The idea is to cater to every need of consumers in these markets leading to higher throughput for our franchise partners ultimately leading to a higher income for the franchisees and better experience for consumers.
1. Brief us about your business model like how did the idea come to start 1K Kirana Bazaar and how does it work?
It has been a journey of 15 months of learning, a journey that has culminated into the idea and being of 1K in its present shape. The journey started at Blackbuck where two of our co-founders were working together in the corporate business. One was handling the FMCG & food vertical and was working very closely with the supply chain teams of FMCG & food manufacturers. During his conversations with these clients, one thing which was common was their struggle to reach and distribute their products in smaller towns of the country. Born in a small town of Sitamarhi & growing up in tier 3 city like Haldwani, he could always relate to that problem.
The product availability was always a huge issue in such towns due to broken distribution networks while with rising income consumers were aspiring for such products. Hence, they both decided to solve this problem by making an efficient and cost-effective distribution model by aggregating distribution rights of multiple brands. Since they both belonged to North India, they left their jobs in Bangalore and came to Delhi. Two of our founders, who were batchmates from IIMA, and they immediately connected with the problem given their long stints in different organisations. They launched Niyotail in March 2019 which was a B2B distribution platform similar to Udaan & Jumbotail but catering only to the non-urban and rural markets.
They operated Niyotail for 9 months. Key learning from those 9 months were:
· While they went out to solve consumer aspirations, kiranas had a huge influence on the assortment that was kept at any store.
· The power in the entire value chain was either with the manufacturer or with the retailer, both of whom owned the consumers.
· Kiranas were selecting products primarily on margins but the underlying desire was to increase the income.
These three learnings led to the idea of 1K.
At 1K, they are building Bharat’s first network of Offline and Online (O&O) hyperlocal stores. 1K is an asset light model where stores are owned & operated by franchise partners (erstwhile kiranas) while 1K handles the entire sourcing, inventory management, pricing and sales & marketing for each store. The idea is to cater to every need of consumers in these markets leading to higher throughput for our franchise partners ultimately leading to a higher income for the franchisees and better experience for consumers.
2. What are the unique key points of your company?
We may look like a kirana tech company, but we are a consumer brand. Within one month of starting our franchise business, we realized that if we must increase the partner’s income, we need to focus on increasing its throughput as the margin game in this market can never be won. India is a land of entrepreneurs and each one of them is exceptionally good in sourcing and trading, but it is the science of sales & marketing where they lack. Hence, from the start we shifted our focus to consumers. If consumers will get what they desire, the sales & income of our partners will automatically increase. Today, we are the only player in the industry that gives an experience similar to “amazon go” to consumers in Bharat. Our warehousing systems, our store POS and our consumer app are so tightly coupled that for consumers, it becomes a novel and seamless experience. Today, we are already the largest retail player in Haryana in terms of number of touch points.
Another myth that we are breaking is the definition of online commerce. It is widely believed that online commerce means delivery at home. We believe that with the presence of touchpoints in every nook and corner, you do not need a delivery at home model especially for the experience seeking consumers of Bharat.
The need of saving time in Bharat is not so high as it is in the fast life of metros. Online commerce has other advantages that consumers need – it has choices, transparency, and engagement. Hence, we began with our focus on integrating the benefits of online commerce on top of the convenience and trust of offline commerce. Today, we are the only retail chain in the country that has 30,000+ downloads of its app that consumers are primarily using for shopping within the stores. We do provide a delivery at home option, but most consumers prefer in-store pick-ups.
The other unique advantage that we have is a 5X efficient supply chain with minimal customer acquisition and retention costs as compared to any e-commerce player. Since there is no need for us to deliver at doorstep, our supply chain costs are like any FMCG or B2B distributor. We are not looking to change the buying behaviour of a consumer, rather focusing on engaging our consumers on the platform. This focus has led to more than 40% customer retention and NPS of 65. We are the first ever Offline and Online (O&O) commerce model in India, and slowly but surely, are creating our own category by capturing the consumers mindshare rapidly.
