E-grocers double down on farm-to-plate sourcing models3 min read . Updated: 27 Aug 2020, 06:34 PM IST
- It takes three to four days for small shop owners to acquire supply directly from distributors and brands' agents. But startups like Shopkirana and Jumbotail are trying to remove middlemen and shorten the delivery cycle to 24 to 48 hours
BENGALURU: Online grocery startups such as Jumbotail, BigBasket, ShopKirana, among others, are doubling down on farm-to-plate sourcing models with a significant spike in demand for fresh produce.
Free movement of goods continues to be a challenge for medium and large farmers and fast moving consumer goods brands alike, and they are now banking on technology startups to help sell locally instead of transporting and selling their produce in a different state.
Through on-demand orders for kirana owners and demand forecasting dashboards for both farmers and kiranas, startups are not only helping them move to a new technology-led sourcing model but also slowly shifting them to the formal economy by opening bank and digital payment accounts.
For grocery e-tailer BigBasket, almost 80% of its fruits and vegetables and other fresh product items are sourced directly from farms, said Vipul Mittal, national category head, fruits & vegetables. Its ‘Farm Connect’ programme which has been active since 2015 currently has around 50 "collection centres" across 15 states and Mittal said the firm is working on doubling this in the coming quarters.
Under the programme, farmers bring their produce to collection points set up in the vicinity of their villages. BigBasket identifies farmers in small towns and remote areas growing specific crops and vegetables that border with tier-1 and tier-2 cities and then procure this supply directly from them.
"Most of these vegetables, fruits, and fresh produce are grown in the vicinity of the large cities, because they are highly perishable, and typically do not sustain long periods of travel. So we have identified these growing belts and we have created an infrastructure in those brewing belts," Mittal added.
Bigbasket also offers live market rates that are displayed in an electronic board at the collection points to ensure that farmers get the best price for their produce. The e-grocer also uses order-level data from its own consumers and combines it with data sourced from farmers to help growers understand demand patterns for each crop category they grow. Using such demand forecasting methods, farmers who work with BigBasket are able to prioritize their growing and harvest cycles for each crop, vegetable or fruit.
Amazon Retail India Pvt Ltd’s plans to offer the largest selection of fresh fruits and vegetables to customers in 2 hours. It is engaging with farmers and government bodies to develop a sustainable farm-to-fork model by investing in technology, an Amazon spokesperson said.
Business to business (B2B) focused startups like Shopkirana and Jumbotail are also doubling down on digitizing the kirana supply and sourcing model.
Indore-based Shopkirana provides an on-demand sourcing model for kiranas and small mom-and-pop stores who usually depend on brand agents to source their weekly supply of goods.
Typically, it takes three to four days for small shop owners to acquire their goods supply directly from distributors and brands' agents. But startups like Shopkirana and Jumbotail are playing an important part in removing middlemen and shortening the delivery cycle to just 24 to 48 hours.
"When it comes to tier-3 towns and villages or remote areas, small store owners sometimes have to travel 15-20 kms almost every day to fill-up stocks of FMCG products. So the pain point here is not only for small store owner but also for the FMCG retailer who has issues in reaching to smallest retailers who require their stock," Tanutejas Saraswat, founder and CEO, Shopkirana said.
Bengaluru-based Jumbotail is also assisting Kirana and small store owners by offering collateral-free credit, especially at a time when sources of credit had dried up during the prolonged lockdown.
“Even though many informal sources of credit have also slowed down, we have even been scaling credit disbursals to (small store) retailers using our NBFC partnerships. We have done around 200,000 credit transactions over the last 3 years, and more than ₹200 crore of credit volume at the same time," said Ashish Jhina, co-founder and chief operating officer, Jumbotail in a phone interview.
Jmbotail is also able to offer credit to small and micro retailers even as they don’t possess any formal credit scores. Jhina said that this is possible due to high-rate of repeat purchases, wherein around 85% of its monthly sales come from retailers who purchase goods 10 to 30 times a month.
“There is a good understanding of our retailer’s cash flow due to high-frequency purchases that allows us to not only help our (NBFC) partners underwrite the credit better, but also, you know, make sure that recollections (of loans) happen on time," Jhina added.
Despite billions of dollars poured into e-commerce companies from VC and PE investments every year, their retail market penetration is currently 1.5-2%, according to industry estimates. Another 7-8% sales come from modern retail formats such as supermarkets and convenience stores.