[Series] A Landscape Study of Bharat Startups: The Role of Trust

The landscape study of Bharat startups studied 25 upcoming startups servicing low or middle-income customers in India. We spoke to a few founders and analysed their business and customer acquisition models. Thus, it appeared that these startups were solving problems by leveraging and building trust within the target segment.

Trust is a dominating factor in digital adoption. But there are two kinds of trust at work in society and commerce. One is ‘relational trust’ that refers to the interpersonal social exchanges in a group setting. The second is ‘mechanical trust’ - a mechanism that ensures Cybersecurity by delivering predefined outputs reliably and predictably. While mechanical trust is easier to ensure, relational trust is harder to achieve – and concerns around it are of a more complex nature. According to Hofstede’s cultural dimensions theory, Individualism and Collectivism are two fundamental aspects in any given society.

India has a predominantly collectivist culture where the focus is on community rather than individuals, the dynamics of which also affect/apply to digital adoption. For someone from the Bharat segment, trust is essential in embracing new technology. Global surveys corroborate this in digital trust with significant concern for personal data sharing. The same report also finds trust as the basis for bilateral relations in business, customer retention, and customer perception. The figure below shows the five attributes of trust given in the Trust Adoption Model, as featured in a USAID report documenting the complex and universal way in which trust works in technology adoption.

As shown in the image above, ‘Product Recourse’ is a fundamental aspect of solving trust issues, especially regarding technology adoption. This means access to reliable customer service becomes imperative for startups looking to build trust within their customers.

In this article, we will highlight three ways in which startups are enhancing trust for technology adoption.

Banking on existing trust mechanisms

Consumers from Bharat have a long-standing relationship with the local mom-and-pop store as they make most of their primary purchases from there. By involving these local stores in order fulfilment, e-commerce startups are tapping into the trust that has been built over many years between the store and the consumer, thus eliminating the need for them to build trust with the consumer directly.

Startups in the B2B e-commerce (grocery/durables) space such as ShopX and StoreKing have used a B2B2C model to tap into the Bharat segment. For instance, ShopX comes with an additional feature that also allows the retailer to onboard customers seeking specific commodities, thus enabling stickiness to the platform.  ShopKirana builds on a loyalty points system and customer analytics that help deepen engagement with the app.

Startups engaging the services of Micro-influencers

Micro-influencers and trust represent a cause-and-effect relationship where the recommendations made directly influence the consumer’s actions because micro-influencers come across as personal, authentic, and relatable to the average buyer. Meesho enables individuals and small businesses to sell items using popular social media sites and Khatabook provides digital ledgering and other financial services. Here, both startups use micro-influencers for advertising their products. BulBul and Simsim also use micro-influencers (predominantly women) to sell products on their platform.

This is because peer acceptance plays a determining role in tech adoption - especially for women. Along with trust, such a way of selling products mirrors the offline shopping experience and also makes first time online shoppers less hesitant to purchase online. The key for startups here is to provide a seamless user experience and minimize user risk to boost onboarding.

Relying on the word-of-mouth

Lastly, the prominence of word-of-mouth in the growth of successful startups, once again shows how a Bharat consumer bases a lot of their actions on trust. A study by Compeau D. & Tsai, P. (2010) demonstrated the effectiveness of word-of-mouth in technology adoption in large organizations. Hearing about a new app from friends or family will more often than not convince people to download and try out the app as well. In other words, it acts as an effective testimonial. Khatabook and OkCredit - providing digital ledgering services, servicing retailers, and small business owners - have benefited from word-of-mouth marketing. On the other hand, Udaan, a B2B e-commerce startup, that aims at proving good efficiency and at low cost by connecting wholesalers, distributors, and retailers have mostly grown its business by relying on word-of-mouth advertisement.

Global companies are moving towards addressing the issues of trust in digitization. Thus, tech startups catering to Bharat are also learning to rely on tried and tested methods of increasing the confidence for digital adoption.

ABOUT

‘A Landscape Study of Bharat Startups’  includes a series of 5 articles on Bharat attributed to Valerie Mendonca, Sr. Associate - Insights, CIIE.CO; Sanjay Jain, Partner at Bharat Innovation Fund, Chief Innovation Officer, CIIE.CO; and Kush Pandey, Research associate, Bharat Innovation Fund. The titles in the series are:

1. An Introduction to the Bharat Startups

2. The Role of Trust

3. The Importance of Building  in Local Languages

4. The Increasing Use of WhatsApp

5. The Price Sensitive Customer

The insights and the views shared in the article are that of the authors with proper research data and validation.