Rise of Super Apps – Are they the future?

Introduction

  • Over the past few months, the world has seen a rise of Super Apps especially from emerging markets like China and India.These super apps provide bundle of services and have disrupt the market.
  • So what is a Super App and what is so special that it is creating a huge buzz?
  • Super App takes the concept of personalization to another level by targeting each customer as a single market and then building a business model around them thereby transforming lives in emerging markets.

Super Apps – An Overview

  • A super app offers online messaging, social media, marketplaces and services under one umbrella.These apps have become so popular in China that it is hard to imagine life without them for an average smartphone user.
  • Chinese apps like WeChat and Alipay provide range of services from messaging friends, ordering food delivery, booking a taxi, shopping/banking online with a tap of button.
  • We Chat is known as “King of Super Apps” after it introduced range of functions including payment, gaming and publishing.

Adoption of Super Apps in other emerging markets

  • Due to its huge popularity, the business model of super apps are embraced by unicorns in other emerging markets.
  • For instance, Singapore based Grab and Indonesia’s Gojek are emulating We Chat’s dominance in china by offering a plethora of services.Line app from Japan, known for providing messaging services during Tsunami disaster in Japan has added new services like food delivery, taxi and payment services.
  • Many of the above apps have secured funding from VC between $500 million to $1.5 billion on the strength of their potential to become the next We Chat.
  • However in developed countries like US and Europe, Super Apps have not gained much popularity and it is unlikely they will make such a big difference in these countries when compared to emerging markets.

Reason for Super apps popularity in emerging markets

  • In developed countries, internet access preceded the penetration of smartphone and apps culture.When users migrated from personal computers to smartphones, tech giants like Facebook and Google also shifted to smartphones by building native apps.Hence they left no room for startups to gain as foothold in this space.
  • To substantiate this, Facebook acquired whatsapp and Instagram which were huge successes.Snapchat on the other hand is struggling to trade at higher price than its IPO listing.
  • In case of emerging markets, the rapid penetration of smartphones along with mobile internet is bring thousands of new people online for the first time. Hence companies that target these customers with access to goods and services through direct distribution channels capture more customer value.
  • The emerging markets also have a low purchasing power compared to developed markets.Due to lower spending, a single app cannot be expected to generate return or can get ahead of its competitors. Hence businesses needs to provide multiple services that gradually build an ecosystem around itself to increase its stickiness in the mass market.

Customer Acquisition and Retention Strategy

  • In the digital world of super apps, each customer is a target for the range of services offered by these apps.
  • In order to successfully acquire and retain customers, super apps needs to collect as much digital information about the customers as possible. Super apps needs to add more value by offering personalized services to customers including targeted recommendations in order to deter customers from switching to other platforms.
  • By retaining customers in its platforms and improving customer stickiness, Super apps improves customer loyalty and increases customer lifetime value.This creates a strong moat around its core offering which in effect eliminates competition.

Success factors behind Super Apps

Three key factors that contribute to the success of Super apps in the emerging markets are:

A strong core user base

  • In emerging markets, transport and food are the major use cases, which explains the large amount of investments that startups like Swiggy and Ola have secured.
  • Recently in India, banking for all initiatives has led to emergence of payment apps like Paytm.Users can link paytm with their bank accounts and banks allow Paytm to auto debit from accounts at zero cost.
  • In contrast global giants like Facebook and Google rely more on advertising revenues rather than transactions.When these giants want to venture from B2B to B2C transactions, they face regulatory hurdles.For instance, Facebook’s WhatsApp pay was rolled back in India as it did not comply with its data storage regulations.

A good payment system and strong loyalty program

  • Strong payment infrastructure is necessary for the success of Super Apps because without it, the user cannot complete a transaction.
  • A strong payment app captures transaction data which can fuel the app’s growth.
  • For instance, having an effective loyalty program by rewarding users like providing discounts on food delivery after spending money on taxi rides would improve app’s stickiness.

Providing value added services adjacent to the core user base

  • An eco system of services that are offered by the apps itself or by the third parties can further improve the app stickiness.
  • At the same time, these additional services should be relevant to the core service offering.For instance, Paytm made an unsuccessful foray towards ecommerce business ‘Paytm mall’.

Conclusion

  • Super apps recent surge in popularity indicates that these apps are entrenched in the life of millions of people.As they evolve further and continue to add new services, they have the potential to improve quality of life of millions of people.
  • The key to success for Super apps will always be the same.They should offer simplicity and convenience to its customers.


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