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Powering Kirana commerce | Karthik Venkateswaran @ Jumbotail
383 Plays1 year ago
A former Indian Army major turned entrepreneur, Karthik recognized that India's strength lay in economic prosperity. He spent six years in disruptive startups before founding Jumbotail to disrupt traditional retail without disempowering the last mile retailers.
For more such interesting founder journeys, subscribe to our newsletter www.founderthesis.com
Read more about Jumbotail:-
1.Jumbotail: The shop for shopkeepers
2.’We help transform kirana stores into convenience stores.’
3.How B2B marketplace Jumbotail has been able to maintain scale amid the Coronavirus crisis
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Transcript
Introduction and Background
00:00:00
Speaker
Hello everybody, I am Karthik Mankteswaran, co-founder and CEO of Jumbo Tail, India's leading online wholesale marketplace and new retail platform for food and grocery.
00:00:22
Speaker
In the year 1998, a young man joins the Indian army. He is deeply patriotic and dedicated a decade of his life in service to the nation. But he starts to realise that the way to make India strong is thought by building up military capabilities, but by making it so wealthy that none dare pick a fight. And he intuitively understands that the path to make India wealthy is by fixing market access.
Vision for Economic Empowerment
00:00:47
Speaker
This simple insight led him to spend the next six years working in disruptive startups before starting up Chumbotail, which today is among the leading e-commerce platforms for Kirana stores. In this inspiring episode of the founder thesis podcast, your host Akshay Dutt speaks with Kartik Venkateswaran, the founder of Chumbotail. Kartik shares his incredible journey from serving in the Indian Army to disrupt in traditional retail without disempowering the last mild retailers.
00:01:15
Speaker
Stay tuned for the conversation and don't forget to subscribe to the founder thesis podcast or any audio streaming app to hear inspiring stories of founders who are making India strong through market disruption. My career started with the armed forces. I am a graduate of National Defence Academy and Indian Military Academy.
00:01:40
Speaker
The goal of the mission was always, how can I be serving the country? How can I create large impact? Army is a way of life. It's not even a career. And I served in very hard combat. I served in the infantry.
00:01:55
Speaker
So I served in Gorkas and I was in hard combat fields in Northeast Manipur. I saw conflict. But over a period of time, I started asking questions, right? Why did I come? I'm always this first principles thinker. Are there better, faster ways of serving the country that are unique to my abilities, my skill sets?
00:02:17
Speaker
Second one was I was seeing it right in front. So conflict is the last resort. I was thinking, what is the necessity that India should be in such a situation that our enemies dare attack us? And I also went to United Nations. I was a military observer for United Nations in Ethiopia and Eritrea, handpicked and deputed by the Indian army. Then I was a team leader of observers of almost 16 nations.
00:02:47
Speaker
and I got to interact with them as well and many of them were economically developed and you know they relied on their economic superiority over having to actually fight and you know go for fist fights.
00:03:00
Speaker
I think the right solution perhaps is be so powerful that nobody dares to raise a finger. It's like almost a startup. Focus on your customers, don't bother about your competitors and then eventually you will figure it out all. So that's the kind of approach that I want to take.
Early Ventures and Collaborations
00:03:18
Speaker
And naturally for me, the largest opportunity was visible in food and grocery. Because wherever armed forces are deployed, you will find two things, farming and fighting. I would say like in Kashmir, it's one of the largest walnut producing zones in the country and probably in several parts of the world.
00:03:39
Speaker
and you know a walnut farmer would lease his tree to the agents and then be a daily laborer in his own trees and then pick and pluck walnuts and then it will go all the way to some processing and then the processed walnut will come back with the connects the price same you know shops nearby so why does it happen like why does it need to happen
00:04:04
Speaker
and why these market linkages are broken. And those were my fundamental understanding of war and conflict. You understood that there is a market access issue in the food and grocery segment. So you had a journey to finally reach there. Tell me about that journey.
00:04:24
Speaker
I believe I asked for action. So I went back home. So I started understanding deeper parts while being there as well and while being deployed in Kashmir. My last tenure was in Uri. So it was, and if you've seen the movie, some of those places, I was physically deployed there. But I also went back to my hometown Madurai, which is the largest
00:04:51
Speaker
coconut producing zone in the country or one of the largest. And I experimented with connecting coconut farmers to far away buyers in Delhi. So this was my first experience and first ideation and conceived a SMS based platform. I named it as Kisanco.com.
00:05:13
Speaker
kithanko.com was having its roots even prior to what I had even, you know, technically I later on came to know Flipkart was not even found at that time.
E-commerce Insights from eBay
00:05:24
Speaker
So much later. It was an academic, I would say, today compared to the scale and size where Jumbo Tail is present, it was an academic exercise. But some of the learnings were very clear to me.
00:05:35
Speaker
Again, started off, I had some worthy counterparts in the industry who were pursuing such a mission of connecting farmers to end markets. But I found that information asymmetry, so there are three flows basically, information flow, material flow, and financial flow. So you go to a shop, you ask, do you have this product? And he says, yes, I have. This is the price. That's information flow.
00:06:01
Speaker
Then you hand out your cash that is financial flow and then it gives you back the material that is the material flow. This is the first principle flow of any commerce transaction. It happens in Amazon you buy, maybe your financial flow is via Visa card and then you know their logistic team can deliver to you next time.
00:06:19
Speaker
and sometimes in e-commerce the financial flow happens after the material flow. So, he gives you the material and he give you the cash right, but all of these three flows need to be solved if you want to conclude a transaction successfully.
00:06:32
Speaker
So in those days, information flow, internet was, Nokia N70 was the smartest phone those days, by the way. So SMS-based, short post-based, somehow prototyping, you could get it done. Somehow you could also figure out sending the goods from Madurai to Delhi, some transport, somehow you'll figure it out. But there was no way at least I could conceive at that time that the farmer wants money at farm gate.
00:07:01
Speaker
The buyer wants to pay in the next consignment not even in the current consignment. So, he not only wanted to pay after the goods have reached and his requirement was I cannot check the quality of the entire consignment at the time of delivery. So, my vehicle will come they will unload it and before your next consignment comes I will you know pay the for the previous consignment. So, there was always money pending with the buyer for the one consignment.
