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Going Hyperlocal Through Vending Machines | Prerna Kalra @ Daalchini
410 Plays2 years ago
The Retail-as-a-Service platform, Daalchini helps micro-entrepreneurs set up smart vending machines and begin earning revenue within months. They are also a strong distribution network for cloud kitchens and direct-to-consumer food and beverage brands. Prerna shares how she found the right business strategy and their method of growing over 1000 vending machines now.
Know about:-
- Birth of the idea and naming Daalchini
- Intelligent retail and smart vending machines
- Revenue strategy
- Creating a phygital distribution network
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Transcript
Introduction and Early Career
00:00:00
Speaker
Hi everyone, I am Prerna Kharzra, founder and CEO of Dalchini.
00:00:16
Speaker
Investors across the world have invested billions of dollars into hyper-local startups like Septo and Dunzo that promise to deliver the product of your choice within 10-30 minutes. In this episode of the Founder Thesis Podcast, your host Akshay Dutt is talking with Prerna Kalra, the founder of
00:00:34
Speaker
Dalchini, which is building a platform to deliver food products to you within 60 seconds. Dalchini has built an amazingly asset-like platform of vending machines offering fresh hygienic healthy food within seconds. Their unique model allows micro-entrepreneurs to set up these vending machines and start earning revenue within months. And on the other hand, they are a formidable distribution channel for cloud kitchens and D2C food and beverage brands. In this conversation, Prerna shares her journey of finding the right business model and
00:01:03
Speaker
how they scale to about 1,000 vending machines today.
Entrepreneurial Ventures and Career Path
00:01:07
Speaker
Listen on, and if you like such thrilling conversations about discovering product-market fit, then do subscribe to the Founder Thesis Podcast on any audio streaming app.
00:01:24
Speaker
I was born in Meerut, which is a city in Uttar Pradesh, about 70 kilometers from Delhi. Then my parents ran a mom and pop store. They still do Kirana store and that actually was my inspiration to do retail tech startup. So, career-wise, I was the first engineer out of my entire family and the first, I would say, person to go out and study because I had interest in math science.
00:01:53
Speaker
started preparing for IITs and IAMs, etc., but landed in Punjab University, did my engineering from there in electronics and communication.
00:02:04
Speaker
And you didn't sit for placements after your engineering? I got through EAS Infosys, but then I wanted to do MBA after that. So I had applied for CAD also, and I had gone about 98.7 percentile in CAD. So that again gave me a reason that, okay, I should do MBA first.
00:02:25
Speaker
You chose IMT Ghaziwad because of proximity to Beirut. So then what, from campus, where did you set for placements? Yeah, from campus itself, I got into Fino payments bank. So my entry into FinTech happened because of that. But prior to that happened, Dal Thi needs in previous version, which was clinic foods at that point in time. So I did start up during my college time itself. And in fact, I
00:02:55
Speaker
So college meaning IFT or Bajab University? IFT and Clinic Food was basically a distribution of healthy food items. And it was 2009, Leeuwen brother crashed and hence my entire ambition to start a crashed because everybody was like, we're looking for a stable job and
00:03:16
Speaker
start-up culture etc was there in 2009 but still it was just coming up and I would say that I did not have that much guts at that point in time probably did not have money right to start out took a safer option and sat for placement and though I had in one of the B-Plan competition I won 50,000 for starting up in fact clean foods but then also we did launch it
00:03:42
Speaker
What was your distribution plan for that? How would you distribute? Was it through retail outlets? Like a D2C? Build your own brand? Yeah, if you today talk about D2C, everybody knows. But in 2009, it was not known. And we had plans to do a D2C model of distributing fresh food.
Journey with Paytm and Financial Inclusion
00:04:03
Speaker
fresh baked items, both Indianized version which is basically chapatis distribution and that was the idea. Like people can do a monthly subscription and get fresh chapatis at their home.
00:04:14
Speaker
at home delivered. And it's not like a frozen chapati or it's fresh chapati, like you get fresh bread, which is like three, two, seven days shelf life. Similarly, fresh chapatis you would get delivered. And different versions of chapatis from Viti Parathas, two kinds of things, right, that you would get delivered at home. And then you can do a subscription on it and take more items on it.
00:04:38
Speaker
So that was the idea, initial idea. We did try it out in college with few work from professors and all that, but then did not materialize it beyond college campus.
00:04:49
Speaker
Okay. Got it. Interesting. Okay. So what were you doing at Fino? So Fino I was... Tell me a bit about Fino also. What is Fino? What do they do? So Fino is basically into financial inclusion. So it's basically open tech company, which is more into last my financial product distribution.
00:05:08
Speaker
for banks and NDHCs, but primarily into rural areas. So it would be like beyond tier two, tier three cities. All of these RSVYs, etc., Rashi Aswash, Viva Yosh now, so they would distribute insurance, Marega payment, basically all that, labor payments that the government distributes for that adhar-linked payment distribution, etc., they had set up. There would be block coordinators and district coordinators who would distribute
00:05:37
Speaker
insurance, to loans, to savings accounts, to their government payments, everything to that mobile handle device. And because I was placed there as a management training, my job was to learn how the distribution work because
00:05:54
Speaker
Eventually I was then moved to the product team over there who was developing product for rural fintech space. And that's where I met founder of ATM in one of the constraints and you discussed the idea and then I came for an interview. This was when ATM was known as a recharge your mobile phone kind of a service. Yeah, yeah, 2011.
00:06:17
Speaker
They didn't have a wallet yet. Yeah, they did not have a wallet. So 2011, it was just a mobile recharge website. In fact, even an app was not there. And 2011, they were just starting work. They had applied for license of PTM wallet to RBI. And that's the time I joined PTM. So that was among the first three people out there. Probably the first one from the FinTech space to join this.
00:06:43
Speaker
started as a product manager over there and then ended up as the product manager. For about eight years, I was heading the payments product at Paytm. Including Paytm wallet and Paytm back. The core Paytm app was your baby, basically.
00:07:03
Speaker
Yeah, so all that scan and pay that you see that part. So there are a bunch of features in Paytm. I have from Uber Recharge to Marketless, etc. The payment portion, wallet scan and pay, payment gateway, and then the Paytm payments bank was my last product that I enlarged to Y at Paytm. So you executed that Uber partnership?
