Peppertap Shutdown Grocery Delivery – Business Model Flaw or Something Else?

Peppertap Shutdown Grocery Delivery – Business Model Flaw or Something Else?

Recently, Snapdeal-backed PepperTap has decided to shut down its hyper local grocery delivery operations by the end of this month to shift their focus on e-commerce logistics. The decision of complete change of business model was made just after two months when Peppertap shut down operations in six cities including Mumbai, Kolkata and Chennai to deepen their roots in the limited cities like Delhi, Noida, Pune, Hyderabad, Ghaziabad, Gurgaon, Bengaluru rather than expansion in different geographical locations.

Navneet Singh, CEO of PepperTap stated, “We are pulling plug from B2C grocery business and pivoting to a full stack e-commerce logistics company. Shutting down PepperTap is extremely difficult call for us but it’s the need of hour.”

As per the sources, Peppertap order share per day was about 20,000 in December 2015 which reduced to less than 1000 orders since last month.

Previously, other players joining the list of operational shut down are – Flipkart by shutting down its experimental localized grocery delivery app – Nearby, Zomato and Grofers by shutting down operations in Tier II and III cities, Ola by shutting down Ola Café and Ola Store.

Is it again Tier I, II, III Cities Phenomenon Excuse?

Till date biggies have given excuse of their operational shutdown in terms of limited market acceptance in Tier II, III cities. Zomato and Grofers business model was shut down in small cities because the acceptance was low while e-commerce players like Snapdeal, Flipkart claim that half of their sale is driven by Tier II and III cities.

So, the question from an outsider point of view is that “Is it again a tier I, II, III cities phenomenon that is forcing Indian Startups to shutter their business model?”

In explanation of limiting the presence to cities like Delhi, Noida, Pune, Hyderabad, Ghaziabad, Gurgaon, Bengaluru in early 2016, Navneet stated “The startup has decided to focus on depth rather than breadth, given the short to mid-term investment climate outlook. We are digging our heels in for the long term. We will focus on building a stellar customer experience by providing additional categories and services that differentiate us from our competition in cities where we continue to operate.”

So, why instead of taking better measures like customer service experience, relationship management and enhancing product catalogue, why PepperTap decided to shut down the hyper local grocery delivery operations completely.

Peppertap Shutdown Grocery Delivery Service

CEO Explanation

This time Navneet came up with some realistic problems that they have faced during their journey through Peppertap blog post. Three drivers of Peppertap shutdown are as follow –

[A] Integration of App with Partner Stores – Peppertap was started in November 2014 and since then it was able to serve approximately 20,000 orders per day across 17 cities. With funding of $50 Million in their hand, their trajectory of expansion was exponential. Due to this huge expansion and integration, the problem that consumers faced was the inability to see the entire product catalogue from a store and sometime even the essential items were missing from the catalogue visible to them.

So, they had to integrate the inventory of partnered local offline stores into their App. They have to change the inventory management and billing system of local store to electronic. For bigger chains and hypermarkets, the data generated by their system was being plugged into Peppertap system. To align up to date price and availability of product ie inventory status, the data needed to be updated at the very least, thrice a day.

[B] Excessive Cash Burn – Cash burn was another major contributor. Peppertap was losing cash in two ways –

  1. Cash burnt in terms of the discounts given per order to consumers.
  2. Buffer capacity in logistics and operations team to meet 2 hour delivery time.

Combined cash burn of both the ways was increasing on every single order quickly with no immediate end in sight. So to reduce their cash burn rate, PepperTap decided to shut down operations in cities with small consumer base in early 2016.

With this initiative, they were able to increase the value of their average sale twice and were finally beginning to build value and loyalty – the cornerstones of a sustainable business. They were still financing orders and discounts with capital but now this was a more concentrated burn with a clear goal, timeline and geography in mind, However the timeline and the path to profitability was looking long (very long in fact) and arduous.

[C] Funding Environment – Seeing the global funding scenario, there was no point of losing cash on every single order. Mathematically speaking, this was certain that they would run out of cash by losing money on every order.

Navneet stated, “We couldn’t shake off the feeling that we were walking (not racing like some other companies) towards the edge of a cliff hoping that things will get better before we reach the abyss.”

So they decided to shut down their cash burning grocery delivery business and shift their focus on e-commerce logistics firm.

Naveent further told, “Had we tried everything? Were we convinced that this was not the space for us? Was hyper-local commerce finished as a sector? The answer to all these questions was a resounding “No.”. But let us be clear about one thing, we haven’t taken the task we set out to do in the late summer of 2014 to its rightful culmination in the limited time that we have had. And that’s the simple truth.”

