand in India would be maybe $250 million. There are a few that are at that scale, but that's the scale. Even though the market itself is tens of billions of dollars. The reality is that there are big brands account for a very small percentage percentage of overall sales in any category.

One last question on the technical aspects of discovery. What are some of the technical things on the back end that you have to do specialties or competences that you're trying to build up in house? Like is computer vision one search.

Given the nature of our business, it's pretty full stack from search to vision, relevance, personalization. So I think as a marketplace, you know, one of the largest by far team is technology and it ranges from end to end.

Talk about logistics and supply chain, which is honestly mine and Anu's. Probably Anu's one of her favorite topics.

Yeah, I mean I think one of the things I'm fascinated by is how challenging logistics and supply chain are in these markets, both China and India for example, versus I think Amazon in the US didn't really, I mean they obviously did a lot by bringing in fulfillment by Amazon and stuff but when they launched their first party sales, right when they launched with books, it was not that difficult. And I remember Bezos in his interviews has said that he they went to the largest warehouse which had books and when people placed orders online, would drive and take the book from the warehouse, take it to the UPS and get it shipped. Which is very unlike India or China where the delivery and the logistics system is so super fragmented. Thousands of couriers and in fact Amazon itself says that their delivery costs, for example as a percentage of transaction in the US is a lot lower than in India. I've been always fascinated by how different is it and what do players have to do in those markets.

And to add onto it, my personal experience in India is that when we used to mail things when I was a child, things would not end up in the package. I remember sending my cousin in India little mixtapes. I mean this is back when there were cassette tapes and by the time it actually got to her house there'd be an empty envelope. So like to me this notion that you can actually deliver products and have them show up without significant shrinkage is like so mind blowing because when I was growing up there was a ton of corruption in the system that you couldn't deliver things.

I think the India of today is very different from that India.

Thank goodness.

Yes, a lot has changed. But Anu's observation is correct that India does not have the same underlying infrastructure around supply chain and logistics that the US has had for many, many years now. You could see it as a challenge or you could see it as an opportunity. We see it as a great opportunity. So most marketplaces in the world allow the buyer and seller to interact directly and manage fulfillment amongst themselves. Our view was that for the consumer it doesn't matter whether we are a marketplace or a first party inventory led E commerce business. They care about great experience. They care about do you have what I want? Do you have it at a price? I like, will you deliver it on time? If I have a problem, will you solve it in a frictionless manner? That's what A consumer cares. So what we've done is done a tremendous amount of innovation and investment in building long term strategic capabilities around supply chain.

And what does that entail?

A lot of stuff which includes building a lot of infrastructure to pick up products from sellers, bring them to our huge network of fulfillment centers across millions of square feet of space across the country where products sit there, the products are still owned by the sellers and then the product is shipped out when the customer places the order.

So it's not inventory proper, but like a holding warehouse essentially.

Yeah.

So when you're doing this sort of full stack end to end fulfillment, one of the arguments we make about a full stack model in general is that allows you to control the consumer experience. So you can then provide that and you have that control for your brand, for everything. But at a certain point you're practically replacing a lot of things. I mean are you then now replacing like existing mail delivery services in order to it comes on time? Like how do you navigate that landscape?

Great question. It's a combination. Sometimes if something's already very good, then you may need to replace. If something's not already very good, then you may need to build for the first time and that also becomes very important. So it's a little bit of building, building some of the pieces that were missing in India because for the longest time retail was not organized, E commerce was not organized, etc etc and secondly, we feed people many times underestimate how much control technology can give you rather than just physical infrastructure.

Oh, interesting. What do you mean by that?

What that means is just for supply chain. Once you build end to end technology from the time a merchant gets an order, how do they ship it, when do they ship it, who do you give the packet to, how's the tracking detail of the packet from the time it leaves from the merchant reaches the consumer? When you control that entire end to end technology, you have far more data of what's going on in the system. And even though you may not be the person, for example, the sellers are selling the product, but you know exactly how much time each of the merchants is taking to ship a product. As a result, you can tell that hey, if some certain merchants are not shipping the product in a day or in two days, which is what consumers expect, then you need to do something about it. So I think just having your technology span the entire stack can give you a lot of control over consumer experience if you do the right things.

Also, controlling doesn't necessarily mean owning. You can choose to own and build certain parts of the supply chain because there aren't existing high quality service providers, which is the case for some parts of the supply chain in India. But for certain parts of the supply chain we work with existing incumbent players, but mostly the good ones and create an incentive structure that enables them to deliver great service quality.