00:07:25
Speaker
Yeah, Uber partnership from earnings on the product standpoint. That was also an interesting time period because RBI asked Uber to comply to their guidelines and Payteam gave this as a solution to them, that how they can comply to RBI guidelines. That frictionless, like as soon as you write this, then you just walk out. Yeah, yeah. Were you there during demonetization?
00:07:46
Speaker
Yeah, I would say that at least for 15 days, me and my entire team were in office for more than 18 hours, right in office. And we were churning out products like nothing. Every day we were doing a release which was like the most important reason of the day and everybody has to be there in office for doing it.
00:08:07
Speaker
Giving examples, what kind of products would you get? How you can sign up for QR code based payment in one day. So it was for most of the products were for the merchant side because consumer penetration of Paytm was there. Even prior to pre-demontization it was there. But what was not there, merchant acceptance.
00:08:26
Speaker
And the consumer product was also mature. Consumer product was mature, but merchant side acceptance was not there in the offline space. And were you there when UPI was launched? Yes, my last product at FETM was FETM payments bank only. And the FETM was part of the first release of FETM payments bank.
00:08:47
Speaker
In fact, PTM was delayed in launching UPI primarily because of PTM payments bank. PTM payments bank had to go and then only UPI had to go because if you see all other payments app, for example, Google Pay or they have their handles at, it has a handle of at PTM. But for that PTM handle, it had to become PTM payments bank first and then get that handle.
00:09:14
Speaker
I was under the impression that PTM was going slow on UPI adoption because it would hit the wallet business. Because if the wallet business, there's that 2% that they would write when the budget withdraws the money. And that's what people say. Which in UPI, then that budget discount rate is zero.
00:09:34
Speaker
That's what people say, but they had to launch the Pippin bank. Otherwise, they would have also ended up creating handles in the bank's name, in some other bank's name. And it's difficult to acquire customers again and again, I think.
Dalchini's Genesis: Concept to Execution
00:09:49
Speaker
Okay, okay, okay. To me, it looks like this, that's the key strategy, at least at that point in time. Okay, so then what, what would you leave Pityam?
00:09:57
Speaker
In 2017, after the launch of Payteam's payment bank, that's when I decided, okay, I'm done with FinTech. I have done a lot of it. I actually wanted to do something in the retail tech space. So, payments is you're building a platform for microtransactions. That's what you're doing. And I wanted to do something similar for the retail space.
00:10:21
Speaker
How do you digitize the micro-ordering, which happens at every retail outlet? How can you bring technology over there? And I've seen the pain. You stand at the store from morning 9 a.m. to 10 p.m. the night, and you have a lot for just for the walk-in customers, right? But there is a lot of scope over there that you can digitize a lot of those transactions and make simpler for those retailers.
00:10:48
Speaker
So that was the idea. And I had this kidney food thing in my brain that I have to create a distribution for fresh, handy food. All of these things were going out in my mind that I wanted to do some trials. I asked that I want to do some trials and I'm leaving. So he asked me that while you're working here, you come once or twice a week. You start with your idea, right? And in 2017, I started with vending machines.
00:11:14
Speaker
One in BTM offices and one in 91 springboard, which is a co-working space. With two vending machines. In NIDA only. In NIDA only. Primarily dispensing braids. Different kinds of braids.
00:11:29
Speaker
methi parathas, plain paratha, ajwani parathas and sandwiches, wraps, rolls. Fresh food basically being dispensed through vending machine. So you can like instantly without waiting 40 minutes and without spending 40 rupees of your delivery time and cost, you can get instant healthy food.
00:11:49
Speaker
This would like, this would remain warm inside the machine or you would heat it in a microwave after you buy it. Yes, it would remain old. Like you keep your food in fridge and it remains fresh like that. So it would remain fresh inside the vending machine. And when you take it out, there is a microwave attached to it. There's a vent attached to it. You just microwave it and consume it.
00:12:09
Speaker
That was what I was trying. Prior to that, when I was there in PTM, I had gone to China a number of times and I had seen this happening there. It was new in India, but not otherwise. Like in China, you saw what? Fresh food available or was it like?
00:12:27
Speaker
Momos being dispensed through vending machines. That was something that I saw there. And I was like, my basically memory of vending machines is at the airport dispensing, coldering, water and chips. Perfect. That's it. And it was so different than dispensing, wild eggs, momos, fruit boxes, everything from vending machine versus in India, only those packaged food.
00:12:51
Speaker
And so actually, I would say that I did not come up with dalchini as an idea on day one. I had these dots and I wanted to do fresh food distribution. I want to do last while there has to be a retail element to it because I want to make it instant for the customer. I don't want people to be there and a lot of operation element over there. So I wanted to do some kind of automated.
00:13:16
Speaker
You use tech to remove friction. Yeah, because I do not want people like my father to be sitting there all day on those retail stores. So while I had to be near the customers, but did not want people to be managing those stores all the time, rather being more efficient when it comes to people resources.
00:13:37
Speaker
So these dots were there. I was just trying to finesse if can vending machines or can a smart store. So what we have at Dalgene is actually not a vending machine. We call it as Dalgene because it's not really a vending machine. It's a much smarter version of it because it manages time. It manages temperature. It manages a lot of things about that smart store. It also understand what the consumer wants based on data. So it would
00:14:03
Speaker
project that okay this office people mostly consume methi parathas at say 3 p.m to 4 p.m so they would accordingly customize the menu for this kind of location and then bundle it with the supply chain and give the information to the people who manage say sector 2 right in wild so that is what our idea of smart retail was that it has to be link this entire supply chain so that
00:14:32
Speaker
we are able to deliver both perishable and non-perishable items in the equally efficient manner. Tell me the journey from 91 Springboard and PTM, you had your test machines. These test machines you imported from China? So I went to Coimbatore for three days, got it developed over there, like sitting there with huge engineers multiple times, went there and then got it done over there. There are companies which make this in India. I guess this would be like a refrigerator plus plus.