00:07:25
Speaker
And those days, there's no NEFT. And I can't think of a core banking itself as just getting farming and shaping those days. So you can't successfully conclude a transaction. Then you'll be an information platform. You'll be a classified service, which is not really something that is there. So I realize
Building Jumbo Tail
00:07:41
Speaker
that this problem that I'm about to want to solve of market linkages is not a minimum viable product problem. It is a minimum viable ecosystem. You have to create that entire ecosystem.
00:07:52
Speaker
And starting from the readiness of the internet or the readiness of a transporter or long distance travel, long distance was always happening. It's not like the country goods were not moving. But it was established through some form of trust and there were many agents that were taking and absorbing the trust gap.
00:08:14
Speaker
The reason why farmers would get lower price is because there is somebody, a commission agent, would absorb the trust gap, pay a lower amount, and then you will have a commission agent on the other side, and these people will make the transaction rate. So therefore, they're taking the risk and charging a margin. Much, much, much different from the conclusions that many people in the industry were drawing, that this ecosystem has a lot of intermediaries that are sucking the value
00:08:39
Speaker
I came to a different conclusion that nobody can suck value out of a system unless they provide value back to the system. I said okay we have to solve this and I was not capable of solving that.
00:08:53
Speaker
Neither did I have the skill, nor did I have the network of friends. I came from the military. So then I applied to business school. And I was fortunate to be admitted to Stanford. And that's when I met my co-founder, Ashish. Ashish is a professional farmer. He's a superstar across all dimensions you can never imagine. He was even to IT Delhi.
00:09:18
Speaker
And then he was with BCG, then he came to Stanford. He's deeply connected to this problem statement. He ran his own farms. He had his apple farms in Himachal. He was figuring out his own ways how to vertically integrate. So the problems that I was encountering in 2008,
00:09:36
Speaker
He was actually encountering in 2015 and things were not very different. The other learning that I also had during very early stages which also fundamentally shifted my thought process on supply side versus demand side. So I said you can go to all these supply side people and you can integrate and there is always somebody who is willing to sell for a better price.
00:10:00
Speaker
But if you don't have buyers, and India is not a country where you have these large concentrated buyers. India is a country of 12 million stores, and maybe probably another million, two million restaurants, and other consumers of food. So now, how do you sell to them? You can't find demand. Then that is one of the reasons why you find these intermediaries, because nobody knew what the end markets were.
00:10:28
Speaker
The farmer only knew about the next commission agent who can buy from you. That commission agent knew the biggest commission agent probably in the next city. And that person knew the local wholesaler. That local wholesaler knew the small trader. So there was no transparency in the entire value chain. So if you want to solve for this problem, unless you have demand, you cannot replace the intermediary.
00:10:51
Speaker
So even a banking system solution will not replace unless you have demand on your control.
Understanding and Innovating for Kiranas
00:10:56
Speaker
So then we said, okay, farmers have to be improved. Market linkages are required, but market linkages rightfully says market first. Linkage level.
00:11:06
Speaker
So you should not start from the former end of the story. So I should start from the other side of the story. And this was a vague and feeble thought in my mind at that time when I go back in 2010. But post Stanford, I joined eBay. And I was very fortunate to join eBay at the time they were making this massive transition under John Donahoe, again, a Stanford MBA, Stanford Business School alumni.
00:11:33
Speaker
And I was fascinated. And eBay was making a transition from a seller-focused marketplace to a buyer-focused marketplace. eBay is always a seller-focused marketplace. They believed that if you get enough sellers on the platform, there will always buyers will come, right? So 2008, John Donego announced a three-year plan. It's all in the internet. You can check. He wanted to reinvent. And he went on two important directions, one focusing on buyers and getting the demand right and making the buyer experience right. And second one is he went for mobile.
00:12:03
Speaker
So eBay was one of the first successful companies in the world to have reinvented itself from absolute abyss into one prominent platform because of way ahead of time they understood the power of mobile and they went mobile first. So it was a journey. So even though Jumbo Tail itself was
00:12:23
Speaker
formed in you know very early 2016 was the first like April 2016 was the first transaction and December 2015 is you know when we closed our seat down and company started but the thought processes were like as early as 2008
00:12:43
Speaker
You were working at Flipkart when you finally decided to take the plans, right? So did Flipkart add to your thought process? So I came to Flipkart from eBay US. I was in eBay US post my MBA. I accepted Flipkart offer somewhere roughly December 2013.
00:13:02
Speaker
And I think they were going through one of the first rough patch, I would say. 2014 was a golden year for them. But nobody of us knew. But when I was interacting with them, I started interacting with them. October, the first email I wrote to them, some of the people in Flipkart,
00:13:21
Speaker
It is 2014 when they had become the poster child. They raised $1 billion of capital, and they acquired mantra. All of those things happened. There are a lot of entrepreneurs, people who are sitting right next to me in the cubicles. Runner, Grow, Playment, Town Rush, Reco, all these great companies. We were just sitting right next to each other, all the product managers. So again, that network very, very helped even today. I can just dial up a few people and seek advice.
00:13:51
Speaker
very important to our friends and make those choices. Most of us will make choices very differently and I'll tell you
00:14:00
Speaker
The advice, general advice
Influences and Entrepreneurial Focus
00:14:01
Speaker
is as if entrepreneurship is sort of as so you go to struggle for like say three years, make a lot of money, save up. In my view, it's a wrong approach. What you're essentially trying to do is you are already assuming you're going to take three years to figure out and you're going to choose maybe a company that is only optimizing heavily on money, not on network, not on learning, not on market understanding.
00:14:25
Speaker
And then you say oh I am going to actually enter and be ready to struggle for three years. No I would not say that. I would say even if you have to you know cut short some of your compensation aspirations go to the place that will give you the network that will give you the learning.
00:14:40
Speaker
and then probably raise capital even before you start the company. Which is what you did. You also raised capital before starting only. That's right. Amazing insight. When you were pitching for fundraise pre-product, essentially it was like an idea on napkin stage. Did you face difficulty there? How difficult or easy was it to raise the first round, the seed round?
00:15:07
Speaker
See, right from the beginning to the very end of even today, I have only one principle. You should partner with people who take the first bets on you because they are the people who have taken the efforts to study you, understand you. It's like basically the attractiveness of a candidate when you are looking for
00:15:27
Speaker
As soon as you say, I have an offer, then everybody else is, whether it's lined up or not, people are lining up for that person. But the first person, the first company that is taking the risk on evaluating and giving, that company actually has gone above and beyond. How much did you raise in that seed round? Two million dollars. Okay. Amazing. Which is a pretty good seed round number. Yeah. We were the very first thesis of B2B. We said, Kirana stores are the most important piece of the puzzle and we want to focus on them.
