An evening with Mr. Rajesh Dembla

On Friday, August 5, we had an insightful session by Mr. Rajesh Dembla, a serial entrepreneur and investor in many start-ups. Mr. Rajesh is trying to create a new paradigm in ecommerce through gamification.

Mr. Rajesh’s portfolio of companies include start-ups in a range of businesses: e-commerce, quick commerce, hyper local logistics, fintech, foodtech, gaming, etc. He has the rare distinction of having played a crucial role in three companies going public in the last 9 years.

Mr. Rajesh is a recipient of several business awards in India, Singapore and London. He has been felicitated by the Economic Times, Times of India, WRCC international, Brand Vision, etc.

Mr. Rajesh is a firm believer in the Indian startup ecosystem and is always keen to engage with youngsters to help them achieve their dreams.

Mr. Rajesh loves to live the good life and is an ardent travel and driving enthusiast. He has driven various cars in 4 continents on all kinds of terrains like frozen rivers, glaciers, volcanic mountains, and flowing rivers.

Mr. Rajesh comes from extremely humble beginnings and is a self-made man.

The ecommerce landscape in India

The ecommerce market in India is big. Consider the following data points:

• There are 887 million smart phone users.
• There are 813 million internet users.
• There are 289 million digital buyers.
• There are 4.56 million registered online sellers.
• There are 70 million daily real time transactions.
• There are 120 million active UPI users.
• 80% of the users in the digital ecosystem (people with smart phone and internet connection) are either buying things or playing games.

Challenges

The customer acquisition costs are very high in relation to the lifetime value.
Customer loyalty is defined by price. Customers have no hesitation to switch to another supplier if they get a lower price.

A few large platforms are enjoying a monopoly status. It is difficult to list and sell on these platforms because of their stringent policies. Once we consider the cost of being discovered, returns and platform fees/commissions, it is not clear how many suppliers are making money. No wonder, many sellers are dropping out of large platforms.

Some suppliers are trying to sell directly through Google, Facebook and Instagram. But in this mode of selling, there are problems related to privacy and targeting. The cost of customer acquisition is also high. For small suppliers, managing technology is difficult, indeed a nightmare.

To build traffic, many suppliers start by giving customers things free. Later, converting free customers to paid customers is almost impossible.

During the Q&A, Mr Rajesh explained that the biggest challenge in ecommerce today (besides changing regulations) is achieving profitability. Companies are finding it difficult to strike a balance between keeping customers happy and making money. Customers are being mollycoddled and businesses are burning money, in the hope that their lifetime value will be high. But the reality is falling far short of expectations. For example, Amazon has spent heavily to build customer trust. Yet, if customers find the same product at a lower price elsewhere, they will have no hesitation to switch!

What customers are looking for

Convenience is the need of the hour. Customers want to locate what they want and place orders right away and expect immediate and free delivery at the lowest price. Even though they want a lot, they do not want to pay for value!

The meaning of omnichannel has changed with the growing popularity of social commerce. Thus, many customers want to buy on Instagram rather than go to an online store.

Customers want a frictionless experience. If there are many steps (like many forms to be filled) or it takes more than 2-3 minutes to complete the transaction, they are put off.

Customers are also looking for flexible payment options like buy now pay later (including EMIs).

Emergence of D2C brands

Thanks to Covid, many D2C brands have emerged. These brands do away with middlemen.

They offer a much wider range of choices. Mr Rajesh gave the example of cosmetics. Unlike in the past when there were only a few MNC brands, now we have many Indian brands which have taken the market by storm. Some of them are profitable and a few have become unicorns.

These brands provide experience before buying. Thus, they allow customers to try out the product and return it if they are not satisfied.

Using personalization through AI/ML, these brands make targeted recommendations that are more likely to be accepted by customers.

The key to success is accessibility. People should be able to find the product on their smartphones.

Changes in regulations

The Indian government (with effect from 2023) has allowed non-GST suppliers to be listed on marketplaces and sell through their website. This will be a game changer. Some 50 million MSMEs with a turnover of upto Rs 40 lakhs can now list on platforms like Meesho. These companies may offer valuable products at low prices. Some of them may operate on their own rather than sell through large platforms. Thanks to technology (and in some cases their high profit margins), they may even be able to offer EMIs directly and underwrite loans instead of depending on NBFCs.

100% FDI has been allowed for B2B ecommerce and marketplaces. So, more money will come into the ecosystem.

A major opportunity lies in digitizing rural sellers and targeting rural India with aspirational products.

Future outlook

From images and specs, suppliers will embrace virtual/video first. Sellers will leverage virtual reality or at least video to showcase their offerings and enable customers to touch, feel and smell the product to the extent possible.

Goals will be converted into rewards and necessity into leisure. On Zomato, if people are not in a mood to buy food, they are encouraged to play the Zomato Premier League. People who win will get discounts on the next purchase. Thus, customers are proactively enticed with rewards. Swiggy uses Spin the wheel/scratch cards to serve as a cognitive hook for increased revenues.

Increasingly, the aim will be to drive customers through intrinsic motivation rather than any external drivers. In other words, customers will feel good if they shop. This is where gamification comes in. Gamification can make customers feel good even if they do not get monetizable rewards. Even badges, which do not have any monetary value, can promote customer engagement. There is evidence to indicate that with gamification, ecommerce revenues can increase by 50%.

During the Q&A, Mr Rajesh illustrated with an example how gamification can improve customer loyalty. Consider Swiggy which promises at the time of taking the order, to deliver food in 35 minutes. If that does not happen, customers will be distraught and unhappy. But at the end of the order, customers spin a wheel and get a 20% discount on the next order. So even if the customers are unhappy today, they will still stick to Swiggy tomorrow.