00:15:00
Speaker
Yeah, so then I had a vacant flat in Noida. So, I got a bunch of engineers whom I knew from my PTM times. I had left PTM some time back. So, I got them in that vacant flat. And we all sat there and designed this. Then we got a contract manufacture, didn't go in, but we got those two machines to Noida and installed it, right. And it was,
00:15:24
Speaker
And it had a QR code base payment, like you could scan and pay. There was no buttons on this vending machine. Okay, there was a display. It was not really like the vending machine you would have seen at airport etc. It was just a touchscreen or there is a QR code you scan and you experience it on your own mobile phone. Okay, you can download the app and then order through the app and
00:15:48
Speaker
Yeah, you can download the app or you can just scan and sit back and just browse what is available and then block your items from the vending machine and pick it up instantly from there. So that was the kind of experience we wanted to give because
00:16:03
Speaker
I had seen that home delivery apps, et cetera, Zumato, and Swiggy, et cetera. They were doing both. People were getting the opportunity of ordering while sitting on their desk. That was my objective, that, okay, I am creating a physical distribution, but it has to be hyper-local Zumato.
00:16:21
Speaker
Yeah, digital elements to it. So it has to be physical plus digital, both put together. It would become difficult, but it should be able to give that experience to the customers. So from these two machines, then tell me the journey.
00:16:37
Speaker
So in fact, during these two journeys, you met a lot of cloud kitchen guys. How do you prepare food for vending machines? I come from FinTech background. I understand tech. I was passionate about retail tech, but it's food. Oh, God. So in fact,
00:16:53
Speaker
caught one person who was working in the same parking space as a restaurant manager of their canteen. We said, come, sit with us, explain us food. So then we got on board with somebody who had 10 years of experience working with Bizao Heart and McDonald's. And we asked them to explain us that how food works so that we can relate to how food in vending machine would work, marriage between the two, because food had to be modified in a way so that it could stay good in the vending machine.
00:17:22
Speaker
And yet, it had to be a bit less, et cetera, because that was the core objective, providing fresh food, right? Did a lot of brainstorming work around that. It took us six months to create a perfect product. When I say product in the vending machine, a lot of work going on, how to perfect that hardware aspect of it. The hardware, the app, and the food. These would be the three elements.
Scaling Dalchini: Franchise Model and Tech Innovation
00:17:45
Speaker
The order experience, the point of sale hardware, and the supply chain for the food.
00:17:51
Speaker
supply chain for the food. In April 2018, we actually started then ramping this up with from 2 to 5 to 10. What made you confident that you have found product market fit? What was each machine doing in terms of revenue? We were doing about 50-60,000 a month, which is about 2,000 rupees worth of sale per day from each vending machine. That was a good number we had achieved.
00:18:17
Speaker
You had to pay rent to the facility owner or this was a value add, so they were not charging you. This was a value add service because obviously people in both co-working space and at BTS, they used to stay long as they had long working guards. And we could see that from data also, right? There were peaks in sales during that time period after 6-7, when the canteen, office capital etc. all is closed, you would see a peak. Right.
00:18:46
Speaker
over there. You would see a peak in the morning breakfast and that's what told us that we need to have some timelines for refilling the vending machine because our customers come to us at 9am in the morning. Data gave us a lot of insights around what is what, when, how, where the customer is asking for.
00:19:07
Speaker
and we kept correcting on that aspect. We kept on working on both on all these three elements like the user experience on the app side, the hardware and the product being sourced and refilled to the vending machine.
00:19:19
Speaker
The vending machine was like IoT enabled, so it would give you back data of each unit being sold and so on and so forth. Like what were you getting data from the machine? Yeah, so they were like about 23 elements captured through all the vending machines, which was helping the supply chain to get perfected. Apart from that, even on the vending machine side, we were able to control the temperature, music, light,
00:19:44
Speaker
The shelf life of the product, all of that experience around the vending machine was something that we were able to control remotely. And that actually became our backbone because a traditional vending machine, you would not have that kind of a control and health, perishable food was not possible.
00:20:02
Speaker
So in fact, I would say on the fresh food side that we started capturing a lot of insight from the customers also that we started showing them menu and start starting asking them what would you like to buy right from the in fact, I would say that a lot of
00:20:18
Speaker
customer insights was captured by that intern of ours who was on the customer support side with whom we would sit another week and gather all the inputs that we would have got for the entire week so that on the weekend the tech team can work on those aspects. So each machine doing 2000 a day, so what is the break event period? Because you would pay upfront to buy a machine, so what is the payback period for that?
00:20:41
Speaker
vending machine which is doing this kind of a sale would pay back in about 8-10 months on the initial cost. Say it costs about a lakh plus so it would pay off and in fact during that time we discovered how do you really scale in a environment like this where it's mostly if you look at startups of today they're asset light. You have to buy the asset
00:21:04
Speaker
Yeah, so we had to buy the assets. Obviously, that problem solving came on a little later. But the first year we spent was basically perfecting these three elements, which is the user experience, the hardware experience and the product being sold through the vending machine. That was the basic task. And how did you acquire more locations? Was it like through company tie-ups or like co-working tie-ups?
00:21:27
Speaker
Yeah, mostly I'm not just client in the first year itself was ENY. And how did we do that? That was also very interesting story. So we, like I, and one of my early teammates, we approached ENY. We said that we have this vending machine, which can actually sell fresh food.
00:21:44
Speaker
And we had E&Y team members in PTM also who had experience. But obviously through them we connected, but that never gave us a foot in the door. What gave us foot in the door was we said that we want to give this vending machine for free for one month as a demo to you. You just experience. If you liked it, then you take it for all your offices. And in one month's time period, we got a card.
00:22:07
Speaker
Give it for free means what? Like you will not charge anything to the employees. They can just order. No, we would not charge the company for putting up this vending machine. We would just put them. Oh, okay. In your business model, there were two revenue sources. One is on sale of product and second is you would charge the company also something.
00:22:27
Speaker
Yeah, as a subscription to the company, we would charge something subscription fee for picking up this out. So I want to understand this decision a bit better. Why not just through sale of product?
00:22:39
Speaker
Okay, so this is like an added revenue source that you are adding. When you are going into corporates, you are only serving corporates employees. It's not a vending machine for public. But when you're setting it up in say, maybe a hospital, maybe in a mall or maybe in a market, that's not where you are charging them any subscription fees.
00:22:59
Speaker
That's where it is. It is something that you are paying it off. And obviously when you are just giving that as a service to the employees or the members of that corporate. So, hence we had put up a subscription fee for the corporate because it was a premium service.