3. How are you different from the existing competitors?
We are the first in our market. Currently, we do not have any competition as there is no one focussed on building a hyper local store network for Bharat. There are a few similar models for urban India, but they are either very asset heavy or focussed primarily on aggregating sourcing. The one key differentiator is that we are a consumer focussed company using the existing kirana network as a distributor. You can visualize this as a model like a hotel aggregator is where hotel aggregation helped in decreasing the prices for consumers and increasing the income for hotel owners, along with providing travel packages to expand the business. Similarly, in our model we are ensuring an unmatched experience for our consumers while increasing income for our partners.
4. What is the monetization model for 1K Kirana Bazar?
We are already unit economics positive through our trade margins and are reliably trending upwards month on month. Our next growth steps are to look at further monetizing our network through multiple strategic initiatives by launching our own brands and category expansion.
We understand that grocery as a category is very useful for customer acquisition which can be then leveraged for selling larger assortments in other categories. Hence, we are looking to go horizontal in our category expansion. Since, many such categories are largely under-served in our markets, we are seeing huge traction in these categories. For the last 2 months, we have been growing 50% week on week. As most of these categories are high margin categories, this is helping in increasing the income for us as well as for our partners while providing consumers what they desire.
5. What challenges are you facing in running your business?
“The only challenge that we see today is providing working capital loans to our potential partners. Since, many of these retailers who are interested in joining us do not have enough capital to invest, we are not able to partner with them. Since there is no credit history of these potential partners with any of the incumbent B2B players as well, we are not able to onboard these kiranas. There are 100 odd outlets which are in our pipeline and now we are looking to find a potential partner who can help us in onboarding such stores.”
6. How has the consumer’s response been so far?
Amazing! We never thought consumers in Bharat will be so inclined to adopt the consumer app. One thing that we realized is that if you integrate a product in the daily life of a consumer without forcing him to change behaviour and through the influence of a trusted partner, the adoption will be very smooth.
Since grocery purchase is a high frequency activity and consumers do not prefer to wait for such goods for 1-2 days, our offline shopping with online experience caught up instantaneously. Today, we are present only in 4 districts of Haryana, but we have more than 30,000 app downloads and more than 15,000 monthly active users.
7. What are the traction details (like number of users, app downloads & other achievements of 1K KIrana Bazar)?
We have 30,000+ app downloads with 15,000+ active users. We have already signed up more than 100 stores in 4 districts of Haryana. In the last 3 months, we have been able to double our store counts, triple our revenues and improve our unit economics by 80%. We work with a working capital of 6 days.
8. How do you look at expansion from Haryana to other geographies?
We are looking to expand first in the northern markets primarily in Haryana, Western UP, Punjab & Uttarakhand. Our focus is to seed new markets while building density in the existing markets. The growth is very organic as after seeding, word of mouth spreads very quickly which leads to more kiranas joining us. A prime example is the Dharuhera market where we started our first touch point in Jan 2020. The town has a population of 50,000 and in the last 12 months, 7 more touch points have been brought under our ambit. Today, you can find one 1K touch point every 800m in Dharuhera.
9. What are your marketing plans, in order to spread the word and grow?
Our strength is offline – every store facade provides me the visibility which helps us in getting leads and building density in the existing markets. Now, we are looking at digital channels to spread the word in new markets. Also, local print media can also be a key channel for us to market 1K in our target markets.
10. What has been the biggest learning so far?
The biggest learning for us was the understanding that although consumers in Bharat do not adopt grocery e-commerce (delivery at home) as the go to channel as the perceived use for that is very low but they are happy to use the online channel to engage, discover and buy. We are building an entire ecosystem based on this insight. Our franchise partners can deliver goods at doorstep but till now the need for that has been minimal. This is primarily due to the difference in life of a consumer living in such areas who is looking to find ways to spend time compared with a consumer in metros who is looking to preserve his time.
11. What is the market size and opportunity currently at hand for online Kirana at large?
65% of India lives in towns with population less than 1 Lakh. There are around 7,000 towns with populations between 5,000 to 1,00,000. This market is a solid USD 150 Billion market that we are looking to cater. Our model is unique in the sense that it first caters to grocery sale purchase, which is 70% of the consumption in such markets.
In the next 5 years, we are looking to win 5% share in such markets making us one of the largest retail players in the country. It is important to note that this will not be 1K’s journey but the journey of more than 25,000 local micro entrepreneurs who will help us in building this business and serving the consumers in these geographies.
Source: Business World