Thursday 16 July 2015

Assisted e-commerce best way to crack rural market: Sridhar Gundaiah

When the importance of rural markets is now dawning on big e-commerce companies, Bangalore-based StoreKing started early. The company, set up 2012, is into assisted e-commerce, where a person goes to a kiosk, places order and then collects it. Its founder and CEO Sridhar Gundaiah hopes to take the retail presence to 1 lakh stores from 8,000 at present over the next 18 months. The company is also in a process of raising $40 million in the next 3-4 weeks, he told Soumonty Kanungo. Excerpts from the interview:
Why did you look at an e-commerce model for rural India?
About three years ago I was trying to understand how rural customers will be able to access e-commerce. Most do not have internet, and even if they have access they would need help to complete a transaction. So the whole idea is very simple. A customer in a rural town walks into a neighbourhood retail store. The store will have a kiosk, which is an online platform. The store will showcase hundreds of thousands of virtual catalogues. These customers need a lot of trust factor in order to buy these goods virtually. E-commerce is a transaction which you would rather make without touching and feeling, you look at an image and place an order. In rural India, people will be very scared if you say, 'I'm not showing you the exact product, but I'm only showing you the image'. This is a very big challenge.
How difficult is to penetrate in the rural market and how StoreKing model works?
It is not easy for e-commerce companies to penetrate into 70% of India, which is rural. But these people have a lot of cash, a lot of consumption demand and they are very aspirational. We have built a hybrid model where the kiosk or the catalogue is the selling machine. So when a consumer demands a product, the retailer searches the product on the kiosk, helps the customer to buy it, and the customer then pays the retailer in cash. This is a 100% prepaid model. Within 24-48 hours we ship the products to the retailer and not to the end-customer, but we keep communicating to the customer on the delivery status of the product. This is how the whole model works.
Is logistics a challenge? Why it cannot be sent to end-customers?
Yes, it is, and that's why we have our own logistic network, as the third-party courier will not reach the rural area. Majority of rural customers are only trained in their local languages or regional languages. They cannot give their address in English. It is also difficult in India because the last-mile logistics system is not developed. It is very difficult to find out the exact address. So our catalogues are all in regional languages such as Telugu, Tamil, Kannada and Malayalam. We also have Marathi and Hindi. These are local languages and for end-consumers it becomes much more easy to understand. This makes the entire ecosystem of the e-commerce look more attractive.
How much the retail owners have to pay to install the kiosks?
The retail store has to pay Rs 1,5000 as a one-time investment to install the kiosk and the return on investment is possible within two months. We have 1 lakh products such as FMCG, home appliances, electronics such as computer peripherals, camera, beauty and cosmetics, mobile phones and accessories, kitchen appliances, apparels.
What are your expansion plans?
We have 8,000 retail stores in South India as of today and we would be having 100,000 retail stores in the next 18 months. We will be in Rajasthan, Madhya Pradesh, Gujarat, Maharashtra and Odisha in the next five months. This is our plan and we are very much on track. These states would be around $80-100 billion.
How many customers you cater to in a month?
The total population is around 24 crore in South India. We have 8000 retail stores and each store gets 40 unique customer a day, so that is 3,20,000 unique people a day. To reach to 24 crore people, we need another 8,000 stores. Every state should have 4,000-5,000 retail stores.
What is the gross monthly business and what is the percentage of products return?
We go with lesser no of catalogues as customer satisfaction is more important. There is a retailer, so a customer can always return. But less than 1% of products come back to us. The minimum basket size is Rs 500 and the average basket size is Rs 1200. We make around 100,000 deliveries a month and last month, we made 140,000 deliveries. Our monthly gross business is around Rs 25 crore.
Are you planning to raise more funds to fuel expansion growth?
We are planning to raise more funds. We have raised around $6 million from Mangrove Capital Partners in 2012. Mangrove is the only investor with us so far. Now we are planning to raise $40 million in the next 3-4 weeks from other investors. These are private equity players who are interested in social sectors.

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