00:15:55
Speaker
So once you got funded, tell me that launch journey. You must have had a focus on a minimum audience to capture, minimum product to build, and as proof of concept before expanding further. So what was that journey? See, at all points in time, we were clear on some basic fundamental paradigms which will operate. And if those principles are agreed,
00:16:24
Speaker
We'll stick to those principles and some of the principles that we did was we won't do things for the sake of what is attractive to investors in today's market. We will do what is right for our customers and building a very, very, very high quality supply chain that will deliver small volumes of good to small retailers at a service level that actually matches their expectation or probably exceeds their expectation.
00:16:53
Speaker
and at a cost structure that is better than the unorganized world.
Logistics and Customer Experience
00:16:57
Speaker
Because we saw the likes of let us say you know Walmart or Metro cash and carry or any other
00:17:06
Speaker
Margins is an eventual, it is a scale game. It will come. There are people bigger than you in the industry, in non-traditional sectors, non-tech method, offline, already getting those margins. What is important is, are you able to operate at a cost structure that is better than the unorganized world? If not,
00:17:25
Speaker
Then you can keep telling that I'm technology driven, I'm a startup, I have new way of doing things, but the market economics is never going to be in your favor. So we perfected our supply chain in one city and then rapidly scaled.
00:17:38
Speaker
to nearly 48 cities in a span of 18 months. And today, our right to exist is this cost mode. Being able to serve small retailers, the quantities that they want, we don't have any minimum order quantity. The world is moving more and more into order more. And I'll come and deliver to you. And you have to make a minimum order. Otherwise, my cost efficient is not there. We are actually the opposite. Order frequently, order less.
00:18:05
Speaker
And our supply chain has understood how to operate at a cost structure that is below or equal to the unorganized world, but operating within all the constraints of an organized world. And that is where the technology is playing, the technology-driven operations is playing.
00:18:26
Speaker
What were those learnings in the five years you spent in one city? Like, you know, what all did you learn? How did that learning help you build the cost mode? I mean, not just the cost mode, but even the service mode. The first is, you have to actually position yourself very clearly and take the stand. What are you? Are you a cost advantage to the retailer? Are the price advantage to the retailer or are your service advantage to the retailer?
00:18:55
Speaker
What we found is many of the small detailers were anyways not buying in bulk, number one. And they were not actually looking for cost. And how do we know that? This is one of the most counterintuitive learnings that we had. Many times a consumer will ask them, you know, let's say I want this XYZ product and he will say,
00:19:17
Speaker
In many cases he was okay willing to buy even at MRP from a nearby store to retain his customer. The best thing, best of this example you will see in Nehru place, you go to any shop and ask for anything, they will say you are it is the go down. They don't want to lose that transaction. Many of them actually were aware of price but they were more concerned about availability in their shelves.
00:19:41
Speaker
And the same thing that we also got to hear from some of our early research that we did not understand. And they say that, hey, I am not buying urad dal from you, I am buying urad dal of certain quality from you, which I have to convert into say vadas and serve the customer, okay.
00:20:01
Speaker
If you don't show up on time or if you give a different quality at which my yield goes for a toss and my vada stays unchanged, then I lose my customers. So I am optimizing for quality or at least consistency in the quality, whatever I have chosen and availability. And whenever I run out, I need to order and you need to show up on time. That is probably their expectations.
Hiring and Customer Connection
00:20:23
Speaker
And then there were a segment of traders who were in the market.
00:20:27
Speaker
who would buy things in bulk, keep with them, and then would serve the local markets. So they were looking for better prices. They would be willing to wait for goods because they're always stocking up. It's for them, a stocking game and a demand game. So therefore, we chose not to serve them. We chose to serve the small retailers. And we chose to play on the service part of assured delivery, great customer service,
00:20:57
Speaker
solve for credit problems for the retailer. Access problems. Small retailers don't get credit. Most of the time they're buying in cash. One distributor may give, other distributor may not give. So we solved for problems for that. And we became their trusted platform. So much so that we today have the highest wallet share among the small retailers who transact with us. We do transactions with nearly 200, 300 vendors.
00:21:29
Speaker
very fractional relationships because the deal had take behaviour offline world is organised that way because every brand will have its own distributor every commodity will have its own trader so they have to deal commodity by commodity brand by brand there is no single platform for them to deal with where there is one unified view of the customer one unified service policies one unified expectations of delivery customer service payments which we created for them
00:21:57
Speaker
And we solved that problem. And second one is we focused on density of demand on a daily basis rather than volume. So we would much rather prefer a retailer ordering every single day rather than him having to bulk up his purchases once a week. Nearly 80% of our revenues come from what we call as sticky customers, the customers who order a minimum of nine or 10 times a month.
00:22:23
Speaker
10 days someone, not 10 times. Within a day, multiple times, they could order 10 days someone. So we go and deliver to them 10 days. And these customers, their average is about 15, 16. Some of them are as high as 30. In India, what we also figured out is if you are lending, or if you are enabling lending like we do, connecting banks and NVFCs to other stores, no amount of contractual guarantees can solve your NPA problem.
00:22:52
Speaker
These are so small you can't go after. The only way is you are so valuable to them that they do not want to default on your loans. Because if they lose your supply, service, they are losing something significantly more bigger.
00:23:10
Speaker
Paint me a picture. Like on day one, you must have launched an app and then you must have done some work to onboard Kirana stores. You must have done some work to figure out supply and there must have been a process for supply. And then after five years, what did that look like?
00:23:25
Speaker
So it's like initially the first five customers, I literally walked into each of the customers and pitched and onboarded them. The WhatsApp group, that's how we started way back. But then the first few apps, some of the first apps that we built, it was a completely stripped down version, only one transaction. For a very long period of time, we didn't even have a cart concept.
