Helping India’s e-commerce leapfrog into the future

In this episode of The Committed Innovator, McKinsey innovation leader Erik Roth speaks with Shiprocket cofounder and CEO Saahil Goel about how he built his e-commerce logistics company into a highly successful platform that is helping launch new entrepreneurs all over India. This is an edited transcript of their discussion. You can listen to the full episode on your preferred podcast platform.

Erik Roth, McKinsey: Welcome back to another episode of The Committed Innovator. Today we are fortunate to welcome Saahil Goel, cofounder and CEO of Shiprocket. Shiprocket is a data-driven logistics aggregation platform connecting online retailers with logistics providers for end-to-end supply solutions so that companies in India can do direct-to-consumer e-commerce all over the country. Saahil, welcome.

Saahil Goel, Shiprocket: Hello, Erik. Glad to be here.

Erik Roth: Let’s roll the clock back and talk about how you came to found Shiprocket. What was the insight you started with? And where did the idea come from?

Saahil Goel: I started developing websites in high school, so this love of the internet started early. Through my years of work—and I grew up in a small-business family—I saw that India lacked the tools SMEs [small and medium-size enterprises] could use to digitize their businesses and build a moat against some of the larger guys.

Having spent time in the US, I saw what Amazon and Shopify were up to, and that was the first eureka moment. I thought that India, with over 50 million small businesses, could benefit from using a platform-like software.

Erik Roth: Coming off that initial observation, what got you to the vision of creating this massive network of interactions between consumers and suppliers of products?

Saahil Goel: India lacked the physical and the digital infrastructure that the Shopify and Amazon types of platforms easily plugged into. In many ways, India has leapfrogged a bunch of innovations, such as skipping the landline and going entirely to mobile phones. We did the same when it came to e-commerce, where we probably have a higher share of organized online commerce than we do offline. And the company was part of this change.

The vision of a connected ecosystem came later. Initially, the idea was to try to build one of these digital components. We figured out that in a country like India, where cash on delivery was and still is the prevalent mode of payment, shipping is broken. Multiple carriers behave differently at different times. So we focused on shipping and payments.

Erik Roth: When you started out, did you take capital or try to self-fund?

Saahil Goel: A customer gave us the first check, which got us the office. Then [Shiprocket chief operating officer] Gautam Kapoor and I started the company, and we did services work for a year to pay for the two engineers who built the platform. Eighteen months into the business, we were able to attract an angel investor, who put $100,000 into the company.

Erik Roth: Tell us a bit about what Shiprocket is today and the breadth and depth of what you’ve accomplished so far.

Saahil Goel: Shiprocket is a software platform that is basically making trust possible between a long tail of independent retailers in India and hundreds of millions of consumers. We do this by creating a platform that is open but at the same time well managed—smooth and frictionless—empowering hundreds of thousands of businesses on our platform to seamlessly sell to their customers. We power about 5 percent of India’s e-commerce, and approximately $4 billion in commerce goes through us. We are one of the largest platforms enabling direct commerce in the country.

Erik Roth: You’re effectively a marketplace, and a marketplace requires basic economic principles of supply and demand. Which one did you start with?

Saahil Goel: We call ourselves an open, or componentized, marketplace because we don’t behave so typically. In online retail, horizontal marketplaces become the face to the consumer, and you’re a supplier that sells your goods through them.

We, on the other hand, help you market your business—power your shipping, your payments, your returns. Essentially, we’re a seller-tools company, but we help sellers create an alternate way they can sell outside of marketplaces as well. We’re essentially obsessed with our customer, but our customer is the merchant.

Erik Roth: As merchants interact with your platform, is Shiprocket empowering and powering them, versus Shiprocket being front and center as the platform for an aggregation of consumers?

Saahil Goel: Yes. Think of these merchants as small businesses that otherwise would not be trusted by consumers. We are the intermediary that represents the merchant, helping them with marketing, a checkout system, shipping, and providing support.

The consumer sees us across hundreds of thousands of merchants, so there is inherent trust. It’s like buying from a brand or under someone’s supervision, so the long tail of merchants can participate in commerce much like the big boys do.

Erik Roth: How do you verify a merchant to come onto your platform?

Saahil Goel: We use a component of India’s public digital infrastructure. We have a unique identity platform, the largest in the world, that allows us to digitally verify a user in a few seconds.

Also, as merchants enter our platform, they have to load money into a wallet to show intent to do business; that’s the ultimate verification. As merchants exhibit data and behaviors on the platform, we build a history of them.