Limitations of Hyper Local Delivery

The value that the core business model of hyper local delivery adds to the consumer is only getting thing at your door step, that too, if consumer is willing to pay additional for that. Here are major limitations associated with hyper local delivery system –

[A] Demand Fluctuations – Following factors contributes to the demand fluctuation of every day –

  • Since the need of grocery is generally at the moment, so people prefer to go for easy option available in the market. Nobody is going to keep waiting for 2-3 hours for a cup of tea, if the milk is running out.
  • People who prefer time to money are the major consumer of hyper local business. So based on the need of consumer, priority and selection of available options changes
  • When so many players are working in same domain, consumers have alternatives to switch to the best fit.

These fluctuations can’t allow the player to optimize the operational team and other resources. You are forced to keep the buffer resources.

[B] Limited Revenue Model – Revenue model of hyper local delivery is limited to commission per sale which if assumed 5% per order, is quite low unless the volume is huge.

The cash outflow includes the manpower cost, assets cost, technology cost, discounts and customer acquisition cost, marketing cost and other inevitable expenditures. So the volume needs to be quite high to meet to balance the cash-in flow generated through limited commission per order.

[C] Operational Optimization Problem – Since the demand is not fixed, the operational optimization can’t take place suddenly. Every single order is different and unique.

Further, 2 hour time bound put a restriction on delivery fleet optimization. Spare capacity needs to be kept to avoid the time bound. Also, the clubbing of delivery is difficult, even though in same areas and particular time span.

[D] Market Competition – Since a lot of other players are also working in same domain, market competition is stiff for long run survival.

Even most of the small shops of nearby areas keep a spare guy for home delivery service for their loyal consumer base, though the process of ordering is not so tech savvy, dependent on phone call, yet it creates tougher market competition as the delivery time is quite less for these smaller shops.

Scope of Improvement is Everywhere

The relevant question here is, “Is there any scope of improvement that can be implements to overcome these limitations for other players?” Here are few thoughts from FS on the same –

[A] Cash Out-flow Optimization and Alternative Source of Making Money –  Since the revenue is limited with existing setup, it’s better to reduce and optimize the cash out-flow and find the other ways of marking money with similar model –

  • Clubbing of delivery orders to reduce per order delivery cost
  • Market dependency for small deliveries in nearby areas ie mixed delivery fleet of own and shops
  • Self-inventory introduction for better profit margins
  • Advertisement on packaging and delivery vehicles
  • Introduction of other product catalogues
  • Last mile delivery of other players ( say e-commerce )

[B] Demand Stabilization Tactics – Since the need of grocery can be easily controlled based on the frequency of consumer usage, it’s good to implement strategies to force consumer to purchase again –

  • Daily, Weekly, Monthly order management system allowing consumers to fix the delivery schedule as per their need
  • Targeted marketing to reach the in-need consumer base. For example targeting office personnel having hectic lifestyle, old age person needing alternative of going to market.
  • Smarter recommendation of next purchase to consumers. For example – Recommendation of organic food in place of normal etc.

The whole concept is to ensure that the demand of old customer shall become known for their every time need and new consumers shall get attracted by the advantages given over other players / alternative.

[C] Smarter Cash Burn – Cash burnt in giving discounts is good enough to ensure the traction but not a sustainable strategy to make loyal consumer base. Cash burnt to give people some reason to return is essential –

  • Loyalty discount for next time use of app. Say 10% discount on next purchase order.
  • Free gifts. Gifts plays a long term impact on consumer mindset rather than 30-40 Rs discount

The point here is to burn the funds not is just giving discounts but in smarter way to win their loyalty.

Logistics – New Hope of PepperTap

The next plan of Peppertap is to become logistics player. As stated by Navneet, “Our foray into full stack logistics space is a well-pondered decision and our experience in consumer as well as business-focused logistics will certainly help us to build next generation e-commerce logistics startup.”

No doubt, with increasing numbers in e-commerce, hyper local delivery, food tech startups and their loyal consumers, logistics is definitely an area in demand. Though the journey is not easy as it seems as other players like LogiNext, Delhivery etc also exist in the market and will definitely create a tough competition for Peppertap. Also, the move of already existing players in the logistics domain will be to reduce the penetration of Peppertap.

What Next in Grocery Delivery Segment?

One of the burning questions here is what next in Grocery Segment. Will other players like Grofers, Big Basket etc face the same fate? Or they will find the way to survive the cash burn, funding toughness and consumer loyalty storm.

The deciding factors will definitely be the operational excellence and optimization, alternative ways of making money and convincing people to remain stick to the same player. Also, the small shops who are losing their business because of these players will definitely come back with better consumer management solution.

Stay tuned with FS for more updates. Till then happy reading.

Offline Shopping – Why not Attract the Online Shoppers?

