Late last year, Amazon India rolled out Amazon Business, its B2B marketplace with over 100 million products. Soon after, Walmart announced the opening of its first fulfilment centre to serve kirana stores. In March this year, Metro Cash and Carry announced that it was starting doorstep delivery for kirana store owners.
Why are these top names in retail suddenly turning their focus to B2B order fulfilment? What problem are they trying to solve?
Well, consider a scenario that plays out every day in small stores across India: It’s the height of summer, and Kumar, the owner of a small kirana store in a city, is finding that many of his customers are asking for a new soft drink that’s being advertised heavily during IPL matches.
Kumar has already run out of the stock he received last Wednesday and would like to order a new, larger batch to keep his customers happy. However, the brand’s salesman’s beat brings him to Kumar’s shop only next Wednesday, which is three days away. Kumar knows that considering that there are hundreds of shops like his in the distributor’s area he is likely to get delivery of his order only 2-3 days after that and even then it’s only likely to be partially fulfilled given the heavy demand. He would probably also need to buy a slow-moving product to keep the distributor happy.
So for nearly a week Kumar must turn valued customers away from his store (and towards the big supermarket nearby) and lose out on revenue and customer trust and goodwill. The brand too loses out on the momentum created by the expensive ad blitz and possibly revenue and customer loyalty.
If this sounds like an absurd situation, consider the fact that this has been the reality on the ground for several decades now. As all FMCG professionals know the retail supply network in the industry works on a top-down, push-based model. This is how it works:
This is no doubt a simplistic description of an extremely complex delivery model. But that’s precisely the point – the current model is so complex and slow that it’s costing everyone in the ecosystem, from brands to distributors to retailers to consumers, precious time and money. Clearly, the system is ripe for disruption.
Now imagine this: Kumar, faced with high demand for the soft drink, opens up an ordering app on his phone, searches for the product, select the quantity he requires and clicks buy. The order reaches the brand immediately and the order is delivered within 24 hours by a local partner (a distributor or stockist/sub-stockist) in a two-wheeler/rickshaw/van. Kumar can serve his customers seamlessly and the brand stands a chance to increase customer loyalty and revenues and gains a better ROI.
This bottom-up, direct brand-to-retail supply model has more game-changing benefits for all players in the ecosystem:
What’s more, all these benefits come at a lower cost of capital for everyone involved as the system ensures better-working capital utilization by facilitating just-in-time, optimal stocking and efficient delivery. This ultimately reduces the network’s reliance on credit (brands usually provide goods to distributors on credit, who in turn extend credit to retailers, trapping all of them in a never-ending cycle of debt.
Considering the big problems the technology-driven direct-brand-to-retailer model solves – and the enticing possibility of taking a piece of the ~$70 billion FMCG market – many companies, big and small are now building partnerships with brands and selling order-taking apps to retailers. This list includes marquee names such as Amazon B2B, Walmart and Metro Cash and Carry as well as small startups, including Bizom’s sister brand Distiman.
It’s still too early to predict winners and losers, but the initial results are encouraging across the board. According to reports in the media, the turnover of Amazon’s wholesale business multiplied 2700 times for the fiscal year 2016-2017, validating their B2B thrust. Metro Cash and Carry’s CEO Arvind Mediratta, too expressed faith in their doorstep delivery model for kiranas: “A lot of small businesses gravitate towards us as they don’t get credit or working capital loans, have lower fill rates, don’t have enough SKUs (stock keeping units) and are forced to stock certain products.”
Among smaller players, some well-funded companies like Shotang and Just Buy Live (JBL) seem to have shut shop while others like Distiman are growing steadily by convincing brands and retailers of the value of a multi-brand direct distribution system.
Distiman is a stock ordering app from Mobisy Technologies (the company behind Bizom) that allows retailers to order stock for thousands of products from over 300 brands across different product categories. Distiman fulfils these orders within 24 hours by using a hub-and-spoke model that uses local franchisees and young entrepreneurs for last-mile delivery. This allows brands to focus on meeting demand while the platform takes care of core distribution and marketing execution.
The app was envisioned as forward integration for sister brand Bizom’s suite of solutions for sales network automation that includes their market-leading sales force automation, distributor management and retail execution modules. “We have already built technology that crunches vast amounts of supply chain and retail consumption data to provide intelligent predictions on the right stocking for everyone in the supply chain, including distributors and retailers. This greatly drives up the capital efficiency of these businesses. Plus, we are an ecosystem player. We are leveraging our existing relationships with more than 160 brands with reach to more than 10,000 distributors and more than a million retailers pan India,” said Mobisy’s Chief Growth Officer Arun Narayanan in a 2016 interview.
Fast forwarding to 2018, their bet seems to be paying off. Distiman now services retailers in Kolhapur, Maharashtra, and Mysore, Karnataka, and has onboarded more than 3000 retailers with an average drop size of Rs. 4300. According to company sources, Distiman’s monthly GMV is increasing 20% MoM.
According to Niranjan Anand, lead of Distiman operations, the success of their model stems from the company’s deep understanding of the retail ecosystem and the relationship it has built with brands over the years. “While Distiman is a game changer for retailers, we also offer many advantages to brands. Our multi-brand model helps brands service outlets more efficiently, providing them with almost 50% higher ROI than what can be delivered by a single brand. We give brands reach in tier-2 and -3 crowds where it’s not financially viable for them to operate through single-brand distributors. Also, brands can directly communicate offers, and loyalty programs or even get research done with retailers individually or by segments. Most importantly, on-demand, just-in-time secondary order fulfilment eliminates stock-outs and makes products available for the final consumer when and where they need it.”
Distiman’s numbers speak for themselves:
We believe that while there are several ways in which this model can work, there are some critical features that a technology vendor must provide to ensure success for brands and retailers:
In conclusion, as technology adoption skyrockets in the tradition-bound FMCG sector, nudged along by environmental imperatives such as GST and digital payments, the next few years will see major disruptions in how business is done. The brands that survive the inevitable shakedown will be the ones that use technology to improve their supply network and reach out to partners directly. The technology partners that help these companies up their game will reap rich dividends. The challenge is in winning hearts and minds by devising a model that marries the best of traditional models with the best of what technology has to offer. Watch this space for news and developments in this quiet retail revolution.
To understand the impact Distiman makes on the lives of small kirana store owners, watch this video.
For more information, call Distiman at 080 41108397.