Erik Roth: Can users rank their merchants and understand how well they perform, just like in other platforms around the world?

Saahil Goel: Absolutely. We take over the consumer engagement and communication experience, albeit under the merchant’s brand. We collect the data on how quickly they ship items, conversion rates, [customer satisfaction score], return rates, what consumers are saying, reviews, and so on.

That allows us to build a view on how the merchant behaves. Then we go back to them with insights on consumer expectations, competition in their category, and how they can move up the chain and do better. In a way, we become their partner for growth.

Erik Roth: As a CEO, how do you build a strong culture of people who have the perseverance and resilience to continue when things get tough?

Saahil Goel: Being quite mission driven in terms of enabling the SME market built a strong culture in the company. We help organizations launch new businesses, grow their businesses, enable them to scale, and so on. That creative mission continues to be our driving force and, in many ways, our moat. We expect everyone coming through our doors to carry that mission in their hearts.

We are firm believers in making as many mini-CEOs as possible in the company by pushing the empowerment of our merchants but also the empowerment of our employees, which means we value speed and agility. Many times, we’ll optimize that over extremely high quality, because we want to be iterative. India and the internet in general are rapidly evolving. We would rather roll things out sooner, get feedback from merchants, cobuild, and so on. That allows us to derisk some of what we do.

Other than that, making sure we continue going down a very fast lane while maintaining a calculated risk is something we try not to manage centrally. We try to let people figure out if their decision is going to burn down the company, versus costing a few dollars per order. We let them run with things without trying to hold them back and creating unnecessary processes.

Erik Roth: How do you get yourself and then your organization comfortable with taking risks?

Saahil Goel: We were late bloomers in terms of fundraising. We never had any capital, which allowed us to build Shiprocket the way it is today. We did come into raising large pools of capital, which we then deployed toward M&A and rarely burned any of it toward our own model.

While our solutions, appetite, and vision need to expand, our way of working shouldn’t change, because this is who we are. You’ve got to be true to yourself and be transparent with the team, so there’s trust and they continue to align to that common goal, mission, and way of doing things.

Erik Roth: You don’t want to change the way of working, but you want to make sure it adapts to the context it finds itself in. How have you managed both the tension and balance there?

Saahil Goel: That’s the largest challenge, because we’ve got a growing business that is already profitable, scaling, and a market leader. We’ve got six new innovations in the oven and two that are baked and showing signs of potential growth. The same set of processes can’t work for all those businesses.

One thing we’ve tried is to physically isolate. We sent a team with a CEO to an office a kilometer away. They’re much faster at what they do because they’re left alone. The cost of error is low because they’re so early in their journey that they should be able to make decisions very rapidly. That’s worked out well.

Erik Roth: How do you decide which core resources, capabilities, technology platforms, and other things should be leveraged to help accelerate a new part of the business? Or is it just “You’ve got to fend for yourself, and once you’re big enough, we’ll think about leveraging the core”?

Saahil Goel: We can’t completely cut them out, because that’s not smart. There are frameworks or rails of the company, whether it’s information security, compliance, sustainability, access to HR processes. A lot of those services, if you will, are centrally sourced and available to a new unit very easily. We’ve tried to design the core platform itself as a set of microservices.

Erik Roth: I think every company needs some version of microservices to be an accelerated innovator. If you can’t intelligently leverage the pieces of the core that matter, while removing yourself from those that get in the way, it’s hard to accelerate innovation progress inside the larger organization.

Would you say there’s a secret sauce in thinking about what you can modularize to be leveraged so you can create these innovative offshoots?

Saahil Goel: Absolutely. You can apply the microservices lens on a technology stack and also on your organizational stack, and design yourself in a way where a lot of the independently scalable, reusable components or pieces of your organization that are going to serve multiple consumers are built to do that. We do this with matrix support functions like HR, finance, marketing, and so on, and also with the tech platform, as I described.

Erik Roth: Shifting gears, it’s hard to talk to a tech company and not mention gen AI. How do you see it impacting your business?

Saahil Goel: We’ve identified a few use cases. Some we’ve been working on even before it was known as gen AI.

In a country as unstructured as India, with multiple languages, dialects, merchants of various sizes, cultures, and so on all meshed into one, it’s a great tool to power the communication between us and the merchant, as well as us and the consumer. Being able to make that more consistent or machine readable is a tremendous opportunity to standardize experiences—to have software and workflows adopted at population scale, using bots. For a country like us, the use of bots is great at driving behavior.

Other than that, we’re looking at anything to do with e-commerce—content, copy, routing, fuzzy logic—and trying to use what’s available in large language models or catalog enrichment and SEO descriptions.