Offline Shopping – Why not Attract the Online Shoppers?

Today, when I was planning to go outside for shopping with my friends and observed their reluctant to go for offline purchase, I was forced to think why people are so much attracted towards online shopping. Because almost everything that you need in your daily life like cellphones, clothing, electronic gadgets, home appliances, furniture, grocery, fruits, and vegetables, food all are available at a distance of few clicks. Few years ago, shopping malls, stores were the center point of attraction for shopaholics. Today, people spend more and more time on browsing wide range of product available on online portals and buy after a long comparison of features, cost, discounts, cashbacks etc.

A lot of times, I have observed people going on stores, feeling the product and then checking the price of product on online portals. Greatest shock was when last time I went to buy a brand new phone and shop keeper told me the price available on each of the e-commerce site. That time look into his eyes was kind of losing one more customer. A small discussion with him gave a hint that there is a need to renovate offline shopping experience.

So if all of the attractions of online shopping could be incorporated in the existing offline stores, the changing mindset of people could be reversed. Here is small analysis on – why do people prefer online shopping rather than offline? What do existing offline stores offer? What are the changes that should be incorporated in offline store?

Offline Shopping – Why not Attract the Online Shoppers

Why do People Go for Online Shopping?

Let’s first analyze all the factors that force people to go for online shopping rather than to store to grab the product –

  • Time Saving – People having hectic daily schedules are the major consumers of online portals. With few clicks you are able to place order for the desired product and get it delivered to your door step in couple of days. Same day or next day delivery is also available at some additional cost. While offline shopping requires getting ready, to and fro travelling time, waiting time etc.
  • Discounts and Cash-Backs – Cost concerned consumers are attracted towards online shopping because of attractive deals and cashbacks offered by online players. Offline stores don’t have funds to burn to acquire consumers.
  • Availability of Product – Acceptance in tier II and III cities are majorly driven by the fact that limited products are available in offline stores while online shops are offering wide range of product catalogue. So people can easily get the product.
  • Easy Comparison and Sorting – For analytical consumers, online is better option as it provides convenience like easy sorting as per popularity, money etc, and comparison of different products at one place. In stores, you need to check the products one by one and then choose the best available product rather than the best fit product.

Other reason of online shopping is that people staying in other cities can easily send the products to their beloved ones staying in other cities.

Why do People Go to Offline Stores?

Another fact that needs an in-depth analysis is why people go for offline stores rather than online players. So here are the major benefits of offline shopping –

  • Physical Verification of Product – At offline store, people can easily view, feel, compare and judge the product which is definitely better way than seeing pictures or videos of the product.
  • Easy Exchange and Return – You can easily exchange or return the products with offline stores. Though e-commerce players also offer the facility of reverse logistics but it takes time.
  • Instant Delivery – At offline store, you don’t need to keep waiting for your required phone or laptop; instead, you get it at once.

Based on the need of the product, people can easily decide whether to purchase online or offline. If the need is urgent and instant, you have no other choice than going to store and buying it, but if you have ample time, you will definitely analyze the product online.

Offline Shopping – Why not Attract the Online Shoppers?

If offline stores try to incorporate the advantage of online stores, more people would get attracted towards it. So what additional offline stores can offer to attract online shoppers? Here is a small list –

  • Screen Display of Products at Store – The biggest problem at offline store is people need to check the entire product physically which is time consuming activity while on online portals you can scan the entire product list in very little time.
    Placing the display screens for your product catalogue would help consumers to view, sort and compare the entire catalogue.
  • Reward / Consumer Loyalty points – Offering cashbacks and discounts to loyal consumers could be a good strategy for customer acquisition.
  • Making Large Product Catalog – If your product catalogue is limited, it’s better to get the trendy products and make more choices available for people.
  • Movable Shops – For capturing time concerned mass, movable shops are good option. Fitted with display screens and delivery from store could be a good strategy to attract consumers.

Apart from above mentioned short term solutions, following solutions could also be considered in long run –

  • Operational Cost Optimization – Since the running cost of Offline Store is quite high as compared with virtual store, so the operational cost must be optimized at offline store to offer more discounts to consumers.
  • Instant Designing and Preparation Techniques – It would be a good strategy to attract online consumers by incorporating techniques that allow consumers to design or customize the product as per their wish and get it prepared quickly.

So the advantage of both online and offline stores can’t be ignored but both have their limitations as well. With huge external funds flow, online stores are able to attract consumers in short span, but with growth of time and technology, these online portals would need new strategies to survive. Offline purchase is a huge market based and the dent made by online players can easily be recovered by acting smartly and offering the benefits of online purchase in their setup itself.

Flipkart Nearby Shutdown – Where Indian Hyper Local Delivery Market is heading?