00:23:51
Speaker
because our customers didn't understand cart and we were very focused on building a localized app from day one because our customers have to understand languages even now our app size is very small and it has to be small because Wi-Fi upgrade
00:24:10
Speaker
was not a possibility. So the architecture was that it's a native Android app, but still we could push a lot of changes. We invested in making critical changes into the app without having to actually have the app upgrade. So some of these considerations we had built for supply chain, again, we were having
00:24:32
Speaker
processes where initially five, seven years ago it's all like manual processes and we figured out that the most important distinction between knowledge in the world and knowledge in the head
00:24:48
Speaker
The more your processes will become people dependent, if the knowledge of how to do the process resides in their head, if you bring that knowledge and put it out in the world, then anybody can come.
Supplier Relationships and Expansion
00:25:02
Speaker
So as you are very focused on service,
00:25:06
Speaker
We are also facing, you know, natural attrition, industry level attrition on the supply chain side, which is a high attrition role for delivery executives or warehouse loading champs or picking champs. Like a lot of startups would outsource logistics and, you know, focus on growth instead, like growing transactions, adding more customers and adding more suppliers.
00:25:31
Speaker
I think that if you look back in the B2C evolution, the only companies that have actually been able to last and survive are those companies that actually build logistics. E-commerce made transaction cannot consummate if you don't deliver. And if you rely on a certain third party, especially when you are actually building a completely new industry altogether. Now that third party logistic provider will not have
00:26:00
Speaker
a process or even a technology driven product to deliver the service that your customers require. Say for example, our customers will do partial return of products. A couple of examples I'll give you. When you deliver a rice bag, there's a net weight of let's say 25 kgs, right? But you know if the rice is very old and you know water content may have got evaporated, if I become 24 kgs and 700 gram at the time of delivery. Now this is a big hit in their margin actually, the 300 grams.
00:26:30
Speaker
So, they need to settle for the 300. So, they need the refund then and there only. So, they will put it while taking delivery, put it in their weighing machine or they would have taken a delivery of your rice bag, discovered later that it is not yielding the quality. They would have used the plexiglass, they would have sold it.
00:26:48
Speaker
say to 10 customers, some of the customers may have come back and given some complaints to them. They would want that bag to be returned. So it's a partial delivery. Second, third is we don't have a different supply chain. I don't know whether it happens in Amazon flip pack today, but at least for a very long period of time. Forward supply chain were very different than reverse supply chain.
00:27:09
Speaker
you have to call for returns and then somebody else will come and pick up your product our customers are daily frequently ordering with us so we had to have one supply chain that does forward and revert in the same length so I go I deliver the products today I pick up a few returns for previous day and then I have to give a net of settlement then and there only so today I'm delivering for let's say 4000 and there is a 200 rupee return for the previous day
00:27:32
Speaker
you will pay me only 3800. You have to solve for these problems. These are all experience problems. Then you have to also see the people who are delivering needs to be trained because that's the face of the company at the time of delivery. And if you are not polite and if you are not waiting for the customer, most of the times when we go, we see our customers are only serving their customers. We cannot hurry them up.
00:28:00
Speaker
We have to wait politely, wait for our turn. A third party logistic agency may not be focused on delivering that level of customer experience. For them, they have to complete the delivery. They'll say, Leylo, if you're not leaving, I'll mark something, not returned or something, or not accepted or something. I'll move on. That's not what we want to build.
00:28:20
Speaker
That's one part. Second is this cash and also credit downtown on top of the delivery. These are all very unique and nobody had. And I can tell you that this is exactly how the B2C journey for Flipkart also started.
Innovations and Technology Adoption
00:28:34
Speaker
They built everything. Later on, things became so standardized. Then the third party capacity providers showing up in the industry. Fascinating.
00:28:42
Speaker
Were you actually going out on these delivery runs, observing and then, you know, incorporating that into product design? Some of our very first deliveries used to be done by me and Ashish together. Ashish, you know, hand built the supply chain from scratch and many, many days, there were days in which, you know, around seven o'clock or so,
00:29:02
Speaker
the night we were behind the deliveries and we used to get the truck to our office assemble some you know 10 to 15 people some in two wheeler some of the thing and split the deliveries into these 15 loads and all of us would go and finish the deliveries next one hour just by parallel processing. Amazing is there a formal process of
00:29:25
Speaker
Like how you get voice of customer, you know, like how you understand at ground level what's happening, what product feedback is coming in, what changes need to be done. Like is it formalized through some mechanism which captures and documents all that?
00:29:41
Speaker
That is right. There is a formal and then there is an informal process. One of the things that we did very early on is to invest in user research, in-house user research. So we have a user research team that is in-house. Design team is led by a career professional user researcher. She's for NID and she started off a career as a user researcher. We are a generative research focused company. What does that mean, that term generative research?
00:30:09
Speaker
In research, there are two kinds. One is generative research and one is evaluative research. Generative research is your method acting first principles. You just don't know what to expect. You go and sit and understand from the customer's point of view how their life is.
00:30:22
Speaker
Evaluative is, I already have a solution and I'm evaluating whether this solution fits in their life or not, so both are required. Like when I go and say whether this app is useful or not, that's the evaluative research. I go and say, okay, your 24 hours of your life, what do you do digitally? Like what are your digital interactions? Why do you do them? At what points you feel that you need to open your phone? What points you, what are the apps that you otherwise use? How do you consume content?
00:30:51
Speaker
Understanding the customer, understanding their circumstances, understanding their higher aspirations, goals is where we start. We have very formal programs called Customer Connects. We actually sponsor Ola over caps to our customers. It goes to their location, pick up them and their families, bring them to our office.
00:31:12
Speaker
We give them food and also some gifts. We perform research on them. We ask them questions and we give them some prototypes that we are building and then we drop them back. These are formal ones.
00:31:28
Speaker
Informal is, you know, 100% of our products get researched on the ground, not by just the designers, but also product managers who will go, who will understand. We call ourselves method actors. You need to know how the customers are living their life. You need to live their life.
00:31:50
Speaker
Enormous amount of emphasis is spent on hiring the people during the interview process. Some of the candidates have expressed their surprise and some of them shocked that we force our candidates to actually talk to our customers. So we take them to nearby shops, we take them to our J24 stores, we just let them do.
00:32:15
Speaker
A couple of interviews post that particular interaction is around their interactions in the shop. What did they find?
00:32:21
Speaker
How would they use? So they don't know what to expect. We just let them, okay, this is your shop. Find out whatever you need to speak. So what we do is, is this person tongue tied?
