Jan 4, 2023

Burning is earning? Is it a good fit for our startup ecosystem

How can one justify the burning by the startups? I don't want to mention the name of startups or B2C commerce players who are trying to bring discount war and luring consumers just for nothing. Is this an innovation?

Take this incident that occurred in the city of Jaipur.

Four days ago, my neighborhood friend told me about a start-up that is delivering #saras and #amul milk at a discounted and below market price, providing a 7-day free milk scheme. I tried to go in to find out more about it and when he showed me the transactions it was actually there. He bought milk for 350 rupees free of cost in 7 days. and later, he continued but with a discounted price. Saras milk price is Rs. 48 per Ltr for toned milk and for fat, it is Rs.62. He is still getting Rs.2 per Ltr discount from the market price ie. price at Saras booths are selling at. 

This is what the consumer is gaining from such #disruption.

Yesterday I went to a nearby Saras stall to buy milk for myself. I started the conversation just to find out what he thinks about these new milk delivery startup/e-commerce players. Suddenly he burst into great pain. He said that two months ago his daily sales were 35,000/-and about 250 customers used to come and buy milk at his stall, but now these numbers have dropped to 22,000/-per day. what was your intake? he said, due to inflation, people started consuming less milk, and that's why his daily sales numbers are going down. But he wasn't aware of the online customer drift. I told him the real reason why he is affected.

This is how the market works and there no one can control the market forces to be favorable, but at what cost are these developments happening? Saras is the milk brand of Rajasthan dairy cooperatives which has more than 5,500 milk stalls supplying milk to more than 0.7 million families in Jaipur city and more than 5,000 small retailers.

Just to facilitate or for the sake of adoption, these startups are doing quite a bit of burning. Just for the sake of offers, end consumers are buying milk from them. Even if a family has 5 members and they all have smartphones, one after the other they are using the offer in the same place. It means that a family is getting 35 days of free milk because they are offering a 7-day free milk program. Is this a way to create loyalty? or adoption or customer acquisition cost?

We all know that the Indian ecosystem is different and it is full of diversity. Amid such uncertainty of the diverse mindset of end consumers, how long do we think about customer stickiness? and at what cost by giving a big dent in the traditional ecosystem.

It would be wise if such startups are getting profit out of such activities then fine but they also know that their efforts are not real and just an act of building a funding story. I am worried about the traditional players who are there for decades and earning bread and butter for their families. 1/3 of India's population is living below the poverty line. Millions of Retailers, Wholesalers, and distributors are the backbone of our retail ecosystem. These are the 12-15% contributor to national GDP and even they are contributing up to 10% in generating employment.

The ecosystem of Indian grocery retail: Estimated Retailers 12-13 million, Wholesalers 300K+, Distributors 30+, and more than 5K national brands and thousands of regional and local brands. Altogether they are driving a retail economy of USD 800 billion and would be more than $ 1.2 trillion in the next five years.

We need to redefine the definition of #disruption. Do we really need #quickcommerce #homedelivery of milk #fruitdelivery? Is it really needed to have merchandise in 10 minutes? It would be better to walk to your nearby retailer and buy from there. This will be a healthy movement for the body, society, and for the nation.

We need to bring ideas, innovation, and efforts to empower the existing ecosystem. We should not create threats to them but tune with them and align our business model in such a way that brings efficiencies and empowerment for the traditional ecosystem players.

Being a retail professional, I am sure that the traditional ecosystem will get more wings to grow in the near future. Here the only thing is that MSME or SME needs to bring more clarity that how they are going to formulate policies for traditional retail ecosystem players. The Department for Promotion of Industry and Internal Trade (DPIIT) should also bring in some strict norms so that online players operate in a regulated environment and do not affect traditional players just for the sake of discounts and promotions. Also, all retail associations should work in the right direction and should safeguard the interest of traditional ecosystems. Organizations like #rai and #cait should act as the apex body but seems they are more inclined towards these giants and nurturing them by doing nothing for the traditional ecosystem.

Even domestic e-commerce players should also bring under the disciplinary ambit of DPIIT and they should not be allowed to start a discount war on their websites.

This also applied to brands. Brands have to bring discipline in channel management & bringing uniform PTR so that every connector in this ecosystem can earn their share of profits. This would be a red flag for national brands whose PTR is in the hands of price cutters. If they fail to harmonize channels, they will be locked out and replaced by the regional players.

This is a layman's write-up.

#retail #grocery #Stores #retailers #Rai #Cait #DPIIT #groceryretailer


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