How This Entrepreneur Aims To Create The World's Largest Rural Distribution Network
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It’s been more than a decade since the first wave of startups cropped up in the country, the base for which started with the e-commerce boom with the likes of E-Bay, Flipkart and Snapdeal giving impetus to a whole new industry. And although the business of startups in India has largely thrived on B2C models, very few have been able to rope in the rural population into their customer base.
While close to 70% of the country’s population still resides at a rural pincode almost no e-commerce company could reach them a couple of years back, even though many of them may have had similar purchasing power as those in big cities. To extend the benefits of retail and new-retail brought by these e-commerce companies, Sridhar Gundaiah, who himself hails from a village in Karnataka decided to tap on the mammoth rural market potential.
Five years ago he used his technological background, to set up StoreKing, and create a model that mixed elements of both B2C and B2B businesses, with a primary focus to set up a holistic distribution network for the rural hinterlands. Today his company is the bridge between consumers in India’s villages and companies like Amazon, Xiaomi, Paytm, P&G, Patanjali and more, who want their products to reach these uncharted territories.
The Rural Market Potential
While most startups choose a target market that comprises of urban, tech-savvy city consumers, StoreKing chose to cash in on the huge rural consumer base, who already had their loyal shopping points – the kirana stores. A PricewaterhouseCoopers report stated, that about 92% of India's retail market is unorganised and dominated by local shops owned by individuals. Instead of trying to reach these consumers themselves, the company gave these kirana owners the platform and technology that would help them connect these retail players to the rural consumers.
“I come from a rural background myself and being a technologist I wanted to simplify the existing e-commerce model and cash in on the rural market potential. We in fact are not an e-commerce company but rather the carriers, and aim to be the biggest rural distributors in the world, in the years to come,” says Gundaiah.
But why the risk with choosing a market that very few have dared to charter into from the startup community?
“I think it’s a misconception. Most of India’s biggest companies are built with a rural base. Be it the industrial bigwigs like Tata Steel who set up shop in Jamshedhpur years back, or FMCG players like Unilever, Dabur, Marico whose products have been reaching these villages for years now,” he says. “If they had the means to do it so can the newer companies be it a startup or not,” he added.
Building on Infrastructural Challenges
Even as most startups continue to complain about infrastructural challenges, Gundaiah believes India has all it needs to foster good businesses and its time entrepreneurs got creative in using them.
“We keep saying we are a country that believes in "jugaad" and that’s exactly how you should address the infrastructural challenge. If you talk about logistics in particular, the government has already an established network of railway lines and roads to remote areas which we just need to work around,” he says.
The company has setup its catalog machines at these kiranas which offer over 50,500 different products. No inventory is stored, as orders work on a demand model. . After an order is placed and the payment made, the company dispatches the package to the retailer in 24 hours to 48 hours.
To deliver more efficiently, StoreKing decided to do away with last-mile delivery to customers as they pick up the product from their loyal kirana stores, and the model has ensured profitability at an operating level.
“We piggyback on existing logistical distribution network and don’t use courier networks at all. I mean think about it, in a country where a ballot box can reach the remotest of the villages, why can’t the same network be used for distributing products,” he asks.
The Road Ahead
It's been almost five years since Gundaiah started his venture and on the way he has had support from not just his core team but also investors who believed in his idea. The company is currently backed by Malaysia’s Axiata Digital which invested $16mn in the venture along with Mangrove capital that umped in an additional $5mn.
In terms of expansion from currently operating in ten states, StoreKing wants to target the length and breadth of the country by adding more states to its network.
“Look at our population, and look at the development the rural areas have been through. Today players like Jio have ensured mobile internet does not stay restricted to the urban areas only. We want to cash in on that advantage, and build a network that will help the next wave of companies to reach out to these villages,” he says.