Flipkart Nearby Shutdown – Where Indian Hyper Local Delivery Market is heading?

Two very contrasting piece of news has come out of Indian startup ecosystem within a month.

In mid-January, Amazon shared news of going ahead with its hyper local grocery delivery app launch. Amazon had launched experimental platform in March’15 to check the possibility of exploring new business vertical – hyper local grocery and FMCG product delivery.

Down the line, after almost 1 month Flipkart announced shutting down of its experimental localized grocery delivery app – Nearby.  Flipkart had launched its experimental platform for grocery delivery in October’15. Through this Flipkart were trying to gauge the potential of the hyper local business vertical.

How Hyperlocal Business became a Hot Topic?

This brings us to a basic question – why all of sudden in 2015, E-commerce leaders jumped into hyper local delivery market?

As per FS Labs analysis, before 2015 it was only Ecommerce companies which were able to get funding worth 30 million dollar or more. But in 2015 PepperTap and Grofers came on the Indian startup Horizon and these two won hefty funding from Tiger global, Softbank and Sequioa Capital. This sudden pump of huge investments in hyper local delivery startups gave rosy dreams to entrepreneurs.

For Grofers, Tiger global and sequoia capital invested $10 million and $35million in two different rounds in February and April 2015. And then came the blockbuster funding with Softbank joining the board. In November 2015, Softbank, Tiger Global and Sequoia Capital together pumped $120 million in Grofers only; While Peppertap booked a net funding of $51.2 million in 2015 only. Peppertap also acqui hired Townrush and Jiffstore to gain substantial share of business in hyper local delivery market.

As per the market analysts hyper local delivery has a potential of annual revenue close to $18 billion.

If we add the daily orders received by three market leaders – Grofers ( 50k/Day), Peppertap (30K/day), and Bigbasket (20k/Day) with an average value of 800 Rs/order , its amounts to only $435 million only. So the potential of industry is huge. Race from $435 million to $18 billion is on. And this value is what led the E-commerce giants to run for the hyper local delivery “Gold Rush”.

Flipkart Nearby Shutdown

Why Flipkart is then Shutting its Hyper Delivery App “Nearby”?

Flipkart Nearby, hyper local delivery concept which was launched as a pilot project in October 2015 in Bengaluru was announced to be shut down. The shutdown is driven by the major factors like “Poor Consumer Demand” and “Less Profit Margins”. Startups like Grofers, Zomato, PepperTap has already shut down their operations in few cities as part of their future strategies.

As far as Flipkart is concerned, it was actually coming. The only matter of fact was – when?

Flipkart’s experimentation in search of achieving elusive ‘Profitability’ led them into trying hyper local delivery. One thing to note is that here again they tried emulating the steps of Amazon.

One reason for this “App Closure” could be – Tiger Global. They being the major investor in Grofers and Flipkart, might have suggested Flipkart against launching altogether new hyper delivery marketplace. Anyway if Grofers gains enough traction and becomes hit in India, may be after 2 or 3 years down the line, Grofers could be merged with Flipkart to ensues the IPO –which requires profitable business model. But if Grofers leaks money – as it is leaking now, then there is no point of adding one more loss making vertical for Flipkart as they are badly chasing the word “Profitability”.

FS Labs stand on Amazon’s “Kirana Now” Launch Decision

As per FS Labs analysis, Amazon is playing strategically to gain something out of every opportunity. Amazon is the leader in world market as for as hyper local delivery is concerned. They might be having some tricks to run the hyper local business model profitable.

Actually by declaring the launch of “Kirana Now” Amazon might be trying to open one more battlefront for all the Ecommerce players in India. It might be actually a strategic move to let others join “money leaking business vertical”.

And its benefit would sure be a blessing for Amazon, who is not worried about pouring money into India till they win the market leadership game. As far as others like Flipkart and Snapdeal are concerned, they are vulnerable to lose money in such less profitable business vertical. Any fancy step could make their balance sheet look more troubled.

Is Hyper Local Delivery Business is a Pan India Thing?

Recent steps by Grofers, Peppertap and Zomato definitely raise question about the Pan India applicability of hyper local delivery business model. Its success is restricted up to Metro cities only. Metro cities are the one where most of the nuclear and working families live. Hectic nature of job combined with complacency and freely running money boosts the hyper local business model. Workaholics on weekdays, party animals on weekends seldom get time for arranging their daily market requirements. Hyper local delivery is for them by providing convenience and time saving.

In Tier 2/3 cities, every family has got a member who takes pride in arranging daily market requirements on their own. Paying a few more bucks for not so good vegetable is not something what they look for. FS labs thinks Indian tier 2/3 cities are not a good choice for hyper local delivery unless a growth suddenly changes the lifestyle of people living in these cities.