Revenue Streams and Market Position
00:32:31
Speaker
Is this person able to hold a conversation with the retailer? Empathy, like... Is this person actually having empathy? Is he asking, you know, what are the quality of questions the person is asking? What is the area of focus? Is he effortlessly speaking to their consumers?
00:32:46
Speaker
Amazing, amazing, okay. When you started, I am sure a lot of Kirana stores would not have been comfortable placing orders online and maybe like you told me you started with a WhatsApp group. How did you change that behavior to get them to do work purely online? You know, remove the bandwidth support part of it.
00:33:07
Speaker
First of all, we gave zero manual support from day one. So we only chose customers who are comfortable. So we made this choice. We only chose those customers who had Android phone. We made this choice. The only support that we provided, sometimes customers call us and say, I don't have charge in my phone. So those early days we used to have a program where we would recharge their phone and then
00:33:28
Speaker
take money when on delivery. But you would have still needed a sales first to onboard the new Kirana store owners, right? We don't need to see what we call a sales force. It's like, okay, in industry today and traditional FMCG distribution plus even new age platforms that have grown crazy and shown those GMB growth and all right. The manner in which it has been done is beat system. The people regularly visit and take orders.
00:33:58
Speaker
Okay. Right. Yeah. So it's not just onboarding, but it's also that hunting farming differentiation is there in sales. So it's not just. The hunting is a very simple process. Before we launch a city, so we use interns to go on, we have an app. So they go and map every single store and generate the leads. Then when we launch the city, so we go to these stores and you know, we will tell them to download the app. It's a four to five minute conversation.
00:34:28
Speaker
And they have about what, 2000 SKUs in their shops, maybe 1000 SKUs, 2000 SKUs. Somehow the other is always running out in stock. And we introduced some of the asks, OK, what is the price, this, that, and also replace the order. No risk for them. Tomorrow the item shows up. They pay. They're very happy. So the item shows up.
00:34:48
Speaker
And then they order again. The next time we show up, they order again. Next time we show up, you have to show up. We only went to those people who already had that approach and attitude. We just self-selected those people. And we waited for other people to naturally change
Core Values and Culture
00:35:06
Speaker
their behavior because they would hear great service. And they would hear about other good things about our platform.
00:35:15
Speaker
So over 35-40% of our customers today onboard on referral they just download the app and they self onboard themselves. We validate their business proof and everything and then during the first delivery again we figure out the process we do the re-evaluation and the person is turning out to be a non-business person then we don't deliver.
00:35:35
Speaker
Otherwise we deliver and then that person is a customer in our platform. Why don't you deliver if that person is not running a shop? Because we are primarily serving the Kirana stores. We can't serve any consumers. We don't want to serve any consumers.
00:35:49
Speaker
So did you launch credit from like early on or when did you launch credit? And like initial, like, you know, first year or two, was it like paying advance or cash on delivery or like tell me that finance flow journey? Cash on delivery, we used to accept checks on delivery. So credit as an enablement. So we are in the business of enabling credit. So we have to connect lenders to our customers.
00:36:18
Speaker
So that probably started around 2017. Throughout 2016, we were doing a lot of small experiments here and there, trying to understand the requirements of the customers, understand the requirements of the NBFCs, what are their challenges.
00:36:33
Speaker
And so the main problems, again, we faced with this thing is massive segment, $500 billion transaction worth flows through this market. But lenders are not able to access this market because of very low volume, high frequency transaction. All the NVFCs in the country, lenders in the country are for high volume, low frequency. Like Yigbar, $5,000,000 credit you give.
00:36:59
Speaker
and then you take it back, no other period of 24 months, 12 months like that, right here, a person is paying by a credit by 2,000 rupees, 2,000 rupees, and then he's repaying that money back in like, say, 14 days, 20 days, like that, seven days sometimes. So they were not prepared to handle this level of transaction. Somebody has to actually create that platform to enable these two parties to be able to do it. That is what we started out building.
00:37:26
Speaker
How do you make this happen? Is it like a typical lending fintech will have a first loss default guarantee to attract the NBFCs to co-lend with it? Or at times they start with balance sheet lending?
00:37:41
Speaker
I mean there are different ways in which the lending context gets kick started. How did you kick start the lending business? These are loans directly underwritten by the lenders themselves. How did you solve those issues like you know lenders are not comfortable with low ticket lending and like how did you fix these? We work with other platforms.
00:38:02
Speaker
So there are platforms that are solving the issues. People look for assurances on collection. So some of the services that we provided on collection, where when we go for delivery, we collect the money.
00:38:15
Speaker
So all of those solutions were provided. Okay. There's like a BNPL. And do you earn from this, like the credit business? We are the business of providing the retailers, the facility of them being able to pay at the time of their comfort, at the time they need to buy. There are different business models here. But does this add to your P&L, like this credit business, or is it like you're doing it without any margin for yourself? We are enabling a platform.
00:38:45
Speaker
there will be revenue streams attached to it. But we are not in the credit business. Make sure it is between lender and the borrower. There are lenders who lend to sellers on our platform. There are lenders who lend to customers on our platform. Every entity in our platform requires working capital. So these are working capital financings that are taken by different people.
00:39:10
Speaker
and we are enabling this. You told me how you are onboarding the Kirana side, like the demand side. How do you onboard the supply side? Like if you could talk about that process, how you built that up. When you have a demand supply side, there are no large FMCG companies, small FMCG companies, regional FMCG companies and then Staples, Mills.
00:39:35
Speaker
So there are always people who are looking to sell and directly reach the market. So enabling supply chains. So today when you have the kind of reach that we have across 48 cities, supply chain naturally comes to us for reaching these and seeing on our platform. So it happens on one of two ways. One is like we know what the selection that our retailers want.
00:39:56
Speaker
So we go and onboard those selections. The other one is, because we have these many retailers, some may say it practically reached out to us. There's a long list of suppliers who want to list on our platform, who want to make the products visible to the kiranana stores that are there in our platform. So Apple is both ways inbound and outbound. Okay, got it. So, you know, what were your learnings in that 18 month period in which you went from one city to 48 cities? You know, you must have,
00:40:24
Speaker
encountered something which was unexpected and maybe differences in customer behaviors. What were some of those learnings? The first is a very pleasant surprise that how scalable are our models. We didn't actually plan to go to 48 cities. Our plan when we started expanding was six to eight cities in one year. Then we realized that opening a city is a cakewalk for us and everywhere we go, we were welcomed to the red carpet by our customers. We wanted our service.
