AaramShop, a Delhi based startup, is looking to monetize online grocery shopping in a rather unusual manner: instead of retailing groceries themselves, they’re tying up with mom-and-pop (kirana) stores and taking orders for them for free, while charging brands for promoting their wares to those online. The company claims to have tied up with 1600 stores in 24 cities within 7 months of operation, and is averaging. Aaramshop has been founded by Vijay Singh, who had previously founded of Sercon, a below-the-line marketing services firm which was merged in 2008 with 141 Worldwide, a WPP owned agency, to form 141Sercon. Singh led 141Sercon as its CEO and Managing Director, before exiting in April 2011. Speaking with MediaNama, Singh explained the rationale behind this decision to choose advertising as a business model:
“In the last 16-17 years, grocery has not been successful in the eCommerce space anywhere in the world. A typical eCommerce model will not really work out for grocery. Books and apparels have higher retail margins – 50-60%. It’s very different in the grocery business because FMCG retails with a single digit margins. For food products, it is 6-7%, cosmetics is 8%-9%, and perishables and temperature sensitive items like butter and liquids need warehousing. Also, in books, the basic issue is of distribution, whereas FMCG goods are the best distributed in the world and what the neighborhood consumes is available in the retail shops. We don’t want to get into something that doesn’t need fixing. Aaramshop is about creating the web stores for the physical stores: you can choose from a range of FMCG brands available, choose a retailer in your neighborhood, and then the order goes to the retailer, who delivers and collects Cash On Delivery.”
Why Advertising? How Advertising Is Being Integrated
Aaramshop isn’t making money from transactions, and Singh believes that retailer isn’t yet dependent on them yet – “We probably contribute 1% or less to his business. When we are a substantial source of revenue for them, we would introduce premium services, but these would be opt in.” But can advertising fun this business? Singh says that their cost of scale-up is not very high. They have a team of 11, with 2 in channel development, and are using 6 activation agencies for signing up retailers. “As a platform, it makes sense for us to be available in as many places as possible we see no reason why we need a reason to expand beyond a point and not hold other cities.” Of its 1700 retailers, Aaramshop has 800 in Delhi-NCR, and is targeting 20,000 retailers across the country by the end of the year. The company claims to do around 100-125 orders on weekdays, and twice that number on weekends.
Singh believes that there is revenue to be made by creating a last mile connect with digital, connecting an online or a banner campaign with an order on Aaramshop. This is free for brands, but monetization also comes through premium services: advertising on Aaramshop, allowing people to add a product to a quick-order list, which allows companies to purchase a standard checklist every month. “We run campaigns prompting consumers to add it to their quickorder list. It becomes critical as mobile app usage becomes common. Brands are willing to pay a serious percentage of their MRP to get into the list.”
Another option is click-to-bag, which allows a customer to add a product directly to the shopping cart. Aaramshop also has brand pages, which integrates videos that play automatically, for which Aaramshop has run an experiment with Mother Dairy. As hard as it is to believe, Singh claims that people spend 4 times more time on the premium pages; I would immediately close a page if a video ad plays automatically on loading. Aaramshop has Marico, Mother Dairy, Parle, Proctor & Gamble advertising with them, to begin with, and they’re working through agencies. Another revenue stream that Aaramshop is eyeing is aggregating retailers for offline brand promotions: instead of talking to individual retailers, brands can reach out to them through Aaramshop.
They’re launching screens offline, showing only FMCG ads at the storefront. Aaramshop is also considering retailer promotions, wherein a techsavvy retailer can create his own value promos, for example, sell atta (wheat-flour) at a lower cost.
The Bigger Play: Consumer Analytics
Singh says that the second genre of services offers a bigger proposition: they’re looking at building analytics based marketing. “The brand has data on how its product is moved till the counter, but not on who has bought the product. We’ve built our engine consumer backwards, specific to age group: what is the number of people who have moved away from the brand, who is buying regularly, enabling them to reach consumers. If someone has been buying a product two months at a stretch, then they’d be open to adding the product to the quick order list.”
How It Works
But how does Aaramshop connect kirana shops, many of whom are not very educated? Singh says that retailers have been verified, and the order is sent to the retailer via SMS or email; they’re also creating a mobile app. “Right now we have the creme de la creme of the retailers, who are fairly educated, once they get the order, and we’re supporting it with a call center.” Doesn’t the need for data connectivity, or for that matter, that handsets aren’t Indic language friendly, limit Aaramshops model? “We believe that over a period of time, the connectivity will not be a signfiicant issue. The profile of the retailer is changing as well. My view was that it’s an old man wearing a vest, but what is starting to happen is that his son is standing behind the counter. They’ve not had a reason to have connectivity on the store. We don’t believe that for us to scale to 20,000 , which is our target for this year, there is an issue. The minute we try and get to 3% of the overall retailer population, we’ll face problems.” The company hasn’t thought about language issues yet.
The tricky part is publishing retailer inventory accurately online, and that is where Aaramshop’s model becomes iffy: “What you currently see is an easy model – all the FMCG products are made available to the retailer. There is a possibility that only 90% will be available on the retailer front. We have to do that because they don’t have realtime inventory in the shops,” Singh says, adding that barcoding will be needed for tracking realtime inventory.
Key Challenge: Users
“Our challenge is to get enough consumers to try it, and we’re trying to address that by leveraging the retailers, each of which has 200-300 households, and his trust is high. Gradually his own customers will start using the online platform. The phone order will stay and it is typically an emergency buy, but in case of the phone purchase, you buy 2-3 things for Rs 100-150. In aaramshop, the average number of products in the order is 12, and the shopping bag size is around Rs 574. The larger order size attracts the retailer.