00:23:14
Speaker
Probably the price would be different. Say the price for a mall might be slightly higher than the price inside a corporate. Yeah, pricing for the corporate etc. Obviously, we wanted to make it very affordable because it's an everyday food for their employees. If you today also look at how corporates work, they do subsidize food for their employees. Yeah, so this was another subsidy only in a way. By paying you a subscription, you would be able to sell the products at a slightly lower price.
00:23:42
Speaker
Yeah, and like it's basically providing fresh food, healthy food for their employees every day. So it's a premium service because unlike a traditional vending machine, which would only serve packaged food, right? Here they were even getting food boxes in the vending machine. They were getting fresh, real fruits.
00:24:00
Speaker
all through one vending machine. It's like a six-square-foot area, serving maybe three tuck shops would have served. So that basically acted in our, I would say, advantage for us, and we were able to charge the corporates. But before doing that, like I mentioned that we gave it as a demo to Paytm, to ENY, and asked them that if they can put this up right, just for a demo.
00:24:24
Speaker
And they really liked it. And then they extended the order for about 10 machines. And then it was not going back because we kept on hiding in more and more of their offices as we started growing. But a lot of our early clients came with that as a model. We entered into Snapdeal. We entered into MeteIO. A lot of these clientele came with that as a model.
00:24:48
Speaker
First month free and then the subscription would start. If you don't like the service, you would take it back after 45 days. And how much is the amount you charge for subscription? So it's 150 rupees per day, which is very normal. It's nothing. So as a corporate also, they like it.
00:25:05
Speaker
And what is your margin on sale of product? If you're selling what, 2000 every day, how much do you earn from that? About a 30 odd percent because fresh food has better margins and we has very low operational cost per se. So we had started making like in 45 days time period of when I wish she would break even on the operational level. And the payback would be about eight to 10 months. Your product was like your Noida flat became a kitchen for making the product or like how did you make the product?
00:25:35
Speaker
That was under the rags for making wedding machines, assembling wedding machines. And before we actually moved into a proper space for doing it. For food, we actually had tied up with new cloud kitchens in and around NCR. And the cloud kitchen concept was also moving equally in that time period. A lot of them like customized food, including jubilant foods. They also came on board, they customized a few of the
00:26:02
Speaker
products like rice combos, etc., which would fit in well into the vending machines. So supplying some items.
00:26:09
Speaker
Jubilant runs cloud kitchens in addition to the Domino's franchisee or like within the Domino's itself. Jubilant Food which is a parent company. So they have Jubilant Foodworks, they have this division which makes frequent food as well. It includes dal, chawal, rajma, chawal. Primarily they supply it to corporate but they customize the product for our vending machine and that also became a hit which gives us confidence that you can not only sell breads
00:26:37
Speaker
Panata's sandwich is a sector but you can actually also sell Rajma's out from the vending machine. So from Vadapav to Rajma Chawal everything is sellable from the vending machine and for the customer it is instantly available. Okay, amazing. So yeah, let's talk about that growth journey. So you hit 50 and this was mostly with corporates. You were telling me like EYS tap deal.
00:26:59
Speaker
Yeah, mostly through our connects, through corporates, we were able to, we were still bootstrapped for this entire time period. I sold some of my ESOPs or stocks that I had with PayTAM and was working on building this as a model in itself. But what really hit road was that, okay, beyond 50, okay, when you have to invest into the hardware, how would we do that?
00:27:22
Speaker
A business model, per se, from the consumer side is there. You have achieved product market. You know, in an individual unit, you are making money. But how would you grow that? When you say that you want to be at every 200 meters of habitable area, which means lakhs or lakhs of vending machines.
00:27:39
Speaker
How would it do that? And that's where we started building on a franchising model whereby people or like micro entrepreneurs would come in and would take this as a franchisee and would do it in their own area. So in fact, my first franchisee partner was a female entrepreneur.
00:27:59
Speaker
who came, who joined us and started with 4 vending machines and gives us a confidence that if we keep adding such people who would have their own geographies, their own cohorts in which they would build their own set of vending machines, your asset cost
00:28:15
Speaker
suddenly from the entire platform has gone away. And that's where our first pivot, or I would say our first change in the model happened. That instead of being a vending machine player, we wanted to become, we started becoming a vending machine platform. I would say instead of becoming a Meru, we started becoming more like an Ola or Uber.
00:28:34
Speaker
Well, we started enabling others to start a dulcini business, start a dulcini franchisee, right? Our startup fresh food vending machine in their own selected job or piece. And we became an enabler in providing them license support, technology support, vendor support, whatever was required for running this business, we started giving them.
00:28:57
Speaker
I want to just zoom in on this a little more on the franchisee model. So say a franchisee would pay five lakhs, get four machines in that and some territory defined for them. And then who would do fulfillment like the stock up? So we would have distributors of fulfillment agents in each geography defined. Who would help them do the distribution part?
00:29:19
Speaker
And the franchisee would directly pay the distribution agent and also the cloud kitchen that was like directly between the franchisee. It was not being routed through you, but you were just... We created a partner app for it where he connected three partners that we had, the franchisee, the vendor, and we call them distribution force, the delivery boy, so to say.
00:29:42
Speaker
We connected all three of them through our partner app. So that was the product that came in year two. We did not have that in year one, but when we started working around the maths of scaling this model, so that's where we created this. And this also helped us onboard a lot of brands in our journey, who wanted to sell a lot of cloud kitchens, who wanted to sell on our platform.
00:30:03
Speaker
But on the franchisee side, they were not connected to them. How would a franchise that I have to procure food from X? That was a platform we barely connected to both of them. It also ensured quality food because it was selected vendor supplying select set of items to the franchisee. And being the distribution force also on the same platform, so we were able to measure
00:30:27
Speaker
Their SLAs also, if they're meeting those SLAs or not, of refilling on time, reselling on a set frequency, also creating SOPs on what kind of location to be served, or what time period, based on sales, etc. Yeah, that's it. So these SOPs were for the franchisee owner. The franchisee owner would essentially operate this business and take those decisions, like deciding what he was like, whether he was to sell Rajma Chawal or what about that decision he would take.
00:30:56
Speaker
Yeah, that's what started happening and that actually became a kind of a problem for us because if the franchisee would decide the consumer elements would get lost, the consumer would need X, but if the franchisee would want to sell Y because of his or her margins.