00:40:53
Speaker
Because of word of mouth. They were introduced to different parts of this method of buying from online, but they were having poor service by getting the kind of service levels that they want from others in the industry. So they were already aware of the concept of, okay, you can buy online and somebody will come and deliver to your shop. But when we went there, they saw our service and adoption was rapid, I would say.
00:41:19
Speaker
Second is because of the model, the complete software automated supply chain that we have, all we needed to start a city was find a virtual facility 20-25,000 square feet and supply chain was already ready, so we were just onboarding them.
00:41:37
Speaker
Another aspect is that if you have to open a grocery to say consumer right, you have to have everything for the consumer to come to you. Even consumer will not come only to sugar only for him. He may go one place for grocery and one place for electronics but within grocery he won't split.
00:41:55
Speaker
Piranha stores are not like that. They're naturally trading commodities, and they are naturally used to looking at distributor X for brand X and distributor Y for brand Y and a commodity trader for commodity A like that. So therefore, you could actually bootstrap even with a good selection across a few sub-verticals, I would say, sub-verticals of staples, high selling products, and then get started in the city and start adding value to the retailer.
00:42:22
Speaker
you don't have to actually have a full selection to get started. So that's another great learning. So for example, in Bangalore, we have several thousands of SKUs. In another city, we could start with a few hundreds of SKUs and still add value on day one. Second pleasant surprise was, you know, contrary to our inclusion or this thing is Bangalore is like a tech savvy market. And what we found was all cities were equally tech savvy.
00:42:50
Speaker
and it is only dawned upon us much later that even within Bangalore, right, these kirana owners and all are, you know, coming from these tier 2, tier 3 cities only. It is not like, you know, born and bought up in Bangalore and is waking up to become a kirana owner, right. So, therefore, we already have, already built for this level of ex-aveners and adoption and therefore, we were not facing the challenge of
00:43:15
Speaker
sort of adoption of tech. And supply chain scaled very well. In many cases, the cities had less traffic or car structures were much, much better. And in tier two cities, brands also appreciated because their distribution strengths were probably in Bangalore much better. So overall expansion has actually worked out really well for us. Being present in more cities have given us more value to the brands.
00:43:41
Speaker
So when we go to them, we are able to add value across the country. When we go to the stores there, they are able to get these brands because you know TV pallet placement will come but then supplier is not there, receiver is not there. The store owner is not able to serve the end consumer who is walking to the store and asking for that particular product.
00:44:00
Speaker
So it has worked out very well for us, the scaling part. You buy directly from manufacturers. So do you also do intercity logistics? Like if a manufacturer is based in one area, will you transport his goods or he has to transport it to all the cities where you're launching?
00:44:17
Speaker
See, we may provide a set of services to manufacturer, especially smaller manufacturers to find, but then our starting point of the journey is their goods are available in warehouses in the local city. So, whether most of them are able to do that in their own. So, sending intercity is not a problem for them. They can get partner trucks, full trucks, they'll sell them. Getting demand is a problem for them. So, which we help. Right, right, right, right.
00:44:43
Speaker
What is the delivery times that you promised to the Kirana stores? Is it same day delivery? Yeah, so we deliver in 24 to 48 hours.
00:44:53
Speaker
It's like you were giving me an example. You will receive delivery tomorrow. Interesting. So for like a new age D2C brand, you would be like a plug and play partner to go offline in a way, like somebody who's only selling online direct to customer or through e-commerce marketplaces. So if they want to be on shelves, then you could be that partner to take them to shelves across the country.
00:45:19
Speaker
That's absolutely right. So we believe that India is going to see a massive explosion of new brands in food and grocery. Some of them could be local, some of them could become regional and national. As the GDP increases, the consumption will double or probably triple, not from a value perspective, but value perspective.
00:45:42
Speaker
So as the consumption pattern moves out of raw foods to processed goods, this is crucial. What we believe is that all of these brands will have to find the offline market. There is no way they can be stuck to the top 1 to 3 million customers that are transacting in the top B2C platforms in the country.
00:46:04
Speaker
They will hit a digital ceiling very soon. We are actually hearing from many venture capitalists that these D2C brands are increasingly being asked to start offline strategy on day one rather than spending because the CAC has significantly gone up in online platforms right now.
00:46:23
Speaker
And also the addressable market is just too small for the top and because of economies of scale and stuff, many innovations in product are not even happening. There's only so much of air you can put inside a snack box and only so much of healthy snacks you can drink.
00:46:43
Speaker
So, therefore, how do you actually build mass products that can reach mass customers and the general trade channel plus the modernized general trade channel that we are pioneering the J24. Those are extremely critical and we are building a suite of services
00:47:01
Speaker
for the brand to say, I have a product, now get me the demand. How is that? So very simple, start with simple communication. Many of the retailers can't even transmit the fact that, OK, there's a great product that has come to their consumers with their own channels. Then offers and also the brand to have a very targeted outreach program in the areas and supply points where their products are already located.
00:47:29
Speaker
So these are, you know, brands are flying high blind, right? They cannot run a campaign in a city like Bangalore if they are not even stocked up in the Toronto store. So it has to be a very coordinated effort to get their ROI for the marketing campaign. Really the brand should market to end consumers only when the local supply points are stocked up.
00:47:47
Speaker
So you can give them a granular view of where all is there in the country. We are also providing services for them to do granular local level marketing to test instead of having to spend money in mass marketing within the city. We can even go for granular marketing services for granular marketing to end consumers and also placement in our J24 stores. And J24 is a consumer brand and we have direct digital relationship with the end consumers.
00:48:17
Speaker
sharing those end consumers, you know, information to the end consumers and then driving traffic to the J24 stores, all of those capabilities we have. When you say services for granular marketing, are you talking of online marketing or offline like point of sale marketing? It could be anything, it could be even VDL, it could be sampling. Today, without us, the limitations of the brand that they will have is they cannot introduce the product to Kirana stores. Because of us, they can introduce the product to the Kirana stores, number one, right?
00:48:46
Speaker
Second is, once the Kirana stores are there, the Kirana stores also require support. So we will be providing services for end consumer sampling, like real sampling, those store points. So now a brand A cannot run only and fund the entire sampling campaign because so maybe we are aggregating demand across multiple brands and do the sampling.