Gamification can improve customer connect and affinity with the brand even in the case of “hygiene” products. Gamification can be used to educate consumers about the benefits of a brand and convey how it is different from or better than other brands. Gamification through suitable design can also be used to nudge customers into responsible ways of behaving.

However, Mr Rajesh clarified that the basics cannot be compromised. Quality and customer responsiveness must be in place. Gamification can only provide an engaging, fun filled and interesting customer experience. It cannot be a substitute for quality.

Bidzapp

Bidzapp believes it is possible to democratize the ecommerce space. Bidzapp uses auction led ecommerce for both B2C and B2B environments. The whole idea is to gamify ecommerce. Brand new products (not used products) are put for auction with starting prices at a steep discount (upto 50%) to the actual price. Even two wheelers from Honda and TVS and laptops from Apple and phones from One plus are auctioned. These auctions are short, typically 3-5 minutes long, based on lessons learnt from eBay. The customer not only gets the product at a lower price but also feels the thrill of winning an auction. Winners get the product while participants get rewards.

This kind of a gamified approach results in superior customer engagement, higher customer interest and awareness and substantial lead generation. A monotonous shipping experience is converted into an exciting one. In a single auction, upto 3000 users participate with no marketing expenses. For each product, about 50,000-100,o00 potential customers can be attracted. Since customers must be fully engaged to win the auction, there is undivided attention which enables a higher level of brand awareness to be created. In case of B2C clients, Bidzapp leverages its own user base while in case of B2B, it works on the customer base of the client. Bidzapp has worked with a large electronics goods retail chain in Karnataka that could not compete with online suppliers. Bidzapp has held 1000+ actions so far for this customer. In the case of a well-known brand used by 3.7 million households, the apps were used 6 times in a day. But sales were not increasing. By using gamification, Bidzapp has helped the client improve customer engagement.

There are no listing fees or sales commissions on Bidzapp. The margins are better. The discovery can take place without clutter as the auction is held purely for the product. CAC (customer acquisition cost) and CPL (cost per lead) are the lowest in the industry.

Bidzapp can facilitate omnichannel expansion. In the case of B2B, Bidzapp creates a new channel with rich customer engagement, low tech/ high touch approach, and improved customer loyalty.

Besides auctions, there are other ways of gamification. Loyalty points is a good example. Korean companies have embraced various forms of gamification.

The Metaverse is drawing increased attention from reputed companies like Nike, Coke, Gucci and Adidas. Smaller brands may also join the Metaverse by 2025. While there is definitely a lot of interest in the Metaverse on the part of large brands, Mr Rajesh is of the personal opinion that these are still early days.

Concluding remarks

A few years from now, ecommerce will be very different from what it is today. We must keep pace with changing consumer needs, demand patterns and technology. We must keep adapting and give customers exactly what they want. Gamification works. It has worked in the past and will work in the future.

Q&A

On his journey

The most important lesson from Mr Rajesh is that we must adapt daily to the changes in the environment. If we don’t do this, we will be in trouble. If we do not disrupt ourselves, someone else will disrupt us. For example, Bidzapp had to change its approach to gamification when it found that a few people (with better phones) were winning most of the auctions. With the old approach, it was proving to be difficult to go from 100,000 to 150,000 users. With the new approach, where no one had an unfair advantage, a million customers have been onboarded.

On gauging the prospects for a start up

Mr Rajesh goes by his gut. He learnt about startup investing from his mentor Mr Julian Robertson, the founder of Tiger Fund. We must invest in the team and not the idea. Creating a new habit is difficult. Any business that leverages an existing habit will find a bigger market. It is better to target an existing market with a different/superior value proposition. Data will always not be available. So we have to go by the gut. Mr Rajesh gave the example of a real estate venture (where people can invest even a few hundred rupees to get a piece of real estate), Altdrx.com. His gut instinct was that things would work out. His investment has already multiplied by 7 times.

In spite of all the due diligence we do, there will be failures. There is no sure shot formula. Every investor has failures, but people usually do not talk about them.

On Gamification vs Gaming vs Gaming theory

Gamification is used to improve customer engagement. It is to facilitate acquisition, retention, and engagement of customers. Customers may get some reward, monetary or otherwise. But they do not pay any money upfront. There are no regulatory authorities for gamification.

Gaming is different from gamification. Games come in different forms: Real money gaming, hyper local gaming, etc. Some games like rummy and poker involve money. Such games are often regulated though it varies from state to state. Hyper local (casual) games are not regulated.

Gamification is also different from game theory. Game theory is used to model interactions between players for better business strategy. The Prisoner's Dilemma is one such model.

It is because of the involvement of money that games are viewed negatively. Many feel that such games should not be allowed. Mr Rajesh’s own opinion is that people make bets during horse races and even gamble at home during Deepavali. So, we need not dismiss gaming as something negative. It can be left to individuals to decide what is good for them.

On simplifying gamification

While games may look simple for customers, building games can be a complex activity for sellers. Small sellers cannot afford the games offered by companies like Zynga. There is definitely a need to simplify the way games are developed, for sellers and for online platforms.

On leadership support for gamification

For companies serious about gamification, leadership support is important. Gamification should be treated as a core activity and not as a peripheral activity. It should be treated as a separate department with dedicated resources. Leaders must keep investing in gamification and not treat it as an expense. Budgets should be protected for long periods of time. Leaders must have realistic ROI expectations and hope to get results only over time.

On gamification in education

Overall, education needs to be gamified. Gamification can be used to improve the process of learning and make it interesting and engaging. Gamification can also be used to attract new students. It has great potential to improve awareness and intent. It is possible to generate hundreds of thousands of leads and build a captive engaged audience (20-25 minutes of undivided attention per month).