Flipkart Nearby Shutdown – Learnings for Startups

FS brings the learning part for entrepreneurs from Flipkart Nearby Shutdown- Why startup should focus on sustainability prior to unplanned experiments, expansions and cash burn.

Business Model Sustainability

The very first step of startups is to get a business model that should be so much compelling that people are ready to pay for it. The recent shutdown of startups has revealed that the business model with limited consumer base either in terms of age groups, geographical restrictions or consumer traditional mindset, has less probability of survival.

So, entrepreneurs must understand the sustainability of their business model prior to execution to avoid the wastage of available resources like money, manpower, time etc. Here are few guidelines from FS to understand the business model –

  • Check for the Acceptance of your product by targeted market. More genuine the targeted problem is more is the market volume for your concept.
  • Check for the Market Competition for your startup. Direct as well indirect competition should be evaluated.
  • Check for the Infiltration of your concept into others’ market volume. Your concept should be strong enough to compel people to get shifted to it.
  • Check for the Scalability of your business model. All other features, verticals and areas that can be incorporated into your business model.

Based on the combination of above factors, you can decide the sustainability of your business model.

Financial Sustainability

Once the business model for startups is decided, the next step is to optimize the cash flow of startup to earn profit. Shutdown of operations in few cities by Grofers, Peppertap was driven by the facts that the operational cost was high as compared to the revenue generation.

Hyper local delivery revenue model is based on the commission per sale model. If the average order cost is considered as 300 rupees and the commission as 10% (=30 rupees), minimum number of orders required per delivery boy is (15000/30 = 500) per month (assuming the cost to company per delivery boy is 15000 rupees). So the financial stability will consume hell lot of time.

So, entrepreneurs must check for the financial stability of their business model in long run. A business model dependent only on funding has very limited probability of survival –

  • Check for the Cash-in and Cash-out of your startup periodically. Cash burn must be aligned with the allowable liquidity.
  • Seek for the External Fund Flow for expansion to avoid liquidity break down.

Management Sustainability

The next step of successfully handling the business model and funds is managing the entire show in a planned way and altering it as per the fluctuating needs of market.

Here are few tips from FS to entrepreneurs to ensure the management sustainability –

  • Pre-plan the work on all the aspects to avoid future failure. Work Schedule, Time Frame, Cost Estimation, Quality Parameters, Communication Flow, Risk Mitigations and Opportunities Enhancement Plans, all related verticals shall be pre planned.
  • Continuously monitor the progress, downfall to take the required actions on time. Gaps in actual and expected results give the scope of improvement.
  • Control and Change the work as per the changing needs of market. Market competition and consumer expectation decide the guidelines for required alteration in the existing business model.

This was the analysis of hyper local delivery market analysis driven by Flipkart Nearby Shutdown. Stay tuned with FS for more updates.

Valentine Week – How Startups are Attracting Lovers and making Money

Valentine Week – How Startups are Attracting Lovers and making Money

Valentine’s Day is on the horizon and with that comes the opportunity for the clever sellers.  Which spot Lovers are selecting to meet up? Which medium of transportation they are going to use for their romantic date? What type of breakfast, lunch or dinner are going to be on the radar of love birds? Not to forget the “Red Rose & Chocolate delivery”. What could be the unique service which would make the experience on this Valentine’s day a special one?

You See – potential is huge and startups are trying innovative ways to be a partner in your Valentine’s day celebration. Some of them are offering simple promo codes while others are trying a bit harder to serve you with a fantastic approach into your personal space. Some are attracting their customers by helping them in selection of the perfect romantic date gift and celebration while others are recommending the most innovative ways to impress their loved ones. And why should they not try their best to win the loyalty of their customers? After every single good service to a customer these startups win at least two hearts and not to mention “word of mouth” publicity.

FS Labs has done the research on how startups are impressing the love birds on this valentine’s week. Their services  are impressive, innovative and value for money for their customers.

Foodpanda – Customer Trends

Forgetting the most important date is natural for the guys like us. When there is a T-20 match going on with Kohli going bonkers , who remembers about some “Rose day”?  These “who cares” attitude  comes with its own reward. We get lectures on how we remember some “98” scored by Tendulkar twelve years back but not being able to recall the most important day of our own life. And then we realize how big a crime we have committed. The entire scenario gets closed if and only if we accept our crime and adopt some innovative way to make “Her” happy.

Foodpanda is attracting customers by sending the lovers’ chit-chat screenshot or cartoon-ed scenario via its targeted email marketing strategies. Here is the screenshot for you. Aren’t they hitting the sweet spot? And let me tell you – In my case this was the savior.