00:49:06
Speaker
We are cross merchandising, buyers will come, repeat purchases, we know, we know relative strength of, you know, shelves. We know from the natural offtake, organic offtake, inorganic, we are able to provide those analytics insights to the brand. Fascinating. So tell me about J24.
00:49:22
Speaker
You know the current gentle trade as we see from let's say five years from now some of the absolute evolution of the landscape of let's say how the country's demographics will shape up which is India is going to be a 600 million population young under 25 years of age.
00:49:41
Speaker
And they are going to have very different aspirations. They express themselves to very differently. They are fundamentally different in three ways. One, they are mobile native, digital native. They are born with mobile phones. As like toddlers, they got mobile phones to pacify themselves. That is the starting point of the journey for their life. For them, everything that does not happen in a mobile is like something that is out of what's happening there.
00:50:10
Speaker
They don't want to be like anyone else. The amount of aspiration to be individual, to be known and the way they express that they are individually different is by the products and the services that they consume.
00:50:26
Speaker
they stand for. And so J24 is a concept where we are modernizing the cream of the Kirana store or the modern, you know, early adopter entrepreneurs who want to build for the future. Fall for and encapsulate what a good Kirana store stands for. Great relationship, better service and then encapsulate that in a brand and offer it via an omnichannel platform to the end consumer appealing to the demographic of the future.
00:50:56
Speaker
So we target urban, Bharat middle class families, young families, young children, they are very hard working people, have high aspirations and they are in that hard spot, I would say not speed spot of neither have money nor have time. There are a lot of them because why they don't have money is because
00:51:17
Speaker
Their aspiration is I have to buy a home, I have to buy a car, I have to save for my, in that order, right? So I have to save for my children's education. Okay. So now that consumes a lot of their salary incomes. And then in order to fend for it, two people will work. One person may actually do one and a half jobs. And they're equally reliant on the local shops. They have very different needs. Nobody is solving for those needs.
00:51:43
Speaker
They are digitally savvy. They are expecting a digital relationship with the local Kirana stores. They want to be hygiene. They want to be known like, I'm not like my parents. I want to be different. J24 is business in the box for entrepreneurs to solve for all of their demand state and in-store technology operations. So we provide them with the GoldenEye retail operating system, which is our in-house operating system to operate a small store.
00:52:08
Speaker
Give me some examples of Goldeneye features, like how it is customized. Like say for example, home delivery, the entrepreneur is giving home delivery. Second is many of the times the entrepreneur gives credit from his own books. They go on this thing, right? So there is no capability for the customer to, you know, repay on time. So there are companion apps where customers can use to repay to the entrepreneur.
00:52:30
Speaker
they have ability. Third is communication to his own consumers. Where you can pass on the communication which is integrated with WhatsApp. There is a method for entrepreneurs to be able to send communication to his consumers. This is all his purchases. How do you record? How do you settle? All of those things are integrated into the banking system. Second is the procurement system. So in his B2B procurement side, it will be informed by the B2C sales. So I think that
00:52:58
Speaker
As soon as he orders, let's say, 20 Cadbury chocolate, when we deliver, the inventory goes up in the system. So he doesn't need to do anything. It's a completely integrated suit. Right, right, right. And as soon as he sells 15 of them, you know, only 5 or 10. So then the recommendations come up in his B2B app.
00:53:15
Speaker
OK, you are running short of this, please buy. And sometimes when he tries to buy some other products in the offer in the B2B platform, he gets attracted. We give him advice, oh, don't buy more than this because you may not be able to sell it because we know your sales. So the entire aspect of integrated procurement and integrated purchase sales, that is there. And finally, the end consumers get offers directly from brands and then, A, get a loyalty program, the first of its kind called green card.
00:53:45
Speaker
and green card loyalty for the target segment that we have, we are able to offer them a real loyalty program that they can value and use on a daily basis. You actually come to think of it, apart from let's say hotel chains and airlines, there are not really much loyalty programs out there.
00:54:01
Speaker
Yeah, none of that work. Every brand wants one, but I personally hardly use any. Yeah, so our loyalty program is used daily. How does it work? Like you get cashback in your like... So you get cashbacks that are passed on by the brands. Now the brands have a problem that, you know, they don't want to give it to the retailers because they don't know whether the retailer will pass it on or not. Now we take the responsibility of passing directly to the consumer and the consumer can come and redeem only back in our stores.
00:54:28
Speaker
So the package for the brand is solved. So the brand knows the actual offer went to the consumer and the consumer purchase. And so along with the cross merchandising, where you can give a cashback for an air conditioner. We are not building what everybody else thinks is B2C. We are opening up a completely new paradigm of technology interaction with your local stores that are already being comfortably used by our customers. We don't need to change their behavior.
00:54:59
Speaker
We just need to provide an easy method for their behaviors to continue.
00:55:04
Speaker
So, are you also launching in-house brands? You know, like, say, if you look at, say, like Future Bazaar had a lot of in-house brands which gives them better margins. Like, Daal is sort of Rajani Daal. They would be like a Future Bazaar Daal or something like that. So, is that something which you are also doing? The answer will be yes and no. And it is not necessarily looked at as like a margin play. We have always adopted a platform approach. The number one belief that we have is you can do everything.
00:55:34
Speaker
yourself or you can be the platform in which people do the things on your platform. Our belief is for the country of our size, hundreds of such brands need to show up in order to satisfy the needs of the growing economy, growing population, modern population. So yes, we will have our own brands.
00:55:54
Speaker
Absolutely. But that's not necessarily from, Oh, I want to make higher margin, right? Margin and all is outcome for us. We start focusing on the customer experience. Even when we launch, there's a set of activities that is required to improve the sales, right?
00:56:11
Speaker
It's not like where your future bazaar or whatever you are kept on the right side and then consumer will come and pick it up. It's a digital product, digital app. Consumers have to, retailers have to discover it. They have to have mechanisms to, you know, try it without any fear of losing money and things like that. Consumer, if he just tries one packet and doesn't work out, he'll not come back again. But retailer, he will lose money, right, which he doesn't want to do. So we have to build those.