00:31:12
Speaker
So that's where we brought in a product called OFT. We call it as OFT order for tomorrow. It's an AI based tool. It captures the input of that location, various parameters, and generates menu and with quantity. This much should be refilled in this vending machine, which comes to the franchisee partners who are partner up. And that is what is taken then as an input in deciding what is to be refilled into the vending machine.
00:31:38
Speaker
Obviously, in the real days of our business, we actually had hit roadblocks because of this element being missing. But then over a period of time, we... How did you realize that this is a problem, that franchisee owners are ordering whatever they want and customer is not happy with their selection?
00:32:00
Speaker
So I would say there is like in this entire like five year almost five year journey of Ganchini there was one very key element that we all always as the core team stand by which was what is customer saying? What is that the customer actually wants? And we kept our customer support team
00:32:21
Speaker
from the day one itself. In fact, our first intern was hired just for customer support because we actually wanted to get those insights on every week level. That gave us the insight. The partner was refilling X while the customer wanted Y. And we quickly went back to the boardroom and decided to brainstorm, how do you control this element? And the entire
00:32:45
Speaker
idea of building OFT actually came through the customer insight zone. So after that, we started creating menus which were pre-published to the consumers and consumers can actually show their intent of what they want to buy, what they don't want to buy, et cetera. And obviously data played a big role in deciding on what should be placed as part of the menu in each location.
Expanding Dalchini: Collaborations and Market Strategies
00:33:08
Speaker
But essentially, franchisees unlocked location intelligence. Like a franchisee would know that, OK, in, let's say, Greater Noida, these are the places where we can place vending machines. And they would probably have some network. And through their network, they would also get the doors open, start the conversation. And your team would support in that conversion. So it gave you that. Wow.
00:33:31
Speaker
opening of doors and location intelligence in addition to money, of course, that they were investing in buying the hardware. Yeah. So basically, I would say that when the partner came in, some bought location and investment both, some only came with investment, some brought in location and some of them were distributors of FMCG companies.
00:33:52
Speaker
They came in as strategy partners, but they did not have investment. So we connected them to NBFCs through our platform to get that asset financing loan to fund the asset. So the idea was to like, if you have to create this network, you have to have people who would be equally passionate about this.
00:34:12
Speaker
network, creating this network as you are, as a company, how much can a company itself create? It has to have partners who are also equally passionate about it and also creating and growing it with the same intent, with the same energy and whatever that partner needed. The idea was as a platform, we shouldn't be able to provide them that.
00:34:30
Speaker
What is the expectation from a partner? Does in addition to that one-time investment, does it need to go visit locations, do any such thing? Or is it all on the app? As a model, we created master franchisees and the entire ecosystem, right? Which basically enables the partner on the ground to cover for the things that they don't have. If they don't have location, they just have investment. And the distribution service, we would help them in scouting for locations.
00:35:03
Speaker
So distribution doesn't have to be through the app. Like you said, you have the distribution force available on the app. That is not necessary. Someone can send their own boy to pick up from a cloud kitchen and stock it in the machine. Yeah, but that also is routed through app only. They all have to get onboarded onto the app itself because the vending machines and everything, all dulcini stores, they all are controlled through the app itself. It all gets connected to one single cloud where you're managing supply chain and the smart stores both.
00:35:22
Speaker
So we have third bucket tiles, we have...
00:35:32
Speaker
For logistics, when you are providing logistics support, do you use some third parties, say Shadowfax or one of those types? Yeah. So we do have like entire fleet of people who would do distribution because earlier we were dependent on some of these TPS, but now we have our own fleet of people who are managing. In fact, most of the metrocities, we would have a dedicated like partner who would have the entire fleet on their payroll, I would say, and would manage it for us.
00:36:02
Speaker
Okay. And you have some sort of onboarding journey for the distributor, for the distribution field boy, so that he can learn how to open the machine. In fact, like in our entire journey, we came across a lot of such people who joined us as a distribution force and now on managing two, three cities that become city managers. So training became an essential component when we onboarded a particular partner with us, because it was unlike just
00:36:28
Speaker
Amazon, Swiggy, Zomato delivery, where you just have to pick up from point to point. It was also operating that smart store, refilling that smart store. So it was little more than just point to point and delivery, and hence, training became very important.
00:36:44
Speaker
We actually ran crash courses in every city that we would go for as partners for the franchisee, for the distributor. You would run crash courses to onboard them, to train them, and then to do repeat trainings every month once. So that became an essential part of our journey. In fact,
00:37:03
Speaker
When we launched, one of the largest deployment that we did was in Reliance, January, maybe it's a 20,000 acre plant of Reliance and it is world's largest refinery. And we got a contract to put up about 90 vending machines, 90 smart stores over there. And we had just 45 days time period. And it was peak of COVID-2, wave to April, 2021.
00:37:28
Speaker
The entire team, which was trained over in NCR, went there, a three-member team, and had actually launched the entire 90 vending machines in just 45 days' time period. So onboarding training like you asked, right, became a very essential component of this journey. And you pay, or rather the franchisee pays the distribution person on a per... On a permission person, yeah. For every run that they do, they get paid a certain amount.
00:37:54
Speaker
every refilling that they do and every extra refilling they get obviously beyond the minimum they get commissions and incentives. So what do you earn from a franchisee? What is your relationship? Ours is like a like we have a subscription with the client which is the location owner similarly we have a subscription with the franchisee partner. Okay that 150 rupees a day that
00:38:16
Speaker
which is basically with the corporate, but there is a one which we run with the franchisee partner, which is a percentage of sales and a fixed component that we earn from them. The idea over there is basically because as the sales grow, as their business grows, so it's lower in the initial period where the sales are lesser, but beyond the mark, then it starts increasing. Got it. What is that number? Like what percentage they share with you?
00:38:43
Speaker
So about three to five percent of the sales is something that they share with us. Okay. So like a large part of the margin is with them only because you said 30 percent margin. So 25 percent of that is them and five percent is going to you. Plus some fixed daily amount.
00:38:57
Speaker
Yeah. So basically a large component was to the franchisee partner because that's what the idea is that we want to create such ecosystem players who are basically it's a company in itself and is able to grow in that territory and create that impact in that.
00:39:13
Speaker
You said you now have master franchisee franchisee, like different levels. How does that work? So basically, they would be partners who would have only 5 to 10 vending machines. So they would be franchisee partners. But then there would be partners who would manage 60 plus 50 or more. So they would have a larger territory. And they might have some smaller franchisees under them. So a franchisee would be also I running a PG and I have say two, three PGs. And I'm running them and I want to put a vending machine in all of them.
