PhonePe, on April 4, marked its foray into e-commerce with the launch of a new mobile app called Pincode that works on the Open Network for Digital Commerce (ONDC).
Pincode will essentially be a “buyer app” on ONDC, meaning the app will allow consumers to discover and buy products from all the sellers that have listed their products on ONDC. Sellers (grocery stores, electronic shops, pharmacies, etc.) can list products on ONDC through “seller apps” like GoFrugal, Digiit, etc.
STAY ON TOP OF TECH POLICY: Our daily newsletter with top stories from MediaNama and around the world, delivered to your inbox before 9 AM. Click here to sign up today!
Why PhonePe should’ve integrated ONDC into its main app: While PhonePe was long expected to join ONDC, it was assumed that the existing PhonePe app will include ONDC as a category or tab, similar to how Paytm has integrated ONDC into its main app. PhonePe is the most popular UPI payments app and has close to 400 million users, which is one in four Indians. By including ONDC within the PhonePe app, the company would’ve been able to tap into this massive user base more easily. The company would have had lower customer acquisition costs. When compared to other ONDC buyer apps, it would have not only benefitted Phonepe but also the ONDC network, which is currently lagging behind in consumer demand. Pincode, on the other hand, was on zero devices and with zero users at the time of launch (yesterday).
- Does Phonepe not have confidence in ONDC: The Indian government has repeatedly pitched ONDC as the UPI for e-commerce, but ONDC is currently far from it. UPI is successful for various reasons, but demonetization is one of the biggest ones. ONDC has not had its demonetization moment. In our status check of the ONDC, we found it severely lagging behind in consumer and order numbers. Is Phonepe launching a separate app because it doesn’t have the confidence in ONDC and would rather not dilute its main app, which is doing well?
Phonepe’s rationale for launching a separate app: If you wonder why Phonepe did not leverage the advantage outlined above, you’re not alone. During the launch event, multiple people asked Phonepe why it launched a separate app instead. Here’s what the company had to say:
- Phonepe focuses on making users spend the least amount of time, while e-commerce works the opposite: “A separate app is required the moment the product expectation is completely different. If you look at Phonepe, we pride ourselves on the shortest amount of time spent to make a payment. That’s what we strive for. We are maniacal about making sure you don’t spend time on the app […] If you think about shopping, it is experiential. I don’t buy food or clothes or even medicines without spending a decent amount of time on the app,” Phonepe CEO Sameer Nigam explained.
- It could have led to a deluge of unserviceable orders on day 1: Another “challenge is a cold start problem. We’ve seen this with categories like insurance in the past. With Phonepe’s volumes, if we had opened up e-commerce on that app, there will be such a deluge of orders, and I guarantee you 90% of them will not get delivered on the first day just because of sheer payment volumes. I think that’s the wrong way to set the expectation,” Nigam said.
- Different information architectures: “Apps anyway have very limited real estate. We’re talking about building an Infinity Store. Phonepe with the get-in get-out use case that is payment related will not be able to do justice to the information architecture needed for a multi-category shopping app,” Phonepe CTO Rahul Chari pointed out.
- Phonepe will leverage its large customer base in other ways: “How we can drive the synergy for distribution and more traffic and trials using Phonepe, I think we have a strategy around that and we’ll make sure that as the ecosystem matures, we’ll be able to drive more and more traffic in a very cost efficient manner to Pincode,” Rahul Chari said. “The biggest marketing expense is customer acquisition, which is what you’re calling out in terms of a separate download. What we have or what we can leverage is our customer base. If you have noticed, if you use the Phonepe app, you’ll realize we have a section called Stores where we help our customers discover stores in the vicinity. The concept is already there. Commerce didn’t exist at that particular moment. We realized that inside that section, if we actually introduce commerce there, it will not really cut the ice in terms of experience. On one side, we can leverage that base,” Vivek Lohcheb, Vice President of Offline Business at Phonepe, elaborated.
- A category or tab won’t do justice to ONDC: “Because ONDC is such a vast ocean of promises for the consumer, we believe a category or a tab will not solve the problem. We need a new shopping app. We need a shopping app that puts the store at the heart of the interaction,” Nigam remarked. “ONDC as a network and commerce as an offering is very new and we didn’t want to mix that with anything else we do on Phonepe,” Nigam added.
- Pincode discoverability on app stores is not an issue: “Even if you search for Phonepe on the Google Play Store, because it’s a Phone Pay developer code, you will see the Pincode app now. Part of the whole discovery thing gets solved just because of the number of people searching for it. This is why we had to take it off at 10 AM. We put it live and people suddenly started downloading and discovering organically. We don’t expect driving adoption or trial will be a problem,” Nigam remarked.
- Integrating ONDC within the Phonepe app is not going to change anything or solve any problems: “I think getting everyone to just come on Phonepe and start seeing shopping on the homepage, in my mind, doesn’t solve anything. I think one of our peers (Paytm) has already gone live with ONDC several months back. I don’t think it’s changed the market. You have to play the product on merit. You can’t hack growth,” Nigam opined.
- Convincing people to shop on Phonepe is harder to pull off: “Phonepe was always designed to be a utilitarian, horizontal population level app. […] It’s basic payments. I think shopping in almost every category, there’s a sense of aspiration involved. Serendipitous discovery of products and exciting sales and events. We’ll have to play that game if you are playing the e-commerce game. If I can’t convince my wife to shop on Phonepe, I don’t think I have started that game. That’s true with a lot of us. I think we had to do our own home research and ask folks, Will you give this a chance? Pincode, everyone says yes. Phonepe shopping, I think would be a very hard one to pull off,” Nigam remarked.
Key features of the Pincode app:
- Hyperlocal focus: Pincode will focus on hyperlocal commerce, which is the delivery of products from nearby local stores. “The Pincode app will promote local shopkeepers and sellers and hopes to digitally connect each city’s consumers with all their neighborhood stores that they usually buy from offline, with the convenience of online ordering, great discounts, and instant refunds and returns,” Phone pe stated.
- Categories: Initially, the app will list products across grocery, food, pharma, electronics, fashion, and home decor. From our testing of the app, a very limited number of sellers are currently available for each of the categories.
- Store-level search, not product: The search bar in the app is for store search and not product search. Product-level search is available within stores. “We want everybody to think about the stores around them, search for the store and then start that interaction with the store,” PhonePe CTO Rahul Chari remarked at the launch.
- Multiple carts: Users will be able to add products to multiple carts and checkout independently rather than having a consolidated cart. “You create a cart with one store, then you realize that I’m also shopping for something else. You create multiple carts, you save it and keep it,” Chari explained.
Live in Bangalore now, max of 10 cities this year: Pincode is launching first in Bangalore and is available for download from the Google Play Store and Apple App Store. “We’re going to first take the transaction volumes to 10,000 a day before we open the next city,” Phonepe CEO Sameer Nigam said. “We will not cross more than 10 cities in the first year, just because, again, everyone’s got to catch up at the same time. You have to digitize the stores, get the logistics capacity in, etc,” Nigam added.
1 lakh daily order target: “We’re targeting to get to 1,00,000 daily orders on Pincode by December. […] I think that would be a very good start for the ONDC network and Pincode. […] We have no idea whether it will be five cities doing 20,000 orders each, or Bangalore takes us there, or it will be 10 cities,” Sameer Nigam explained.
This post is released under a CC-BY-SA 4.0 license. Please feel free to republish on your site, with attribution and a link. Adaptation and rewriting, though allowed, should be true to the original.
Also Read