Food Panda Valentine Week Email Marketing

Ola – Customer Satisfaction

Traveling  to your favorite spot with your loved one for a romantic date on Valentine’s day is next big thing you could think of. On Such occasions budget is not always a thing which people look for but when a service provider is offering a discounted service just to make your day special – it’s an offer which no one will refuse to accept.

These Ola Guys are trying to win hearts of hell loads of customers by offering an one shop solution to all the “Valentine’s day” needs. “Gift – Shop – Eat- Travel” these four pretty much sum up the Valentine’s day.

  • Ola is trying to attract customers by offering discounts on ride and gifts – Ola has partnered with Flaberry to help customers express their love. Ola would send 100 lucky customers’ beloved a bouquet of 6 roses, a cute teddy bear and 2 chocolates on their behalf.
  • Ola has also partnered with selected restaurants in Delhi-NCR to give discounts on food bill. Ola would offer 25% discounts on bill amount at the selected restaurants between 8-14 Feb if the Ola travel invoice of same day is presented.

Ola Valentine Week - Customer Attracting Strategies

Snapdeal, Amazon, Flipkart & Grabyourlooks – Customer Convenience and Suggestion

What gift should be given to the beloved is the biggest challenge in front of every person. The probability to get woo by your partner is quite low if the selection of gift is not appealing.

E-commerce giants like Snapdeal, Amazon, Flipkart have categorized their product catalogues to recommend their customers with the best choice of gifts fitting to the occasion.

Grab Your Looks is trying to attract female customers by aggregating the selected product catalogue of e-commerce players at one place. It’s a superb market place which suggests girls the type of dress based on the occasion. Nothing could be better to impress your girl than suggesting her the dress for Valentine’s day .

Amazon Valentine Week - Customer Convenience and Suggestion

Grab Your Looks Valentine Week - Customer Convenience and Suggestion

Urban Clap – Customer Recommendation

To think of something different, apart from conventional gift options chocolates, cake, soft toys, flowers etc, to force the customer to think in different dimension – Urban Clap is recommending its customers with different ideas for memorable Valentine’s day like Live Music at Home, Personal Chef at Home, Romantic Décor, Complimentary Gift etc.

Adding to their unique service list Urban clap has also joined hands with Bombay Shaving Company to gift the guys – yes you have read it right –  a  the ultimate grooming experience – a professional lather, shave, and face massage that’ll make him feel like a changed man at just Rs. 799! and this will work wonders for those ladies who do not like the “bearded look” of their Hero. Check the snaps below. Though the look on the guy’s face is alarming – but the luxury of getting a that experience at home with a reasonable price is worth trying.

Urban Clap Valentine Week - Customer Recommendation - Save the Date

Urban Clap Valentine Week - Customer Recommendation

FS Outlook

Customer Relationship Management is the essential element of startup success. Suggesting and recommending your services to consumers as per their trends and need is a good strategy to attract the consumer base towards your product or service. Startups must focus on maintaining the healthy relationship with their customers to expect the best response from consumers.

Stay tuned with FS to know more.

[Image Sources – Foodpanda Emails, Ola Blog, Amazon Portal, Grab Your Looks Portal, Urban Clap Blog]
Entrepreneurs are New Age Pirates

Entrepreneurs are New Age Pirates

Pirates

History tells us about the Vikings who looted right from Western Europe to Persia. It tells us about Moorish, Irish and Arab Pirates or the Blackbeard – a Caribbean pirate whose hidden treasure was never found. They all were fearsome, their occupation was plundering and killing, their passion was gathering treasure. They loved risks and were fond of adventures.

While old age piracy was about looting the gold or silver or currency or taking ransom for releasing hostages, it changed its meaning when privateering came into existence. Privateering meant for the kind of targeted plundering or capturing of a ship related to a particular country on the behest of another country. Then came the present day piracy – Somali Pirates, Great oil plundering all around the world. On some accounts today’s sea Piracy is as big as 25 Billion USD per year!

What fascinates the most and what is common among old and new age piracy is “The Risk Taking Ability of Pirates”. Economics has a term called Risk Aversion. Every person has an aversion for risk. Which means, anyone when readies himself to take a risk, he has to be awarded properly (read monitory gain). Higher the risk associated with a job, higher will be the reward which has to be given to the person. So what was the payout of the Piracy?

Going out to sea in a small sized boat, with hundreds of men on board, would have sickened even best of the captains. Managing the greedy beast out of everymen and then coming to a plausible solution for dividing the booty were the challenges which could put most logical men into a crisis situation. Extensive touring, unpredictable rewards, not supporting weather and looming threat of fight with protective agencies – Pirate life was tough.

There were little chances that anyone could become rich beyond measures just by gathering prizes from plundering few boats. Most of them met the fate of Blackbeard – they were either shot dead, hung till death or drowned in sea.