00:39:42
Speaker
But I don't intend to become a Dalchini Sensaiji partner on an overall basis or for a territory, right? So in that case, we connect them to a Master of Sensaiji who would then help them with logistic work, all the supply chain support, they would need any technical support, maintenance support, etc. So in a way, it's almost like FMCG supply chain where you have distributors and retailers, so something similar here. And like when a customer pays, there's only digital payment, you don't have any cash option.
00:40:12
Speaker
Yeah, our vending machines are 100% cashless vending machines. That cash will first hit your account and then you will further deduct your take from it and send it to the franchisee.
00:40:22
Speaker
Yeah, it's the escrow. And obviously, this also helps in getting our franchisee partner loans or asset financing from the NBFCs also, because the money first hits that account. It also gives that, I would say, comfort to the financing partners and helps them grow also, because if the partner needs financing for the asset, that also has to be looked into and from the model itself.
00:40:48
Speaker
Okay, so there could be an arrangement where the FinTech partner, which is giving the loan, can do like a daily deduction. Yeah, we call it as EDIV. We actually launched that during COVID times, a lot of our FinCISy partners who wanted to scale but did not want to invest upfront. So we created a model in which there were NBFCs who were financing the assets and they were making daily deductions and then the FinCISy was getting the rest of them out on a daily basis.
00:41:13
Speaker
When you create a platform, the problem statement for say, like converges to one, which is you want to solve the customer instant, anytime, anywhere, that is just the problems written from the consumer. But if you look at downs out, there are a lot of other equally important aspects, which will not scale if you don't solve those key problems for the partners that you have in hand.
00:41:37
Speaker
So this financing was one, like there was another one where basically a lot of brands who wanted to sell on our platform, were not really known to the consumers, how they were given better margins, but the franchisee partner was like, they don't sell, what do I do, et cetera, right? That the right mix of product is sort made, which gives you the right balance of margins and yet you don't lose on to the sales.
00:42:02
Speaker
Rana also became a key element of our entire picture and we created a product for a lot of D2C branch to sell on our platform by advertising and listing their products and pass on that advertising and listing to the franchisee partner to give them of comfort to basically like whatever revenue loss that they get because maybe the product gets lesser sold than as comparison to a regular FMCG brand.
00:42:27
Speaker
On the other side, giving that option to the consumer because unless they try it out, how would they know whether the product is good or not? And just like when you say like an FMCG company wants to launch new product through their GTs and general trades and modern trades, they had their entire GTM plan. So it was equal to that when you're launching and creating this for about 600 odd stores.
00:42:50
Speaker
The good part was that data played in our favor, because we had a lot of data inside before doing this. By that time, we had already built into our analytics platform, which gains us insight that, OK, this price point product, the 50 rupee bar, you might not want to launch it in, say, a manufacturing plant where the AOV is about 28, 29. You will not want to launch it all day.
00:43:17
Speaker
Yeah, so that data insight helped us capture onto this wave of D2C brands which was going on and helped them launch. In fact, during this journey, a lot of brand launched their single brand stores with dulcini as the
00:43:34
Speaker
core platform and they launched their own entire smart stores on our platform which was which would say powered by the Alshini app and they would have only their own products also stacked into the smart store. So this really like in a shopping area like a mall or something where
00:43:51
Speaker
Yeah, a metro station or a mall where the brand would want to launch their product and we would help them land their entire GTM for it. But the brand in this FNB segment, they like this model because their operational costs are very lower.
00:44:09
Speaker
They also saw the value in launching their products in R5 Pro because we were right there where their actual TG is in offices, in hospitals, in colleges and they all wanted to reach out this customer segment because
00:44:24
Speaker
beyond the digital e-commerce penetration that they got through Amazon Flipkart degrees, etc. What next? How do they get new customers? How do they get customers to paste their product? Because if you buy on Amazon Flipkart, etc., you only can buy their entire batch of, say, 6 baht or 12 baht. Unlike that on our platform, they could actually try it out. Just one baht or two the customer could buy it.
00:44:48
Speaker
maybe they could run an offer on single bar or maybe buy it to get one thing, something like that on our platform and get that customer's insights to our app itself. So we call it as precise sampling. When a brand wants to launch their product in a particular TG, you say they only want to launch it in colleges or educational institutes, coaching institute sectors. Say this and like this as a TG, right? In this, do you earn from the brand say Snickers wanted to launch that K-service tab?
00:45:17
Speaker
Yeah, definitely. In this case, like when the brand would give you a platform fees, second, they would want to run some offers so that they would like say, run an offer for franchisees that you can buy this at a discount so that their margin is better. They could do that. And third, they could also run an offer for end consumer where like the end consumer, when they open the app to order, they could be like a deals and they could be like, get five rupees off on stickers.
00:45:42
Speaker
So, we would cross-sell the customers while they are ordering on the app or on the kiosk. We would obviously repeat purchases can be incentivized for a particular brand, for their one product or for their bunch of products. All of this is like both physical and digital elements all club together. So, when the customer is right there in front of the
00:46:03
Speaker
Smart store, he's standing there, he's looking, gazing at it and trying to browse what is available. If at that point in time you give them an offer, hey, you're buying this, would you want to add a bar to it? Or would you want to, are you buying a vada pa, would you want to add a juice to it? Then it's a sore and sore for running on it. That is, and because
00:46:23
Speaker
See a lot of this food purchases and like we all know data that a lot of this retail still happens offline, still more than 80% while we have e-commerce, growing, etc. The impulse purchases still today in NTR are happening offline and all of this entire segment of FNB purchases of food products, right? This is all impulse.
00:46:47
Speaker
Yeah, I would not really order an unknown brand online. An unknown brand maybe I see in a store, I might still buy it, especially food, but it's unlikely that I would see an unknown brand online and order it. That's true.
00:46:59
Speaker
Correct. And you would want to buy a small portion of it, which can be distributed only through a distribution, which is like this, or GTFT, General Trade, Kiana stores, the kinds that my parents run. How much do you earn from brands? What percentage of your top line comes from this marketing support to brands? About 10 to 15% as on date is already coming from. Do you see that becoming more significant?