And I think this also, like the supply chain inefficiencies can be an opportunity as we have seen in other markets like Russia. Right. Our zone has the same problem of the mom and pop retail fragmentation and they in fact used, if I remember right, the mom and pop stores to do the deliveries in certain cases. So sometimes you can find ways to sort of take advantage of those inefficiencies to deliver a better overall service.

Also, I think that it's become a big deterrent for new players because unless you've built those capabilities, why would your service quality be better than someone who.

Someone existing. Right, exactly.

So it's actually become a deterrent for hyper competition in India and yet there.

Is so much competition. So let's talk about that.

That has been something which is very interesting in India and you know, have someone who has followed the E commerce space closely. If you look at the us you know Amazon is both first party and third. You know, it has third party marketplace which is now bigger than the first party sales. They are by far the number one player. You look at China, Alip Baba is the market leader and I've always been curious why is it different? In India today we had maybe close to a thousand competitors, came down to 50, but you still have at least three or four strong competitors in the space today. And I've been curious as to, is the Indian market different? Is it a winner take all market?

I think at least as we've observed E commerce around the world, we've seen that C2C tends to be a winner take all in most markets. Like Even in the US you have one C2C player. EBay. In China you have one C2C player which is Taobao. Whereas B2C, you tend to still have many, many players. I think us is a little unique with Amazon. Yeah, I think there was like a 10 year journey where one company executed really well. Whereas if you look at the Chinese market, there are actually a lot of B2C players. There's not just one. I think the same dynamic we are seeing in India where you have multiple B2C players, each one potentially and hopefully for them catering to a large but specific segment of the market. For us, we built a lot of supply chain capabilities in Tier 2 markets, which enables us to get to places of the country where others don't. So I think there is competition, but it's very important to know what are your focus areas.

I think it's actually really relevant because the broader context there is a huge growing middle class in India and you are sort of tapping into that when you talk about reaching those other audiences. But I'm glad you brought up the point about Cast because I do want to bring this up unlike China or, you know, other places where there's heavy regulation around who can come in. And now obviously there's been some recent rules around foreign direct investment. But putting that aside for a moment, how can people really compete when they're competing with, say, players like Amazon who have very deep pockets and can do a lot with a lot of capital? So how do you navigate that tension?

I think the key is one, one you focus on only on problems that are specific to India as a company. Any big multinational company can focus all their energy, all their resources, however vast those may be, only on one market. Our speed of execution is materially going to be higher and faster than any market player which has a very large global mandate. Secondly, we've seen experience after experience of entrepreneurs winning in the end. Thirdly, I think deep understanding of the.

Indian market more than just local knowledge.

And E commerce anywhere in the world is a very, very local business.

One thing that I think about is that labor is readily available in India and it's quite cheap comparatively to a lot of places. Like for example, you could have a courier service deliver all your products and it would probably be as cost effective as using a mail delivery or something else. Do you guys do anything special with how has the labor market kind of changed how you think about your full stack approach?

I think in India, cost of shipping is one of the lowest in absolute terms. It costs about a dollar to ship a product in India.

Wow, that is low nationwide.

I think that's a structural advantage for the Indian market which will ensure that in perpetuity the economics of E commerce in India will actually be quite good because as people buy more and more high margin stuff and more discretionary items online, the cost of shipping is not going to become higher.

That's a structural advantage for the whole market, but not necessarily in the competition landscape because everyone has those same advantages then.

But at the end of the day, if everyone's unit economics are good, that's in general good for everyone. And your ability to innovate on things like supply chain, on payments, many of which require Very significant local context around infrastructure and technology. We have not seen large global players demonstrate that.

Yeah. And coming to payments, you know, that's. That's an interesting topic because if you look at the U.S. you know, credit card penetration is really high. And we probably had, you know, smartphone evolution came as the second stage. But India is different. You know, more people have mobile phones than they have credit cards. So how is the mobile payment and the wallet landscape sort of evolving? And you recently acquired FreeCharge and would love to understand, you know, how that's sort of playing into the ecosystem.

Our view is that one of the big reasons why e commerce didn't grow as fast as it could have is because of the immense amount of friction that exists in digital payments. That's why cash on delivery was so high, like going up to 70, 80% at one point as a percentage of all transactions, because it was just very, very painful. We have like an additional factor of authentication needed in India for digital transactions.

That's like a national law.

Right, like verified by second factor.

Right.

It's called verified by V. And so what we did with FreeCharge is very similar to what Alibaba did with Alipay or ebay did with PayPal, where Snapdeal became the anchor merchant for free charge, which has a wallet, 30 million verified addresses, 20 million stored cards, which is a lot by Indian standards, and tens of millions of existing customers and make all payments one tap.

