Why we invested in Oyela?

Are you thriftin?

A latent activity has emerged in the social commerce sphere which is also enabling existing micro-influencers to become entrepreneurs by monetizing their reach on social platforms. We have found an extensive level of peer-to-peer e-commerce being executed through Instagram in what is currently a high-friction experience. (lack of transactional ability etc.)

Oyela is building a peer-to-peer (P2P) marketplace to cater to this latent demand. We believe the company is better equipped to understand the needs of the Indian market and consumer that lacks the same purchasing power as their western counterpart, Poshmark. The reason for that is that Oyela understands tier 2,3 India in depth and has understood that aspirational market by spending time with many thrift store influencers. Instead of solving for the obvious which was creating a platform where transaction was easier, they focused on what the micro-level pain points for them were (like ease of use, tech to solve for product appeal and creating content on their behalf, operational barriers of selling) and solved these bottlenecks with a bottoms-up approach. The team aspires to become the leading platform for Gen-Z & Millennials to sell, buy & engage with each other around fashion and apparel.

Currently, Instagram-like platforms use a discovery-first approach which means that users with larger followers reach large audiences regardless of the content they are creating is relevant. The differentiator in Oyela’s approach is a content-first approach, where they help sellers (who can be a common individual)  easily set up shop and a content-based model helps it reach relevant users. Their content-first approach solves for discoverability which Instagram-like platforms do not (they are “reach-first” models and expensive to monetize) which helps them curate the medium for optimal buying and selling.

Why is this market exciting?

There is a change of behaviour observed on social media today, with several influencers building thrift stores that are selling newly sourced/pre-owned products to monetize through their reach and followers. They currently use their Instagram pages to catalogue and model products on themselves and then sell at discounted rates. These products range anywhere from clothing, jewellery to artwork: from their own wardrobe, or what they procure from brands / offline, to monetize on their reach.

The reason thrift stores are successful is that these micro-influencers create relatable content compared to larger fashion brands. Their followers are able to visualise products better, and in turn become customers. In addition, these are more affordable (or have the perception of being more affordable) and unique in nature, which is attractive to the average consumer. It creates the perception of being a “steal”. 

The average cost of a clothing product at a primer fast fashion brand like Zara and H&M is INR 1,900, making it difficult for the masses who aspire to keep up with ever-changing trends. On the contrary, a large majority of these “thrift” products range from INR 500-700 making them more affordable. This is especially attractive to the generation addicted to Instagram because they:

1. Do not want to repeat an outfit and be photographed in it twice (social status); and

2. Constantly strive to be more fashionable, at an affordable and sustainable manner

Growth on Instagram is limited due to the crowded reach-first model wherein people who have more followers are able to also reach more users on Instagram.

Oyela has the first-entrant advantage in the non-metropolitan segment. The P2P thrifting marketplace is at an inflexion point where consumers are quickly realising that fast fashion is unaffordable at the scale it changes, similar to the West three years ago. In India, the age group of 18-24 lacks purchasing power, opening up a market for lower-priced products that can be purchased via peers, and keeping them up to date with ongoing trends.

Poshmark (global leader in thrifting pre-owned products, with a GMV of $1.2 billion) launched on September 15th in India recognizing this exact need. However, while successful in the west, they are still to recognize the difference in buyers and sellers, tiered cities and needs of the average Indian customer. Poshmark has entered the market with an intention to change the behaviour of how an Indian customer looks at the luxury and second-hand product space, coupled with a complex platform that does not cater to the mobile-first Indian audience.

Oyela on the other hand, in serving the needs of non-metropolitan customers has built an extremely simplistic, user-friendly interface.

The platform recognizes that the seller is looking for ease in

1. cataloguing

2. discovery

3. Fulfilment.

On the other hand, the buyer is looking for;

1. cheaper alternatives to existing options

2. relevant options for themselves in terms of fashionability.

On the buyer side:

1. Lack of platforms for affordable trendy apparel
   India has a large tier 2,3,4 aspirational market that doesn't have access to big brands due to a lack of purchasing power. Through a P2P thrifting platform, they can come and buy such products at a price they can afford.

2. Where can they transact?
   There is a lack of organised sector and platform for a reselling/thrift store in India. Most of such businesses propped up during the pandemic due to a lack of
   a) ability to physically go and shop
   b) lack of DTC brands targeting the tier 2,3 customer with limited purchasing power
   c) since sizing is a large issue in online shopping, pre-owned products became an affordable bet since their prices are so low.

On the seller side:

1. No discovery mechanism
   There are over 1.5 million "homepreneurs" and DTC brands in India. 
   On platforms like Instagram, there is no way for them to convert their audience to a customer. In addition, Instagram’s shop feature requires them to build a website for transactions for which they do not have the capability. Many sellers utilise Instagram as a marketing tool but have struggled to manage this efficiently due to 1. lack of a platform that can manage order to fulfilment which remains largely a manual task and 2. exorbitant marketing costs ​​(CPC costs are between INR 36.69 - 146.75).
   The CAC is exorbitant in comparison to the cost of products and algorithms on platforms like Instagram limiting their ability to reach audiences that are relevant for them.

2. Shopify like applications are still too sophisticated and time-consuming
   To set up a shop on Shopify requires technical knowledge and time that these sellers do not see value in. In addition, Shopify becomes an expensive platform with a lack of discoverability without the right marketing know-how.

Product

Interface

Oyela has created a very simple interface for these non-experienced sellers to upload their existing wardrobe as well as what they procure, to sell and become independent “micro fashion entrepreneurs”. By adding a simplistic drop-down based upload mechanism, listing on Oyela is a 2-minute job. The sellers also get price suggestions based on real-time platform data. 

The platform also has the ability to scrape the internet for sizing per brand built into the product, making the possibility of going wrong with a purchase based on size minimal. 

Platform

The platform enables ease in buying and selling, the ability to manage returns (a very high % in the apparel space) while making it operationally easier through Oyela’s technology optimization throughout the order fulfilment process.

• Example: The logistics process is tech-enabled from the backend, where as soon as the order is placed by a buyer, 2 different ways bills are generated. One to dispatch the packaging to the seller and another that is pasted on the packaging sent to the seller to enable seamless logistics from the seller to the buyers. 

Live Engagement Tools
Apart from like and repost, the platform has Virtual Selling Events (Drops) & Group feature that lets sellers create their own sub-groups & engage with the community

Data-Driven Guidance
Pricing Guidance along with insights about how your profile is functioning, which product has the highest glance views, who are your potential buyers, what should you source in future. 

Order Management Tools
A very simple and fun order management tool to manage orders, disputes, rating & shipping from a mobile phone. 

Credit lines & instant payout to sellers
Oyela’s sellers are individuals (as opposed to other e-commerce companies where sellers are vendors/suppliers). Hence unlike other e-comm players, Oyela cannot keep the payouts on hold till the buyer return window is over (as the sellers would need the money to source more). Through Oyela’s proprietary risk scoring algorithm, the platform is able to provide instantaneous payouts to all its sellers. 

Image Processing tech tool
Oyela has quick-adds and easy image processing tools for sellers to make their products look more attractive to buyers with the least amount of effort.

What’s to come?

We are noticing the market trends in the thrift product segment, and we think this space is going to see tremendous growth in the upcoming years. Oyela’s bottom line is to ensure that Gen Z is not limited to platforms that do not enable them to transact faster and better. With this granular knowledge of the pain points, it’s set up to be successful in attaining the leading position in this space.