00:47:25
Speaker
See, today we have only a bunch of brands who have single brand stores. I've seen over a period of time when the penetration of smart stores, vending machines, etc., have grown, more and more brands would come up who would want to launch their single brand stores. So that is one major reason that I see that this would become big right over a period of time.
00:47:46
Speaker
Within this earning from brand, how much comes from a single brand store where the brand is paying you a flat subscription? And how much comes from the go-to-market where you are promoting the brand? I would say majorly is go-to-market one, whereby basically through our own franchisees of 800 smart stores, most of the brands are selling through that. Most of it is still that. There are very lesser brands who are doing single brand stores. But that is something that I'm seeing.
00:48:12
Speaker
seeing that a lot of brands were showing now in trust and would like to. They initially started with one slot. Now they want a tray that at least give me three slots or six slots or a tray so that more of my flavours or more of my products are there on the shelf. That trend is something that we are already seeing and hence I think that would become significant over a period of time.
00:48:38
Speaker
You can't really promise them a whole tray, right? Because if a franchisee doesn't want to display that, doesn't want to order that product, or there is enough incentive for the franchisee also in this. There is enough incentive that we pass on to the franchisee partner also for this. We also don't promise them the entire tray. But what I'm saying is that there is a lot of interest now for them to take the entire tray. And they're willing to pay because they're seeing that they are getting repeat purchase when they have taken a single slot in the vending machine.
00:49:08
Speaker
because if you look at like SMG products like food and beverage products and the D2C brand in this segment versus a D2C brand in Aparangal or maybe cosmetic etc, the very big difference right in the way their distributions are set up because a lipstick which is distributed through a website or something that's the cost is about 500 and hence
00:49:34
Speaker
When it gets delivered at about 40-50 rupees, it is still less than 10% of the product cost. But for a chips or an energy bar of the same size, which is also of 50 rupees or maybe 100 rupees,
00:49:49
Speaker
If the delivery cost is again 40 rupees, how would the brand deliver that to the consumer in a more efficient way? A brand would not be able to deliver a single packet. Helps a distribution like us, which basically works on a more of a hub and spoke model. You collect it at a master franchisee, then you work to a hub, which is a franchisee and the franchisee reselling to the different vending
Growth During COVID and Strategic Expansion
00:50:13
Speaker
machines. This whole hub and spoke model is required and
00:50:18
Speaker
To make this cost efficient, you have created these smart stores which do not require a person to stand, hence cut down the operational cost significantly. So, a D2C element where you know where your product is placed, when the customer is buying, you are getting a real-time insight on the L3D dashboard that so and so customers there has bought my energy bar. So, that element of being near to the customer knowing who
00:50:47
Speaker
and when they're buying is also there is also in short and on the other side you are able to deliver the product also instantly which modern trade or a general trade out it would have done otherwise amazing okay you see this becoming 50% of your revenue from brands or will it remain like a
00:51:04
Speaker
Yeah, at least 30% by 40%. Amazing. Okay. What are the number of machines that, and maybe you can tell me from a timeline perspective, pre-COVID, what was the count? And then say 2020, what was the number of machines? So in 2018, we started with just two. So by the time year ended, we had about 50 odd 2019. April 2019, we had about 50 odd vending machines.
00:51:28
Speaker
March 2020, we had about 250 of them and that's where COVID happened. And out of these 250, 200 were franchisee owned. Yeah, most of them were franchisee owned. And in 2019-20, we actually figured out this franchisee model. Pre-COVID itself, we had started moving and more than 80% of our vending machines by the time had gone on to the franchisee route. We had started on an asset life model by the time COVID happened.
00:51:56
Speaker
And that actually came as a very good point to us, unlike other players in the segment, because when COVID hit, we were actually asset light almost. Anyways, coming on back to our timeline. COVID would have hit the sales because offices were shut down, co-working spaces were shut down.
00:52:14
Speaker
There was like many pivots, like the first pivot happened when we moved from our own stores to friend-side stores. That was the second pivot happened actually after COVID, whereby we were, so pre-COVID, I would say more than 75% of our vending machines were there in corporate offices.
00:52:31
Speaker
I had a very small percentage into college campuses, hospitals, and some of those kind of places. Our first launch into when this COVID, etc. was happening, one of our franchisee partners asked us to move his machine to the facility of Vivo. Vivo was assembling plant in Bretonnorda. So this franchisee partner was there in Bretonnorda, had a vending machine in some corporate office. And he insisted, we said that
00:52:59
Speaker
We understand your sales are not happening in this office. And till that time, everybody would thought that next month, the lockdown would be over, right? Every month, every week would go by with that notion itself. We were trying to convince him that don't move it. It just may be late for another month. But he insisted. He said, no, I want to move it to the Milivos manufacturing plant. I have a connect. I would move it there. So he said, OK, fine. Let's just move it. And that actually gave us the biggest insight so far of Dalchini, right?
00:53:29
Speaker
Pre-COVID, we thought that manufacturing plants, people would not buy from vending machines because it's a smart store. You need a smartphone. You don't know whether people would have it or not have it. It's generally plants have a cafeteria where you get like a 30-40 rupees or you'll get like a full shorty dal, several types.
00:53:49
Speaker
Yeah, a lot of those preconceived notions and we did not have any manufacturing plant or a factory or a semi where we would have a vending machine. And that was the first one and that was a game changer for us because after the hit over there, we actually proposed the similar solution to reliance.
00:54:09
Speaker
And in December of 2020, we proposed this to Relias that you just put one Devo Mending Machine of ours. And I still remember, 25th December, 2020, we actually installed our first Mending Machine in Reliance Jamnagarish facility. And this was basically the feedback that we got from the September launch in Veevo's manufacturing facility.
00:54:30
Speaker
and that became an instant hit because people in Jangnagar had about like they were working 365 days even when the knockdowns happened barring the first month. It's essential services. It's essential services. In fact, all corporate offices, everything was closed and people had an option to work from home but factories were open.
00:54:53
Speaker
Fully functional, they did not have anything which is gotten from home because people were coming and they were like three shifts in a day which was happening. On the contrary, all the food services were closed because they did not want any kind of food contamination, etc. to happen. So they were asking people to bring food from home only so that they can avoid or basically cut the chances of any food-based contamination.