So you guys own the payment infrastructure as part of this whole model of delivery?

Yeah, we have eBay, PayPal and Taobao Alipay. It's Snapdeal and free charge.

And that's how you're essentially tackling the issue of people not having because of the cash and delivery model, because culturally, people do not have as many credit.

Cards, but people do have bank accounts. It's just that COD was not so prevalent was because people didn't trust online portals. And now as trust increases and as friction goes down, more and more people are adopting digital payments.

I almost think of it as a second inflection point in e commerce growth. Like in the US when eBay acquired PayPal, it actually helped drive growth online much faster because now you have removed even the last leg of friction in the entire transaction. Because before payments were not seamless in India, it was cash on hand. Here, if you're a local marketplace, you have to meet up and then, you know, make sure that you have bank, you have a cash. It's not a cash economy. So you literally had to go to the ATM to get cash and then exchange the good versus you know, when eBay acquired PayPal automatic. Now like it was just a one time setup. And so that actually helped drive growth, which was counterintuitive to a lot of people because in general if you think of it, you think of oh, they put payments and monetization, is it going to impact my growth in the e commerce marketplace world? It actually helped drive growth and I.

Think we are seeing leading indicators to the same effect in India as well. Because freecharge processes a million transactions a day, which is a lot by Indian standards and with very, very high retention of cohorts and those users over a period of time are becoming transactors.

What's the demographic by the way?

So I would say people start buying online while in their teens in India already, but the core audience is 20 to 35 originally in India it used to be very male centric e commerce buying. But over a period of time we've seen a very, very healthy gender mix.

That's great to hear. So you mentioned one tap on the payment side. Is it in a messaging app? Is it one tap and an app itself. Is it on an actual website? In a mobile browser?

It's actually within the app. If you want to buy something you just press one button.

So it's mainly an app.

Yeah, mainly an app. And actually 75% of all our orders transactions now happen on mobile phones.

On mobile phones. But in the app, is it an in app purchase per se? Because I have have to tell you at least anecdotally that when I, you know, look at a lot of my cousins home screens and phones, they're just not very app. There's not a really strong app ecosystem at least compared to here. They tend to do, you know, they used to use, they tend to use messaging more. They will use apps, but really they're just using a mobile browser most of the time to complete a transaction. They're not actually in an app a lot. What have you guys found about that?

What we've seen is that still a lot of users are browsing. At least 25% of our transactions are coming through mobile mobile sites. Because many of the, not everyone, unlike the US has an iPhone. In India, many of the phones are $100, $150 phones don't have a lot of memory or processing power.

Exactly. And low bandwidth as well, which is not fun.

Yeah. About a quarter of our orders are still coming through 2G networks. Right. So hence we've created a lite version of Snapdeal's mobile site which auto detects the connection and goes to a lighter version if we know that the bandwidth is low.

Who is that company that went all mobile app only and then went back again?

Not us, Myntra.

Right, Yeah. I think it's interesting. Myntra actually decided to go all mobile only and then suddenly went back, kind of backtracked and decided to go back to the website.

You have to give consumers choices. There are still we are getting 25% of our orders on website from our website. Can't tell those consumers that, sorry, we are not open for business. We want to take the complexity upon ourselves of how to manage a mobile site, a mobile app and a website and not tell consumers that hey, we don't have time to manage a website so we are going to force you.

To download our app. It's actually a pretty interesting dynamic in India because unlike western markets for a very large number of users, they are getting access to the Internet for the first time because of mobility.

Exactly. This is what I'm fascinated by. Tell us more about that.

So it's not that everyone already had PCs, Internet access and now they're getting a mobile phone as a second screen. A large chunk of the growth is happening where people have mobile phone as their first access point to Internet.

So they don't have an expectation for this is the full user experience I expect.

What's also interesting is it's easy to get confused and start thinking that hey, that's the only user base that matters because that's not the case. And as NVC and this is what we see in our data over a period of time, people who have only mobile phones, they are okay, they do everything on their mobile phones. But there many users who have both mobile phones as well as PC devices and they have different behaviors on both things. Anything that is far more impulse driven where you can just have a look and make a purchase decision, people are okay buying on the mobile. But there are many things which are very research oriented purchases where hey, if you want to buy, let's say a laptop, you want to go read reviews, compare things, go into specifications and it's almost a very deliberated purchase which people feel far more comfortable doing. It's like our email behavior as well. All of us, I'm sure when we need to send 10 word emails we are okay sending it on the mobile, but when we need to draft like a two page email, we draft it on our PC. And people who have both demonstrate that similar behavior when it comes to commerce buying as well Hence, it's important to keep that in mind while building experiences.

