Vijay Singh, MD & CEO, AaramShop, an online grocery platform that leverages the strengths of neighbourhood retailers by making them digitally enabled, speaks to Progressive Grocer about the unique business model of his shopping network, which is focused on helping grocery shoppers make smart shopping decisions through better and deeper engagement with FMCG brands and retailers.
Take us through the period that saw the conception and formation of AaramShop. When and how was it conceived and how did the idea become flesh?
We started our operations about six years ago on a core premise that consumers are adopting an increasingly digital lifestyle and the day is not far when the grocery-buying process would have a significant digital component that will present interesting and large opportunities for digitizing the entire eco-system. As we studied the market, it was clear to us that an imported business model would not be the way to go. But there was an opportunity to create a unique business model based on the ground realities of an emerging market like India.
The near ubiquitous presence of independent retailers across the country meant that we could leverage their strengths, and work closely with them as partners to help them digitize in ways that make them interesting to the modern consumers. Our ambition was to be the enabler of engagement between consumers and retailers, rather than be a retailer ourselves.
What made the space really exciting for us was the presence of great product brands that we could work with to create interest amongst consumers, who could purchase the specific product from our partner retailers. The presence of these marketing savvy brands enabled us to forge revenue models that were not focused on further squeezing the retailer margins.
What is the typical customer profile on your platform?
Our users are the normal grocery buyers. Folks who walk into our partner retailers are also the kind of people who order on the phone, on the app or on the web. And we are working hard to ensure an Omnichannel access to our customers.
What is your marketing positioning and customer value proposition vis-a-vis the competition – online as well as offline?
We enable grocery shoppers engage with brands and retailers to make smarter shopping decisions. We recognize that there are existing relationships between the shoppers and their neighbourhood retailers. We support this by enabling consumers to select their preferred “home store/s” from the multiple stores available in the neighbourhood. We are then able to showcase that store’s catalog, its offers and deals in their full glory to the consumers for them to choose and order.
The shopping environment at the cluttered neighbourhood stores is far from ideal. However, with our tech tools, the process of discovery, shopping and tracking of orders at the same store becomes easy and fun.
Our objective is to enable transactions – not just on the web or the app, but also in-store and on-call. And I believe, most importantly, our unique business model makes us a valuable and a long-term partner for retailers with no potential conflicts areas.
What is your business model and how is it differentiated from those of other hyperlocal players?
Our business model has always been robust and our unit economics positive. Our approach to business is to leverage the strengths of each member of the retail eco-system and ensure that every retailer can benefit from the opportunities offered by digital engagement across the country. The consumers, when they use AaramShop on the web or via our mobile apps, are prompted to select their preferred home store/s. They can browse through that store’s catalog, offers, deals, etc, and place the orders. The orders are moved to the retailer on the retailer’s app, where they get processed before being packed and delivered.
AaramShop enables the retailers to create their own unique catalog, pricing and offers. The retailers, who are closely tracked via the delivery app, undertake all the deliveries. The entire process, including usage of the related technology, is provided to the retailers and consumers at no cost. As their business partner, we operate with transparency and ensure that consumer details, etc, are always available to the retailers. We help the retailers use our tools on their own to create and distribute store-specific coupons and undertake other marketing initiatives to ensure they are able to grow their business.
AaramShop’s revenue models are based on premium services that we offer the brands and retailers. These premium services are predominantly marketing and analytics linked and based on subscriptions.
How tough or easy was it for you to convince the investors of your business model? What are the investors’ expectations?
Investors are excited about the opportunities in the space and have invested heavily in the category. Most of the investments have been in the conventional e-com or logistics-heavy models, especially in the last couple of years. However, AaramShop’s asset-light, tech-heavy business approach has seen a lot of interest.
Tell us about AaramShop’s current range of operations and progress? How do you convince retailers to come to your platform in preference to other more established online grocery players?
We partner with grocery stores, personal care stores and pharmacies. Almost 95 per cent of our partner stores are independently owned and operated. We have partnered with over 18,000 stores, in over 100 cities across the country. We will significantly increase the number of partner stores in the months ahead, and hope to partner with over 40,000 stores by April 2017.
The retailers’ association with AaramShop has been designed to be easy, quick and based on the existing business practices of the retailer. Further, our business services, revenue model, etc, is fairly differentiated from other players and therefore partnering with retailers poses not a big challenge. Until a few years ago, we had struggled to communicate the benefits of digital to retailers.
However, the adoption now is a lot easier. Today, there is also a kind of a perfect storm helping to build the digital base – the adoption of smartphones, decreasing cost of connectivity, increased penetration of digital monies, and the forthcoming GST. A number of factors have come together to ensure that there is real interest among retailers to adopt our technologies and tools.
Which are the product categories available at your platform? Tell us about your product basket and the sales contribution from each of these categories.
The retailers drive the availability of product categories. While we support the retailers to select from our database of over 74,000 products, we also enable the retailers to put up their private labels and commodities for sale. Our top five categories in terms of volume are water & beverages, chocolates & sweets, breakfast items & cereals, biscuits & cookies, and dairy & bakery products.
The top five categories in terms of value are breakfast items & cereals, edible oils, rice, atta, dals & lentils, soaps & sanitizers, and home care items. However, since the retailers have the option of creating their own categories and adding their own products, the variation from retailer to retailer is very high.
What is the number of daily transactions at your platform and what are your projections for the future?
Our number of transactions is growing at a fairly rapid pace and our average order value for the month of November 2016 was Rs 510. This has come down from the earlier highs of Rs 750 keeping in mind the increase in the number of orders. What is of interest is that the online transaction values are still higher than the offline values.
How would you describe the consumer buying pattern online? How much of the purchase are under ‘planned’ and ‘top- up’ list?
Consumer behavior is fairly diverse and still evolving. There are customers that use the “shopping list” feature including the auto re-order mechanisms. These can range from monthly shopping to just the milk subscription. Coupons, whether issued by the store or brands, have an immediate and predictable impact on unplanned purchases. Some of our product features like “udhar” extended by the retailers to their known customers, drive repeat usage in a big way.
Margins, range of products, consistency of product availability and freshness remain a challenge for online players dependent on physical stores for customer fulfilment. How do you propose to overcome these challenges?
We have overcome this by working with seasoned retailers on the ground. Our service is faster and due to the close proximity to the retailer a number of issues get highlighted and solved on the fly. There are however stock-out situations and similar challenges that we face and are working to fine-tune the process further. Does being overly dependent on your partner retailers come in the way of listing and delisting of different products on your platform? We are completely dependent on the stocks of partner retailers and we are designed to be like that.
Our partner retailers have decades of experience on stocks that move in their areas and so we don’t really need to worry too much on that count. However, we are trying to make it even more seamless in a few more ways. These include direct integration of AaramOn (merchant app) with the retailers’ various POS system; increasing the ease of listing and delisting products on the mobile app by the retailers and making that reflect across all access points; sharing B2B insights on buying patterns with the retailers and thus helping them enhance their product mix.
How do you propose to encourage customer stickiness for your platform? What is your strategy for nurturing a stronger and deeper relationship with your retailers?
Our partner retailers already have a strong and sticky customer base. Our objective is to offer increased convenience to this customer base and increase the frequency and value of orders for our retailers. Our CRM solutions, built into the retailers’ mobile, etc., enable a number of nifty solutions. For example, these solutions enable the retailer to design and push/ flash mobile coupons directly to his consumer base, thereby increasing footfalls and orders specific to the nature of store’s coupons.