00:55:17
Speaker
And hence, the vending machine launched at VU and then Netreliance became an instant hit. And today, as we speak, more than 35% of our vending machines are in manufacturing plant. The entire next year of COVID, which is
00:55:33
Speaker
year of 2021, went on to launching many machines into manufacturing plants. From Vivo to Reliance, to other Tiberla groups, Hindalvco, Norial, and to Volpoo, Hyundai, all of these manufacturing facilities where there was no knockdown, where people were totally working from office, from the factory, from the floor, right, office floor. These were like, new owned or franchisee owned, like the Reliance one and
00:55:59
Speaker
We raised funds again in 2021, deployed our own vending machines initially, got them funded from an NBFC because it was an instant requirement over there. What is the number of machines you have today now? We have 800 plus now, just reaching 900. In how many cities, what's the spread geographically?
00:56:22
Speaker
We are there in 23 cities now, 11 states, about 35% into manufacturing plants, about 25-30% into corporate offices. Now we have a significant number into hospitals, college campuses, coaching institutes as well. We have a double-digit number into co-working co-living spaces also. Co-living spaces also is like co-living spaces, PGs, that is also a big chunk of our vending machine.
00:56:48
Speaker
Okay, amazing.
Challenges and Future Vision
00:56:50
Speaker
So what are the challenges you need to solve to make 800 as 8000? What are those key things that you need to get so that 800 becomes 8000? Is it supply? Is it capital? Is it marketing? So I would say that in terms of capital, that's not a challenge because we have set a model where we would have a hub and spoke model and we would have a franchise removed.
00:57:10
Speaker
Yeah, you have an asset light model, so you don't necessarily need capital. Yeah, so today if I talk about not even 2% of our vending machines are on our books. So that's not a challenge, but the challenge obviously is basically when you go in tier 2, tier 3 cities, that education of the customers, yes, that fresh food can be bought through the vending machine, that notion has to be broken. Once it is done, right, and obviously our model is to launch manufacturing plants, then co-working, co-living spaces in that city, if it is there.
00:57:38
Speaker
corporates in that city, then hospitals, then colleges, et cetera. And then public market malls, et cetera. So in that you scale, right? So that has to be perfected. Do you educate customers? How do you build that awareness? So one is basically through Excite, you do a lot of things like on the vending machine, we would show up different things about how fresh the food is, a lot of education that goes on when you work. There'll be like a video running or something like that.
00:58:06
Speaker
Yeah, that is the first bit of it. But I think as a brand, when we grow and people understand, start understanding that it's not about a vending machine. It's about all kinds of food being provided instantly to an unmanned store kind of a thing. So that is that once that piece sets into the customer's mind, it becomes easier to scale. And it's a very visible asset, which is marketing itself only because it would have some branding and TV screen and all of that.
00:58:34
Speaker
It's basically getting put in the door and the right door basically is what the first challenge is. Once you crack that, that you are able to. On the text side, I would say that still in India, there are a lot of, I would say, challenges in terms of getting the right thing manufactured or right thing contract manufactured in India. So, we are working on solving that challenge also, that how do we have everything? Our idea is to have everything in India eventually.
00:58:59
Speaker
So I think you just had your biggest fundraise recently, about four million dollars. So what was that for? And prior to that, how much had you raised total before this series? We raised half a million in 2019. That was our first seed round that we did. Then we did another pre-series around of another half a million dollars. That was like one million we had raised prior. So this time we raised about four million. And the idea is basically what I mentioned, the first challenge, which is basically
00:59:28
Speaker
marketing it right to the consumer in the right way, both technologically and obviously through the go-to-market strategy. Technology and marketing are the two places where we would be, I would say, spending most of the sum. Help me understand how you market through technology. One way is obviously you need feet on the street who are going out meeting corporates and trying to get foot in the door. What is the other way to market?
00:59:51
Speaker
So basically, if you look at it, we on our app itself today run a lot of campaigns. This is basically a referring campaign. A corporate refers us to another corporate because once we say I'm there in Lucknow, in a co-working space, how do I reach out to the people in that area who would want to then have the Al sini vending machine? Do you earn anything from sale of machine? That is purely passed on to the contract manufacturers.
01:00:18
Speaker
Yeah, the agenda is not to make something on the sale of the machine. The idea is true. Yeah, you want that too. That number should grow, so that thing should stop that growth. And what is the GMV that you do? Your total revenue from subscription and from sale of product? So we are doing about 24 crore ARR is something that we already have. Two crores a month is something that we are already doing of revenue.
01:00:45
Speaker
Amazing, amazing. So currently you're like a food vending machine brand. The name also DAL TV indicates that. Do you see opportunity beyond food?
01:00:54
Speaker
Yeah, in fact, when I say dralchini, it's actually essential. So everything which is essential is going to be sold through our smart stores. Today we are around food because that was the first problem we wanted to solve as a vertical. But beyond food, there is personal care products, there is hygiene products, cosmetics, a bunch of stuff which can be sold through vending machine and which is already done if you go beyond, if you go to China or Japan, etc.
01:01:24
Speaker
People sell t-shirts from vending machines. Toys, even newspapers are sold through vending machines at metro stations. A lot of these impulse purchases. In fact, one of my dreams to put a vending machine at Taj Mahal, selling those souvenirs, Taj Mahal's souvenirs, I would say I did. It actually is meant for
01:01:42
Speaker
automating this retail, why should India waste our resources, people resources, especially for one guy standing outside the entire day selling souvenirs? Why can't he have five stores and just refill all five of them at different outlets of Taj Mahal rather than just standing at one single gate? That's the idea, right? I feel that all the retailers in India, they are those 40 odd hour SKOs, which they know and
01:02:11
Speaker
which is the reason that they would open up their store at 7 am in the morning. Why do they have to do that? They already know that these are the 7 40 items which would get sold in the morning. Why we just can't refill?
01:02:23
Speaker
Okay, so like people come from milk at 7am, you can just have milk being sold through a vending machine. Right, why don't you just put those 40 items into the smart store and just have a good sleep today. That's my idea of retail in India, like in the next few years.
01:02:42
Speaker
And that brings us to the end of this conversation. I want to ask you for a favor now. Did you like listening to the show? I'd love to hear your feedback about it. Do you have your own startup ideas? I'd love to hear them. Do you have questions for any of the guests that you heard about in the show? I'd love to get your questions and pass them on to the guests. Write to me at adatthepodium.in. That's adatthepodium.in.