Do your customers have email addresses? Because I think of how I get my Amazon confirmations over email. But in India, I would expect to get more confirmations through text messages.

Large number of users get confirmations through notifications.

Oh, on their phone, through the app notifications. Okay.

Yeah. And actually that's, you know, in the US as well as in China, we talk about how messaging is the next os. You know, Facebook messenger is putting a lot of resources behind, behind that, you know, to sort of be able, you know, getting a lot of businesses on their platform so that consumers can message the businesses directly. Do you think, you know, how do you see that evolving in India?

I think, look, in India, messaging is largely driven by WhatsApp. And given there aren't many APIs available right now, there's not a lot companies can do. But we do believe that within existing, let's say commerce apps or payments app, chat will play a very big role. Messaging will play. So for instance, within our payment app, free charge for P2P transfers, we've integrated chat because we feel people, there's always context around sending someone money. You want to be very precise about the amount, what is it being sent. Be very confident that you're giving the other person the opportunity to confirm that yes, I received the money. So there's always a lot of context and conversation around payments and commerce. So even on our on Snapdeal, buyers and sellers can chat with each other to get clarifications on products or resolve some issues.

And you do that through chat versus over email, which is how it's done in ebay.

I think chat is second nature to consumers in markets like India. So they feel very comfortable doing that action even in the context of commerce or payments.

Right.

I guess it also hits on that broader trend. Conversational commerce.

Exactly.

That's right.

I'm not so sure about. I fill out the phrase though. Yeah. Okay. We don't have time to talk about bots. Okay, so one last question. Regulation. There were some recent rulings around foreign direct investment. And it sounds like you guys might be coming out ahead in that because you're not in an inventory model, you're a pure marketplace model. What's your view of some of the reasons?

Recent news, you know, there was a lot of press around this over here as well, being more open to marketplaces, but not that favorable to first party inventory models. And I was just more curious on whether the regulation was done in part because India is a highly unorganized market and they wanted more SMBs to enable them to have access or whether there were broader issues that were kept in mind as well.

The regulators are probably best positioned to answer why they did what they did. We feel it's a very encouraging development. It's actually good for our market because suddenly building the right and the most efficient marketplace is far more important than how much capital you have to go and buy a bunch of product and stock it in your warehouse.

So it sort of levels that playing.

Field on that significantly levels the playing field for all players.

The question I would say in the US at least, the sentiment was, you know, why is this industry being regulated by government? Because you don't see that happening in the US So I guess if you can say why, how do you feel about the regulation?

E commerce in India is not a regulated space. There are different laws, whether it's a consumer protection law or labor law, different laws we have to adhere to. But when something is regulated, I would say telecom is regulated in India, there is an authority. We don't have anything like that. We have to adhere to different rules. And this guideline, not regulation, that was released last week is actually essentially a clarification of how do existing rules of India apply to e commerce marketplaces. There was no new regulation as such. Just a clarification.

I found it interesting that they were specific about two things. One, the maximum percentage that a seller or a vendor can have on the platform. It was surprising from two fronts. One, that they were would specify that if you build a true marketplace model, you would hope that there's not significant concentration to a seller. And then the second thing was around discounts and refunds and it was sort of saying you cannot give any guidelines to the sellers in a marketplace on pricing. Especially given the context in recent years where there's been heavy discounting due to hyper competition. Would love to get your thoughts on those two aspects Culturally especially.

One of the things that we've noticed in China as well is that, you know, foreign market, I mean every market probably loves discounts, but in foreign markets it's a huge driver for getting people to actually transact.

So I think on the former front, the 25% cap is primarily so that people adhere to the overall guideline of 100% foreign investment allowed in pure marketplace model. I think this is just a check built by the government. I think on the no discounts. It's a bit unclear right now as to what does that mean, what is the process of enforcing it. But for the most part, what we are seeing is as the market matures majority of the discounts or promotions on products are being funded by the sellers themselves and it's the responsibility of marketplaces to offer them a lot of analytical support in a very simplified manner that enables them to price their products appropriately. Hey, if you price your product 20 rupees lower than this this you will see an increase in sales by 7%. That can be very motivating for a seller to say okay I'm happy to adjust that in my margin then that anyways is the future. We are not that concerned by this part of the guideline either and that's.

Probably why interestingly MRP in other markets is minimum retail price while in India it's maximum retail price.

Oh really? That's actually pretty funny. Okay well you guys thank you for joining the A6 and Z podcast where fascinated by how things are playing out with tech internationally. So thanks for coming in and talking to us about this.

Sure thanks for having us.

Thanks for having us.

Thank you.