Advantage Technology For Unorganised Sector
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While much has been written about consumer facing retail aggregators and their so called ‘Amazon effect’ on unorganized retail, the past few years has seen the emergence of several businesses focusing on Business to Business (B2B) retail aggregation. These technology enabled platforms cater specifically to the procurement needs of small unorganized retailers– providing wholesale access to everything, from agricultural commodities and FMCGs, all the way to high end electronics and apparel. In fact, according to Confederation of Indian Industry (CII), India’s B2B e-commerce market is expected to reach US$ 700 billion by 2020.
With Alibaba internationally and home grown IndiaMART leading the way, Amazon has also recently gotten into the game. Additionally several startups are now also addressing this space, often focusing on specific verticals and its nuances. This new wave has in many ways ended up overall revolutionizing the unorganized retail sector and how micro retailers source their merchandize.
Bridging information gaps
With poor market linkages, micro retailers often have limited access to new vendors and products. These platforms collate new and previously unknown sources, making them easily accessible on the retailers’ phones. Additionally, with so many sellers on one platform, these micro retailers have access to better pricing and trade terms. This new found and unmitigated access to information allows retailers to either find more advantageous trade partners or alternately better negotiate with their existing vendors.
Creating value from aggregation
Small volumes often prohibit these unorganized retailers from negotiating the best prices. Aggregated demand allows these platforms to collectively negotiate better prices, making it more lucrative for these micro retailers. This can be especially integral for products with a strong consumer pull and fixed MRPs. Larger demand will also eventually allow these platforms to procure directly from the source, circumventing several middle men and their margins, hence creating larger benefits for their retailer customer base. Thus, retailers can choose to either retain these additional margins or preferably pass them on to the end consumer- better positioning them to compete with their more organized peers.
Curating vendors and quality
Comparable products and competing vendors can often make it hard for retailers for discover reliable sources, with retailers previously relying on long standing relationships. These platforms are introducing quality benchmarks and peer rating systems that are helping these retailers evaluate their option and make safer purchases remotely. The future may also see a lot of these players introducing private labels on their platform, bringing further reliability into this process. With a built-in purchase assurity, retailers can now explore new vendors and discover unique products from a greater geography.
Ease of fulfillment and cheaper logistics
Fragmented distribution networks result in poor order fulfillment and even more unreliable after sale service. In contrast, these platforms provide 24X7 access and almost no friction of taking orders & communication with these stores, creating a tangible advantage and a natural ease of doing business. Also with 1000s of products listed on their catalog, these platforms are better able to control the cost of logistics by being able to create a unified supply chain. These “super networks” create not just operational efficiency but also helps retailers more conveniently schedule their procurement.
Access to credit
Most of these businesses heavily rely on working capital credit for their daily operations. With poor access to organized credit, these micro retailers must often accept predatory terms from local vendors. These platforms often provide access to in-house or third party credit at far more lucrative rates than their current vendors. Access to organized credit can not just help reduce costs for these retailers and provide more flexibility in terms of their choice of vendors.
My recent experience with these retailers has also shown a growing willingness of these previously smartphone enabled but technology reticent retailers in the uptake of business tools. With this new found willingness and the advent of these technology enabled platforms in the unorganized retail sector, micro retailers are finally getting access to tool that help them strengthen their sourcing capabilities and better compete with their more organized counterparts.