The battleground of Indian Grocery Retail Market
The Indian grocery market, a $350B-$400B opportunity, has traditionally been dominated by an extremely unorganized value chain, an inefficient distribution network and low-tech penetration. A large part of the market continues to be unorganized/fragmented and dominated by general trade. In the last 3–4 years, this space has seen the advent of several tech platforms trying to solve for the last mile delivery of grocery to the consumer through e-commerce and hence, a significant value has accrued to the B2C segment in the recent past.
Why is B2B Grocery Important?
More than 80% of grocery consumed in India continues to be channelized to the end consumer through the B2B channel ending up at 12M+ offline mom & pop kirana stores (corner stores). Significantly larger than that of B2C, the opportunity resides in building technologies to digitize the upstream players in the value chain, and to enhance the strengths of the pre-existing extensive distribution network of corner stores in India.
Despite the strong global and domestic competition from e-commerce and modern trade, the corner stores have managed to fend off the competition. This has been done by focusing on their inherent core strengths like hyperlocal assortment, credits to shopper, convenience and trust for the consumer.
However, the segment of kirana stores are yet to overcome some structural challenges. While digitization has helped create efficiencies in parts of the value chain, many other legs have not been able to keep up the pace.
· Under-stocking or over-stocking
· Unreliable fulfilment
· Pricing volatility with extremely poor visibility
· Lack of access to credit
· Assortment and ordering constraints
· Rigid schedules with no control or certainty
Peelworks Digitizes & Provides a Full-Stack Platform (Taikee) For Kirana Stores
With the context of challenging competitive environment for the corner stores in India, Sachin Chhabra and Nidhi Ramachandran started Peelworks as a technology and analytics company to transform traditional retail trade. Peelworks offers a full-stack suite of digital solutions for corner stores, rolled-up into Taikee. The core premise of Taikee’s utility lies in an easy-to-use B2B marketplace catering to the procurement needs of stores, allowing stores to make on-demand purchases via an app.
The B2B marketplace launched in early 2018 completed the closed loop of Peelworks’ full-stack platform. This marketplace has a symbiotic relationship with Athena, another core part of their product stack which offers data insights to CPGs based on captured store sales data. This drives visibility for Taikee into understanding the selling patterns at a particular store, intelligently unlocking value for the suppliers based on this intelligence.
The Taikee Advantage
Taikee is a vibrant marketplace of suppliers and stores connected through a simple interface. It helps stores forecast demand, localize their inventory management, order digitally and capture new data streams. The overall supply side industry can be segmented into the following categories:
· 2W — To Wholesale: 2W stores are wholesalers. They typically sell in cash (no credit offered) to smaller grocery stores, that are not well served by CPG distributors. This is a highly price-sensitive channel, transact on cash (no credit availed or extended) and have large ticket sizes.
· LI — Large Independent: LIs have ~2,000 square feet of selling space, are open format stores (where shoppers can walk through aisles to interact with SKUs on sale). LIs receive over 200 shoppers a day and carry 3,000–10,000 SKUs. LIs are highly sensitive to stock levels (i.e., having an SKU in stock when a customer walks in), assortment and service levels. These are the key levers that LIs use to attract & retain shoppers in their catchment areas.
· SI — Small Independent: SIs make up 90% of the 12 million independent grocery stores in India. They sell between INR 30k and INR 5L of products a month. These stores may or may not be served by distributors with a subset relying on 2W to procure their inventory. By & large, these stores do not have access to formal credit and by necessity prioritize cashflow management over profitability. In situations where they are able to avail credit facilities these stores prefer smaller margins made on a credit invoice to higher margins on a cash invoice.
Taikee Value Proposition — Addressing Core Problems
This end to end offering is enabling the mom & pop corner stores to grow profitably with the help of the following levers on Peelworks platform:
· Digitizing shopper interactions to build trust and improve convenience
· Aggregated buying leading to lower price points
· Wider assortment driving higher hyperlocal discovery for the consumer
· Optimized inventory management driven by predictable order management
· Private label opportunities leading to better margins
· Availabilty of credit for kirana stores
With inbuilt self-learning models, Taikee enables the member stores to serve their customers better, grow faster and generate higher profits. The value proposition that Taikee drives depends largely the on nature and format of the target store.
Why Taikee Will Continue to Outpace the Market
The legacy sourcing from a diverse array of channels is a friction-laden and defect-prone way of replenishing inventory. Taikee concierges this complex requirement model to optimize procurement for the corner stores. Leveraging technology and analytics from various sources of data, Taikee’s underlying engine changes the game for kirana stores in a sustainable manner which makes them a core partner.
1. Inclusive of Value-chain: Taikee is becoming increasingly important for every player in the value chain. This is primarily driven by a model that preserves and respects the nuances of legacy channels of distribution, thus creating a sense of trust and assurance for the retailers.
2. Value for Retailers To Increase Wallet Share: The product is a concierge that solves the problem of retailers up and down the value chain. With wide assortment, price advantages, credit and faster turn-around times, Taikee builds up a very strong value proposition for retailers and enables them to drive loyalty with its customers.
3. Club Taikee: With the introduction of Club Taikee, which is their flagship priority customer program to reap greater loyalty benefits and have easier access to credit, Peelworks is creating an extremely high brand recall for the retailers.
Lessons from China — Ling Shou Tong (Alibaba model)
It is estimated that about 85% of the total retail sales in China happen in offline stores. Alibaba began expanding its physical presence in the retail market with several supermarket and retail-chain acquisitions. They launched a new convenience store concept called the Hema Store, which is an integration of grocery and food — service businesses. Alibaba uses big data analytics to remember purchase preferences for each customer and make personalized recommendations on the Hema app. Shortly afterwards, they decided to move ahead from supermarkets to the millions of mom and pop stores across China. Via their retail-management platform called Ling Shou Tong, they enabled store owners optimize the process of product procurement and give a boost to the sales.
Utilizing a model similar to Taikee, they offered the following solutions from their platform:
- Procurement Assistance
- Logistics & Fulfillment
- Private Brands
18 months from launching, Alibaba was transacting $1.2B in GMV through the stores on this platform.
Eyeing a $10B opportunity and 1M corner stores by ‘22
Peel-works is sitting on a blue-ocean opportunity of $300B worth of grocery being channelized through 12M+ dark & disconnected mom & pop stores and its connected ecosystem of distributors, CPGs and ultimately shoppers.
Taikee has been blitz-scaling since launch with its presence in 20,000 stores currently and targeting $1B in GMV by the end of 2019, paving their way into a million corner stores by FY22.