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1Mby1M Virtual Accelerator Investor Forum: With Rehan Yar Khan of Orios Venture Partners (Part 3)

Posted on Friday, Mar 16th 2018

Sramana Mitra: Explain the Zomato business model that you think is going to scale.

Rehan Yar Khan: Zomato occupies premium mindshare when it comes to food. From that, you can develop several monetization levers. Some of them get switched on. The older ones like Yelp is where you monetize listings. Newer ones involve food orders where they get a commission on every order. Very soon, they will come up with some very interesting models. They will actually start monetizing your bill at the restaurant. That is a big one. Monetizing the bill of the restaurant is the big one.

Sramana Mitra: What they do in the future remains to be seen. Currently with the business that they’ve built, I think their valuation is way off. Do you disagree on that?

Rehan Yar Khan: I don’t disagree on that. Valuation is ahead of where it should be, but we think it’s a clear leader in the space. Given time, it can become a very valuable company.

Sramana Mitra: How do you read Flipkart?

Rehan Yar Khan: It’s a tough space. We don’t think Flipkart is a great brand. Flipkart sells on price. Anything that sells for price is a commodity. It’s not a brand. Amazon is a brand. It stands for range. Amazon never stood for price. They stood for range. You go there and you get anything you want, so you don’t check other stores.

Sramana Mitra: Actually, Amazon did position on price. They still position on price, but not only price. The customer service that Amazon is delivering is unbelievable. You order a $2 merchandise on Amazon and they deliver it for free as part of Amazon Prime. That is a level of service that I don’t even know how it works or how they do that profitably. It’s an unbelievable level of service.

Rehan Yar Khan: Correct me if I’m wrong, but they never had the tagline of the earth’s cheapest store.

Sramana Mitra: No, but they routinely offer the best prices also. When Amazon came into the market, they didn’t have Prime. Prime was a much later invention. In the beginning, they were positioning on price. They weren’t positioning on range either. At that time, it was books and CDs. They entered the market through price and moved up the value chain. Maybe that is what Flipkart is trying to do.

Rehan Yar Khan: That’s what Flipkart hasn’t done. They haven’t been able to move away from price.

Sramana Mitra: Flipkart is also going to compete with Amazon, which is really good at doing what they do.

Rehan Yar Khan: I’m less concerned about the back end. I’m more concerned about the brand positioning. I bought a pair of shoes the other day. I went to Amazon. They were for 47,500 Rupees. For next-day delivery, they either want me to join Prime for 100 Rupees extra or free delivery in two to four days.

I go to Flipkart. The same tune of 65,000 with free next-day delivery. This clearly shows that Flipkart are not consumer guys because if they were consumer guys, they would have charged me for next-day delivery and sold me something to make it free. That’s the difference between a company that understands consumer psychology and a company that is great at the backend and very functional.

Sramana Mitra: Your point is well-taken but I think what Amazon is doing, in the US is, the level of service that they’re providing plays very well to consumer psychology. These days, if I have to buy something online, I first look at Amazon just because of the level of delivery time. They’ve got me.

To deliver that level of service, you’ve got to get your backend right. Otherwise you’re not going to be able to deliver that. That’s not a simple backend. That’s an extraordinarily complex backend.

Rehan Yar Khan: Flipkart is pretty similar, in India at least, in delivery, but they don’t sell that well.

Sramana Mitra: Anything else you’d like to say about Indian startups in general?

Rehan Yar Khan: I’ll talk about an unusual segment. Non-tech is a great opportunity in India. A lot of entrepreneurs miss that. There’s just so much influence coming from global media and global role models. A lot of entrepreneurs in India are missing out on the non-tech opportunity like FMCG.

Sramana Mitra: Thank you for your time.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Rehan Yar Khan of Orios Venture Partners
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