Erik Roth: With any venture, scaling requires adding resources, capabilities, capital, et cetera. What have the challenges been? Where do you believe things could hold you back, if anywhere?

Saahil Goel: Working with a long tail of customers is good and bad. It’s good because once you have them, you have critical mass. It’s a hugely powerful moat and distribution channel. And you can continue to sell anything. We started with shipping. Now we’re selling ads, loans, insurance, a lot of things.

What’s hard about it is continuously adding more customers through the same channel, especially given that we’re built like an internet company, where we try and acquire these customers digitally. Either we wait for them to come online and search for our services, or we find a quick way to reach out to them en masse and get them onboarded.

India probably has between two and three million online merchants. We’ve been able to touch about half a million, and we actively work with about 150,000 of them. How do we reach more of them? We need to solve that.

Erik Roth: Do you see that as more of a technical challenge in terms of building the trust and the tools for your merchants to interact with you, as opposed to scaling up thousands of people?

Saahil Goel: Part of it is trust. A lot of merchants, for example, don’t have a printer, and our platform requires you to print a label. We can’t sell everybody a printer, but can we set up shops or a franchise network that can then be the point of service for these customers?

There’s also a trust issue, a language issue, between, let’s say, the west, east, south, and north. Things change quite drastically in India, where the cultural nuance takes over. Having a local presence helps. I think we’ll need to start showing up more on the ground to build that trust and reach over the next few years.

Erik Roth: Are there other things unique to India that you’ve encountered? The notion of merchants is not the mom-and-pop shop down the street. They could be artisans creating unbelievable product, but the storefront might not look like anything someone in a traditional Western market would expect to see.

Saahil Goel: That’s a great point. Living here, we take it for granted, but these are not local businesses. They’re dark stores. They’re digital entrepreneurs either running their own dot-coms and building brands or selling purely on social media. And they’re super young. Our average merchant is about 28. Most of them are tier two. Sixty to 70 percent are not in the metro cities. About half of them are brands themselves, which means they’re either doing private label or building, manufacturing, or artisanally making, and so on. The other half are just traders, using imports from China or things they’ve bought from a wholesale market in India—very low quantities or doing just-in-time drop shipping.

We do serve larger brands that are well-known in India. We also work with a lot of the large offline retail chains to power their dot-coms. But the real focus of the platform is this true heartbeat of India. This is what’s going to power our economy and what gets us most excited as a company.

Erik Roth: Do you see part of your purpose and mission to be a socioeconomic engine for India in addition to just putting in the infrastructure?

Saahil Goel: We look at ourselves as nation builders. We align very closely with the pro-development kinds of policies of India today. We believe we have a role to play in making that happen because we power 20 or 30 percent of our addressable market already. I think it’s our duty to continue to innovate and push that forward and make India’s goals happen.

Erik Roth: I suspect most of your business is within India today. Do you aspire to bring your platform to other, similar markets around the world or to open your platform for international commerce as well?

Saahil Goel: Last year, we started enabling merchants to sell globally to digital shelves in the Middle East, Europe, the US, and so on. It’s very expensive to sell there, but we’ve built a system using analytics and our logistics routing to bring down the cost by almost 70 or 80 percent. That’s working well, so we’ll continue going down that path.

I think a lot of countries in Southeast Asia, Africa, the Middle East, Latin America, and some parts of Eastern Europe could be good markets for us later. But right now, we’ve got our hands completely full with India. Some of the innovation that comes out of India will be applicable not just for Shiprocket but for a lot of the other developing economies trailing India by a few years.

Erik Roth: Any other thoughts you’d like to share from your journey?

Saahil Goel: The journey itself has been very enriching—going from website building to mobile-based marketplace to interoperable components.

India is only about 6 or 7 percent retail penetrated in terms of digital, whereas the US is probably 20 to 25 percent, and China is more than 40 percent. Our GDP is set to double per capita in the next six or seven years. We know there is going to be a tremendous amount of e-commerce coming. We just don’t know what form it will take. It could be live commerce or more high touch. Regardless, the fundamental building blocks will be the same.

And that’s our biggest bet: saying that in the next 20 years, we’re going to embed in every transaction in India and basically start powering all these things with the various sets of tools and apps we’re building, essentially pushing the envelope and helping India get there in many ways.

Erik Roth: Saahil, thank you for your time, insights, and perspectives on what it’s like to not just build a company like Shiprocket but also scale it to the level you have so successfully.

Saahil Goel: Thank you, Erik. It was my pleasure.

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