Risk Aversion algorithm which pirates used was the most fuckedup. They actually lusted after that risk. The potential for riches was just an argument for the venture. But the real payoff was the pirate life itself.

Entrepreneurs are new age pirates

Entrepreneurs

There is another league which uses the same – most screwed up Risk aversion analogy, and this league consists of those who have left their jobs to embrace Entrepreneurship. Like piracy, chances of success for an entrepreneur are little – only few out of many taste the success. Entrepreneurs are new age pirates.

Throwing away the well-paid jobs, security of healthcare and monthly paychecks to try luck in the success of an idea (which most would argue is destined to fail) is the trademark of founders. There comes a time when even closest of the relatives & dearest of friends show concern about what you are doing. Unless your venture becomes the next Flipkart, nobody knows what you have been doing.

Entrepreneurs, though, are all screwed up. They don’t need to be rewarded for risk, because they actually get utility out of risk itself and they like adventure. In Entrepreneurship as well, the potential of getting rich is one argument for venture. Getting rich depends upon how well customer accepts the idea of a new product or service. Those who come to Entrepreneurship with a target of becoming rich soon, see their friends leading easy career path (read working for others) making more money. Those who think they have customer in their pocket; they face the uncertainty of customer behavior. Everybody becomes an entrepreneur with an aim to get success at the earliest – and exactly that doesn’t happen.

Making your first hire and getting someone else joining your venture to support you in the fight ahead, with getting first funding from some crazy venture capitalist who sees some green light in your idea, selling your product to a customer and counting the cash which you earn, then to a day when you sit stunned with all funds burned and you are clueless where it has gone – These experiences, just like the life of a Pirate, is what an Entrepreneur’s aspiration and reality.

But then only an Entrepreneur or a Pirate could tell you – how he has tasted the blood. Like “Man in the Arena” only an Entrepreneur could tell you why some people in old days loved to live a life of Pirate. Was it the Risk or the adventure or the success or the failure? I say all contributed to it in some way or other.

There is “PayPal Mafia” and there is “Traitorous 8” who has made fortune out of Entrepreneurship. And for that they have left the cosy jobs under a Nobel Prize winner or under the big name of Ebay. One group went on to make the “Silicon Valley” and other group has been at the bottom of “modern startup boom”. They are the pirates who are really successful; they are the names who have given Entrepreneurship a new dimension. They have given people a hope what an entrepreneur is capable of doing and what payoff the risk of being Entrepreneur has got.

Logistics Startup – Challenges

Logistics Startup – Challenges

In India, Ecommerce market place has grown exponentially. Its reach in deep inside the Indian cities has now reached to tier IV & V levels. People have come out of bargaining the price of product at brick & mortar stores to ride the discount wave offered by online sellers. With this boom, some challenges have appeared. Controlling the logistics is among major challenges in front of Ecommerce players.

Managing the logistics has various elements – first mile pickup, transporting a product from a seller to a warehouse, to the last-mile touch point and the final journey to a customer in a major metropolis or a tier-4 village. In between these steps, comes micro level management of inventory, warehousing, billing, packaging, labeling, shipping, cash on delivery, payment, product return & exchange etc.

Choosing reputed courier company or third party logistics is not easy. Snubbed by blue-dart and other courier service providers in 2011, Flipkart began its own subsidiary for facilitating delivery of products. But in festive season & peak demand season, Flipkart also battles with the timely deliveries to prospective customer.

Developing a reverse logistics is also very crucial for gaining rapport with customers. This comes into play when the customer requests for return of a product because it is damaged or they wish to exchange the product for its size, color and other reasons thereof.

The global average of Logistics costs accounts to roughly 4 to 5 percent in comparison with 6 to 10 percent of average Logistics cost of India, which means there is a gigantic scope of improving the margins by 3 to 5 percent by improving the supply chain and logistics processes.

As per FS Labs, following are the challenges in front of logistics startups in India –

FS Labs Logistics Startups Challenges

[A] Capital Intensive Operations

Providing logistics solution to industry is a business which is capital intensive. Huge amount of funds are required for following activities –

  • Setting up a new branch.
  • Acquiring required work force.
  • Acquiring necessary equipment- Loading & transport, tracking & immobilizers
  • Acquiring customers i.e marketing capital.
  • Getting the operation running i.e working capital.
  • Hidden costs – Toll tax/ Fuel charges/ Traffic fines
  • Insurance & licensing.

Unless the logistics startup has funds to run its business for at least 10-12 months it would be quite tough to concentrate on work only.

