Last week, Indore-based B2B ecommerce platform ShopKirana achieved a unique milestone. In its 12-hour-long flash sale, the startup generated more than Rs 1 crore from 4,000 users, all from its home city.
Unlike B2C ecommerce platforms that give discounts on a daily basis, B2B player ShopKirana gives no discounts. But the flash sales pushed retailers.
Tanutejas Saraswat, Co-founder and CEO of ShopKirana, says,
“Most retailers prefer us because such products are not easily available at traditional distribution systems, either due to service issue or because it is out of stock. In the first two hours of the sale, we sold 20 lakh pieces of Clinic Plus shampoo in just one city. These are low average selling price (ASP) items, which modern retailers don’t sell due to low RoI. But we give demand for such items from the small retailers to the brands.”
He adds that about 50 percent sales (out of the Rs 1 crore) came from farm products.
On an average, in India, local (unorganised) retailers often depend on 70-100 distributors for stock replenishment.
Founded in 2015 by Tanutejas Saraswat, Sumit Ghorawat, and Deepak Dhanotiya, Indore-based ShopKirana was one of the early players to connect retailers and brands/factories directly using a mobile app. It helps retailers with generating better sales and keeping less inventory by buying in real time, and by keeping track of the data on their mobile phone.
At the beginning, convincing the retailers – who are not tech savvy at all – itself was a huge challenge. “Most of them do not even use calculators. But once they started using our service, many of them saw Rs 2 lakh - Rs 3 lakh worth of orders were done via our app,” Tanutejas tells YourStory.
Within four months of its launch, ShopKirana’s mobile application got 500 retailers on board with just 10 brands integrated in the system, and the company had managed a turnover of more than Rs 50 lakh.
Earlier this year, the startup expanded to Jaipur and Bhopal, and currently has more than 12,000 retailers on its platform. It aims to expand to 30 cities and on-board one lakh retailers in the next 18-24 months.
ShopKirana is targeting 10 percent market share in Tier II cities in the short term. It has also launched local content in Hindi and Gujarati to target a wider audience.
“We are piloting animated characters in our app - which will use local language for conversations with the retailers, and hence understands their behaviour,” says Tanutejas.
The winning pitch
In 2016, ShopKirana raised an undisclosed amount of funding from Atul Jain (ex-Samsung), Jai Kumar Nair (formerly with Mondelez), and Anil Gelra (Founder of Hola Chef), along with a few other veterans.
Later, in December 2018, the B2B ecommerce platform raised $2 million from Info Edge, AET Fund, Better Capital, Incubate Fund, and Akatsuki.
The story behind the fund raise is also as interesting as the company’s unique feats.
Despite the heterogeneity of the Indian market, in the B2B retail sector, Tanutejas believes that if a business doesn’t make sense in one city, it won’t make sense anywhere else. So, the team waited till their business model and unit economics made sense, before raising funding. “We did not want to burn anybody else’s money on a model which may not work,” he says.
The team met Yuki Kawamura, Principal at AET Fund, via reference, and presented their pitch for about 15-20 minutes. Within an hour, they got the commitment from Yuki.
Tanutejas explains: “We were clear (in the pitch) about some points: retailers buy about 40 items via our platform in a month. Otherwise they have to meet some 400 distributors every month. Interacting with each sales executive takes at least 15 minutes, which means nearly 100 hours in a month. We save those 100 hours for a retailer every month.”
Incidentally, in a recent interaction with YourStory, Yuki had said what he looks for in a startup is the business model.
“It doesn’t matter if the current product itself is good or bad. If they’re still in an early stage, they are trying to make the product market fit as they go. It’s more about the business model, monetisation, and user acquisition.”
With a zero-inventory model, ShopKirana presents itself as a purchasing company and multi-brand distributor for retailers. The demand they get from retailers are sent to the brands, which they deliver to ShopKirana’s warehouse in 48 hours (they have one warehouse in each city they are present in). And ShopKirana delivers it to the retailer the same day, mostly in three to four hours.
The company claims it has generated Rs 150 crore in revenue since 2015. Tanutejas says the company’s revenue has grown 10x in the last six months, and they are operationally profitable.
Filling a gap
According to Anarock Retail consultancy, the offline retail market in India will be worth $1.3 trillion by 2020. India is the sixth largest grocery market in the world, and only five to eight percent of grocery stores are organised.
Titans like Walmart and startups like Udaan, Bizom, ShopX, Gramfactory, and Smerkato are all working in the B2B space, but under different business models.
Unlike the B2C business model, B2B ones have unique traits. For instance, discounts won’t help much in user acquisition.
“We have to be reliable and comfortable for the customer, and we guarantee 10 percent market share to the brands. At present, we have 300 brands and 1,200 products. We will expand to all Tier II cities in 18-24 months, and then may consider Tier I cities,” says Tanutejas.
He explains that brands have two advantages here – the middlemen/distributors are eliminated, and there is no need to give discounts. Even during flash sales, the company offers only loyalty points.
“Top retailers buy from us more than 40 times in a month. We have got even Rs 3 lakh to Rs 4 lakh in a single order. The biggest single order we received was for Rs 4 lakh, but it came on a normal day, and not during flash sales,” he adds.
ShopKirana is also using technology such as data science to predict customer demand and stock replenishment for its customers.
“We can help launch a local brand overnight, and take it to the national level in a few days,” Tanutejas says.
The startup provides mostly FMCG and grocery items except oil, flour, sugar, etc. due to less margins. (For other items, it gets eight-10 percent margin).
Its private brand, called ‘Kisan Kirana’, connects farmers directly to kirana stores. Tanutejas claims it enables farmers to get more margins and better access to retail stores.
Kiranas generally don’t have a standard distribution channel to buy these products. ShopKirana’s brand, he says, benefits farmers to earn more, and helps kirana stores to procure on a single platform. And for the retailers, the B2B ecommerce company has launched an exceptional programme. Tanutejas says,
“Usually, loyalty programmes come with deadlines, and is redeemable in your orders. But we wanted to empower the retailers who dream of buying a refrigerator, TV, chairs, etc. So, we built a programme in which the retailers on our platform can accumulate points with each order, and use the points to buy non-FMCG white goods. It’s like a B2C function."
These points cannot be redeemed otherwise. Brands on their platform are also competing to give more points, as this may motivate the retailers to buy more from them, which will help their unit economics. These loyalty points were given during the flash sale too.
Discounts may not rule ecommerce forever, but customer loyalty sure will!
(Edited by Megha Reddy)