Local neighbourhood stores have found it hard to match the attractive discounts doled out by capitalist-funded online players and this has put them in a spot of bother.
Should they jump onto the online wagon and try to change their business model or continue using the age-old offline channel, and stay true to their limited, but loyal, base of consumers?
This is where a company called NeoMart wants to help the kirana stores narrow the gap with the new-age buyers. The startup wants to make apps for kirana stores through which people can buy goods and get them delivered through the store’s delivery staff.
“We are helping offline retailers reach mobile users. The mobile screen is the most expensive real estate right now and only the big players can afford to pay high acquisition costs for them,” says Ashwini Kharbanda, Founder, NeoMart.
The company is keen on getting local kirana stores onto the digital bandwagon, and this will be done at a minimal subscription cost starting from Rs 890 for one year. Ashwini claims to be using his retail experience gained from working with biggies like Bharti Walmart, and he understands the pain points of these sellers, who’re losing out to the giants.
“Ninety percent of the offline traders are not able to set up shop online. This consists of local traders, mom-pop shops which have not been able to adjust or benefit from the digital revolution. Because they don’t have presence. They are comfortable in taking digital payments, but not selling their products online.”Ashwini Kharbanda, Founder, NeoMart
So how does NeoMart make this happen? The company has made a one-stop app for merchants as well as the buyer.
If there are 50 kirana stores in an area looking to go digital they can try NeoMart as one of the ways to get online. It is like a super-aggregator app, listing all the sellers who sign up for its model.
“The shop owner can manually feed the details of the product listed in their store and offer them to the users. The app can be integrated with payment platforms like Paytm or physical cards to help buyers pay the shopkeeper online.”Ashwini Kharbanda, Founder, NeoMart
The app for the seller works like a mobile point of sale (POS) that will digitally record the inventory list, as well as keep track of the finances for running the business.
Rivaling the Behemoths
With so many heavy-funded players like Amazon and Walmart also plying their trade in the ecosystem, what chance does a NeoMart have in trying to compete with them?
And what incentive does a seller have to join NeoMart instead of biggies like Amazon, Flipkart (now Walmart) or even the upcoming JioMart?
“The merchant doesn't have to invest in a regular POS machine. Over 40 million retailers will be keen to jump onto the digital bandwagon if the business is run without anyone's interference or control,” Ashwini explains.
A market study says that partnering with an Amazon or Paytm comes at the cost of paying a small portion of the retail margin to the platform, but with NeoMart that is taken out of the equation.
He also suggests that people can buy products through the app and get them home-delivered through the store’s delivery staff faster than a Big Basket or Amazon. While this does sound attractive, analysts are not sure if the model has the legs to run this marathon.
“The retail sector is heavily reliant on an ecosystem, which helps the market players to grab attention of the consumers. Without ensuring the quality of service and right kind of support, models like this will find it hard to operate without scaling up their merchant network.”Sanchit Vir Gogia, CEO, Greyhound Research
And he’s got a point. After all, the app will facilitate delivery of goods, but if a product is not of the desired quality, who takes the responsibility for the lapse in standard?
Getting Users on Board, Not Easy
Multiple research studies have shown that acquiring a new customer requires heavy investment, and people don’t want to have more than two or three apps to do their shopping, which leaves little room for new players.
Plus, customers have already made up their mind about the platforms they would prefer to shop on. Changing that and asking them to trust new entrants will be a tough ask.
More importantly, how will the sellers react to the adjustment required to operate in a model, which is cashless, transparent and fully controlled. And unless they start getting better returns, Sanchit doesn’t see the seller sticking around after their initial tryst with the model.
“Changing the mindset of kirana retailers and asking them to run a business through an app will be exciting to start with, but they might not stick around if the returns don’t improve in the long run.”Sanchit Vir Gogia, CEO, Greyhound Research
Currently, NeoMart has signed up 150 stores located in Gurgaon and by end of this year it plans to enter South Delhi, and have over 500 merchants and 5,000 consumers on board. Now it remains to be seen if these targets are met and if this ambitious model has the nous to rival the heavyweights.
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