Small Retailers as a Market for Tech Startups

Last week, ET published an article on how small and medium retailers wanting to take their business online are turning to technology startups for help. These typically charge Rs 1,000 to Rs 4,000 a month for technology services ranging from building websites to linking them with payment gateways and logistics providers. When compared to the potential earnings from doing big projects for large customers, these amounts are negligible. Still some of these companies are confident of being profitable soon. This got me thinking on how it makes business sense for these startups to target retailers as a market for cloud-based services. To be profitable with this model they would need huge volumes, meaning a large number of retailers. But are Indian retailers ready to take the Web plunge?

Let's look at it from a retailer's point of view. Here shall assume that the retailer in question is not just a grocer or a hardware store owner. He/she has one or more specialized products or services and seeks to target a particular segment of customers. Consider an exercise equipment shop, for example. For such an entrepreneur, normal Above The Line advertising alone will not bring in customers. Nor will word of mouth publicity get them the large number of leads they require, given their low conversion ratio of leads to sales. Since theirs is a lifestyle product, they would need to reach out to their target audience through micro level focused messaging. An online presence, including social media outreach, would be an essential part of their strategy. Here's where a tech startup can help.

Social media advertising and reviews on popular forums can attract the customer's attention to either the physical shop (where it is arguably easier to close a sale) or at least a website. If the website is designed and built well, and has payment gateway integration, it is possible to push the customer into buying the product online itself, while a tie-up with a logistics provider ensures that the product is delivered to the customer's house within an acceptable timeline. If the customer can be coaxed into writing a Web review of the product, that in turn would bring in more leads for the entrepreneur. On seeing that all these services are available for a moderate monthly payment, other retailers would jump on the bandwagon. So it's a  win-win situation for the entrepreneurs as well as the tech startup.