00:56:34
Speaker
capabilities. When we build those capabilities, we will build it in such a way that all small brands, all new brands can take advantage of. It's again a platform approach. The reason, the answer is yes, we will do it. Amazing. Help me understand
00:56:48
Speaker
What all contributes to margin at what rates? So, you know, for example, with a company like Amazon, we know that they have AWS, which is a big part of their margin. The pure e-commerce is not a big part of margin, but then they also earn money through advertising with brands, like brands who want to advertise on Amazon. That is a big part of margin. So can you help me understand for Jambotil, what are things that give you margin? Like, you know, what are the sources of profitability?
00:57:14
Speaker
See, our primary sources of profitability is the commissions that we charge from our sellers on the platform and then the shipping charges that the sellers pay us for their goods. And then for the J24 stores, the retail services fee that we charge from them.
00:57:35
Speaker
And then the brands also pay for additional marketing income for the facility that they get. They have brand stores, they have brand stores. We have a real estate within the app. We are able to monetize. So it's a complete suite of products and services that we offer.
00:57:53
Speaker
Do you get more margin from the brand services or from the commissions? Primary, the transaction platform, the commissions are the primary one. Okay, okay. Help me understand the market structure. There are a lot of companies in this similar space of working with Kiranas, like there is Uran, there are smaller brands also, like say, there's ShopKiran, there is, I think Elastikran also is in this space, there's a much smaller brand like Apna Club also.
00:58:20
Speaker
are there different spaces that everybody is occupying or is it a large market and everyone is there is enough room here for everybody or like what is the industry structure like? I think primarily that the philosophy is there is general trade there are 12 million Kirana stores in the country who require to be supported it's a large market in itself.
00:58:45
Speaker
Where are these? Some of them are geographically spread. I wouldn't take names of competitors, but I can just tell you that some competitors are not even competitors. Some players are focusing only on tier 4 and below.
00:59:00
Speaker
Some competitors are focused on what they say tier two cities. Our primary thesis is India's economy is going to be concentrated more and more around urban centers.
00:59:16
Speaker
100% of our national income is going to come from urban center. So you will see us operating heavily on the urban side with a complete thesis that there is where the money is going to be made, right? Plus you will see other cut between a horizontal and a vertical approach. So we are a complete vertical. What is the difference here? Horizontal versus vertical? Horizontal is there'll be in grocery, there'll be in fashion, there'll be electronics.
00:59:44
Speaker
Anything that there is an organized retail market for, then they will be in that segment. Then there is an intersection of a split between, within a vertical player itself, are you a full stack?
00:59:59
Speaker
So we are the only full stack vertical player. Full stack means we have an offering on the Kirana's demand side, Kirana consumer, J24. We connect the Kirana to the brands and we are also operating on the new brands, D2C brands plus one brands as a manufacturer. So we are full stack and then we are offering financial services, banking solutions, all of these enabling solutions. Some people are operating between Kirana and brands
01:00:25
Speaker
in rural markets. Some people are doing the same thing in tier two markets. Some people are doing that thing across all markets, across all categories. Can you share some metrics like GMV or like what is your earning or revenue numbers or some of those just to give listeners an idea of the size of Jambotil? First of all, we've never focused on GMV as a metric at all.
01:00:55
Speaker
But we are a fairly large platform. I can tell you that I can't give you the specifics because also we are operating in 48 cities. We are a fairly large platform with multiple thousand crores of GMV.
01:01:10
Speaker
And we have about 250,000 retailers on our platform across these 48 cities and who are heavily transacting with us and 80% of our GMV comes from what we call our Stiggy customers who transact with us in an average of 15 to 20 days a month, 15 to 16 days a month and a minimum of 9 to 10 days a month for this cohort. Amazing. So what is the headcount of Jambotail today?
01:01:37
Speaker
And today we are roughly about 800 odd people full time. Okay. And, you know, what is the way in which you have built up like a 800 strong organization so that everybody is aligned and mission driven and, you know. See, when we started the company, right, Ashish and I first enunciated the core values that we will build this company around, which is very, very important.
01:02:05
Speaker
And all of the hiring, retention, reward, everything centered around how aligned to the value system that we have. So 70% of our employees rating is awarded over here. So only 25% is with the managers. And your skip manager doesn't even have a say in the rating.
01:02:33
Speaker
So therefore, your managers are fairly independent to build their team, protect their teams, irrespective of what their managers will feel. And we said that if you build a culture where everybody thinks there are two eyes watching you, or maybe four eyes including your skip, that's going to be a very different company than any eyes can be watching you all the time.
01:02:58
Speaker
And second one is, okay, now if there are so many different people, each of them will have any number of expectation, we need to bound that expectation and be bounded by that 15 core values, which are all fundamental values of any good human being. We have a constitution.
01:03:20
Speaker
And we have done this right from day one. It was never an afterthought. It was a very conscious decision right from day one of the company. In fact, actually, even before we incorporated the company, I think we wrote this manifesto. Amazing. What is this manifesto or this constitution? Like it spells out the values. You can see in our website, the core values that are there. Like it starts with customer fanaticism.
01:03:47
Speaker
think long term, what do you want to do? And one of the things that we said was not one thing is going to be able to achieve your goals. For example, take risk, fail fast, fail safe is one of the core values. But now, if you don't exercise judgment, then you may be in trouble. You can be open, honest, and direct, which is one of the core values.
01:04:14
Speaker
you have to disagree and commit too. You decide to deliver and disagree and commit. I can come and tell you that your plan is not right, but that cannot be the end of it. Somebody has to prevail for the customer to benefit in one way or the other. Because I want to experiment, I trade. But non-architect, for him, the most important thing will be principles.
01:04:40
Speaker
So now he needs to pick up the person. So an engineer who's entering into the system as he's evaluated, he'll be evaluated by his for action. As he grows into the system, he needs to be evaluated for things long term and pursue excellence.
01:04:55
Speaker
So in the peer review, the parameters are these 15 core values. Some of these are selected and there is some weightage. These are selected and easy there. So we have tremendous amount of distance to cover in making the system perfect. So we are now in the process as the organization has become now suddenly large.
01:05:18
Speaker
We have to now define okay for this role these are the values that are important and probably give more weight than something else. Those are work under progress and we will figure it out. But needless to say that you know this is not a company where will come and tell you oh you achieved great results.
01:05:40
Speaker
and okay you have done your sales or you have done your product and this thing but if you have rubbed your people on the wrong side if you have taken shortcuts if you have actually not done it right then you are not going to be rewarded on the other hand if you have adhered to these values
01:05:58
Speaker
We believe that results will be an eventuality. 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.