Competition and practical problems are knocking each and every sector of e-commerce. Hard times have begun to bite neighborhood commerce, more commonly known as n-commerce, as is evident from the fact that of late, prominent and heavily funded players have begun shutting shop in various cities, while others have suspended operations.
Although one can see the tough times approaching, n-commerce is one sector that has got enough target audience and it is certainly not going to slow down or stop growing, provided the players have the right strategies and business model figured out. It is precisely for this reason, that n-commerce players like Lazylad have not just been able to survive, but grow at an astonishing pace while larger and far more established players are taking a hit.
Let’s decode Lazylad’s key to survival – Why and how it will be able to sustain in the market in the long run amidst high competition?
While n-commerce players like Big Basket are highly capital-intensive models, since they have their own infrastructure and manage their own inventory and logistics, others like Grofers, ZopNow only handle the delivery part of it. LazyLad, however, has a completely asset-light model in place, which minimizes their risk. It neither has its own infrastructure, nor does it handle the logistics, thereby using the existing infrastructure and resources of brick-and-mortar stores while simultaneously boosting their business. This gives Lazylad a huge edge in the long run in many ways, viz.:
- Less Investment – Infrastructure, in any business, is the most capital-intensive investment. A player can consume huge investment and grow very slowly if most of its fund is utilized for its infrastructure. For instance, Grofers In April 2015, despite a huge investment of Rs. 288 crore, was doing only 500 orders a day, LocalBanya, on the other hand, had received Rs. 126 crore in funding and was doing 1000 orders a day, while PepperTap was doing 400-500 orders a day and was with 75 crore worth of funding. However, LazyLad is already doing 1000 orders a day and it has raised only 3.7 crore so far from GHV Accelerator and three HNI’s – M & Y Partners,Tamarino Holdings and Kiyohiro Sugashita .This clearly shows a capital-intensive business model will prove to be a liability in the long run. An asset-light model is what will ensure long-term success.
- Easier to scale up – Lazylad has also been able to scale up very fast due to its asset light model as it lowers the operational cost significantly. So while many are n-commerce players are shutting down their operations, LazyLad has started operations in two smaller cities – Panchkula and Mohali, taking their presence to a total of 5 cities now. From 100 orders a day, the company is now handling more than 1,000 orders a day. Currently, 3,000 retailers are registered with LazyLad and the registration is growing at an astonishing rate of 140%. Furthermore, over 2 lakh items have been purchased through their app, over 12 mn SKUs searched and 120 mn data points viewed on the platform.
The most interesting aspect of the app has been that vendors of perishable items like bakery products, florists and, fruit and vegetable shops are enjoying better patronage since they signed up with LazyLad. Mr. Rajesh of Sajan Cake House knows the pain of having to throw away unsold products all too well. In the last two years, since the influx of big name e-commerce brands, people like him have felt the pinch rather strongly. While his neighborhood customers continued to buy from him, he was not making any new connections. He has been a LazyLad vendor for about two and half months and he is happy that new orders have started coming in.
- Focus on providing the best customer experience to ensure customer retention – Customer is the ultimate king, be it offline retail, online retail or n-commerce. If you are not focusing on customers, you cannot go far. LazyLad has kept its focus on its customer’s right from the beginning and maintained it continuously while increasing their bar gradually. While asset heavy players have to handle multiple issues like warehouses, logistics, human resources etc., LazyLad has very few things to take care of other than ensuring customer delight. As a result, it has been able to provide unmatchable user experience to customers by constantly upgrading its technology and building a sizeable number of network partners to provide them more options. This has been vital for them in retaining customers too. After all, customer acquisition alone is no good for any business if they are unable to retain them.
This is also one of the points raised by one of the biggest vendors enlisted with them, Mr. Balaji of Balaji Departmental. He says it was because of LazyLad that he was brought into the online world. While his customer acquisition has increased 100% since he teamed up with LazyLad, he has hired more hands to manage and deliver the orders he gets. His customer retention plans are paying off. His business is doing even better as they is plenty of goodwill with every sale leading to increased patronage and word-of-mouth publicity.
- Better profit margins– To create value in the long run, you have to focus on your profit margin, and being asset-light, LazyLad has been able to do so. After all, success lies not in achieving a certain number of orders. Ultimately, it all boils down to the profits you are able to generate and maintain in the long run. By being an asset-light model, Lazylad has been able to achieve really good unit economics, which seals its fate as a long-term player. The kind of numbers that the company has achieved in a small time with a relatively small investment, others have been able to reach only with huge investments.
Lazylad has completed more than 70000 transactions so far and the number of app installs is more than 63000. Take Mr. Yogesh of Kirti Departmental Store, Gurgaon for instance. At 20, he is one of the youngest vendors to enlist with LazyLad and has taken off with a line of business his father is already into. He has opened two other stores since his association with LazyLad and claims his orders have doubled. The app is definitely opening up venues for these vendors.
LazyLad’s orders and profits are directly proportional to those of their vendors. As Mr. Anil Kapoor of Vidya Store puts it, ‘an increase of 40-50 orders per day is a big deal. If the numbers keep increasing, it will be great for both parties.’ Meanwhile he is thrilled about the new momentum his business has gained because of the app users.
The company is looking to expand to more cities and this is only possible due to the kind of business model it follows. Also, it is important note here that ideally, any startup must retain some core activities that are limited to the co-founders only. The Co-founders of LazyLad are on top of their game here – esp in the tech arena.
We think that by keeping lower or negligible operational costs, better cash flows and less risk as compared to their asset-heavy counterparts, Lazylad should be able to continuously grow and succeed in the long term.