[B] Poor Infra Structure

With Ecommerce reaching deep into Indian consumer base, online retailers in India are under pressure to deliver within short timelines to battle out competition. Alibaba-led ecommerce boom in China was largely facilitated by the growth of state-funded infrastructure, Indian ecommerce companies have to pave their own way to their customers’ doors, and within tight wallets. Any support from government is not there as for as Infrastructure build up is concerned. Due to this logistics is not able to keep pace with the strides of Ecommerce giants.

The startup has patented technology that pulls up optimized routes for delivery boys in real time without relying on GPS. As cofounder of a logistics firm puts in “In India, it’s horizontal players (or online marketplaces) that are driving growth and volume of ecommerce, and no logistics are currently capable of providing the entire supply chain.”

[C] Difference in Billing Cycle

Another hit which the logistics companies take is difference in the billing cycle of payments from customers and payment of dues by logistics firms. Generally customer payment has a billing cycle more than 60 days and payment of dues has a billing cycle of 30 days or less. This puts extra pressure on logistics firms for getting timely funding. Without extra money on-board these companies will not be able to run even for one month. As the operations grow, in term of addition of new customers or business expansion to new area, funding pressure rises.

[D] Not a Choice for Venture Capitalists

Venture capitalists across the globe generally favor a business which could achieve quick value creation by scaling up operations. Rapid expansion brings in quick money. Logistics business is operations intensive. Rapid expansion is not the way which gels well with this industry. Due to this reason VC’s are not willing to put in good amount with logistics startups.

[E] Volatile work force

Work force that actually gets involved in delivery is very volatile. These guys generally deliver anything more than 60+ orders per day at a meager pay of 8 to 10k per month. In such scenarios even additional 500 Rs extra is a big lure for delivery guys. They can change job for even this much amount of money. Most logistics firms face challenge in keeping its workforce intact and running. Indian post which covers almost every pin code in India pays around 20k+ to every postman for daily delivery target of 25 to 30 packets.

[F] Varying Tax Structure in Indian States

Different states levy different tax structure for logistics. Absence of a single tax structure though out the nation asks for different business model for each and every state. Though GST could bail logistics players from devising separate strategy for different states, right now many players chose only selected states for delivery. Different tax structure in different states can slow down the pace of growth. For instance, ECOM Express has not expanded to eastern states and Kerala.

[G] Cash on Delivery Mode of Payment

If a consumer orders a product and then returns it, then seller will have to pay for the logistics for both of the ways, plus commission, plus tax. For a product costing as less as Rs 200, if the customer returns it, total incurred cost would be around Rs 80-100. Cancellations and returns are a big problem that all online sellers face. The risk is especially high in sales made through cash on delivery (COD) mode of payment, which has been one of the defining pillars of India’s e commerce boom. This not only puts extra pressure on the seller but on logistics firms as well due to extra care and lost opportunity.

[H] Tough to Break Monopoly of Old Players

Logistics is a deep pocket game and a major chunk (approx 90%) of the market size is dominated by established logistics players like Fed Ex, DTDC, Blue dart among several others.

While startups think about how much money they need to run their operations, existing players burn little amount to expand their market in new areas.

FS Labs Outlook

Whole E commerce sector is dependent upon the support service like logistics management and CRM. Delivery guy is seller’s representative for customer. Behavior of delivery guys, timeliness of delivery, ease in cash on delivery mode of payment etc are the factors which directly affect the bond between seller & customer. This is the sector to watch for with possibility of unparalleled growth prospects.

There are several startups which have not been able to fare better on test of time. Several companies that have sprung up in the past few years offering logistics services to e-commerce firms have shut shop, stifled by competition from established players, uninspiring margins and a dearth of funds. Among these are – Parallelway and Dialaservice in Bangalore, Earth Movers in Mumbai and Chottu in Delhi. These were logistics companies exclusively targeting the online retail sector, betting on the e-commerce sector’s exponential growth.

Sometimes too much aggression coupled with plan to make fast money and inexperienced investors – who force these logistics firms for sudden expansion, brings upon such fate to logistics startups. India, being a tough terrain and with vast potential for growth, checks the knowledge and patience at the same time.

Stay tuned with FS Labs for more updates.

Tiffin Service – Why not change the design of Tiffin?

Tiffin Service – Why not change the design of Tiffin?

Whenever I go in a new city to stay, after foodie escapades of exactly two week – when my digestive tract starts rejecting  everything I eat on road side ( be it a Baba ramdev dhaba at Nigdi,Pune or Chur chur naan at Gurgaon), I feel like booking a Tiffin service straight away for regular dinner. That will save my hell lot of time and on time delivery will ensure that I eat something to keep my motor running.

It works fine for first week. I feel eager to grab the Tiffin box from delivery boy and taste the food as soon as I get comfortable in the surroundings of newly occupied room. Then comes the second week and the turmoil begins again – I hate that look of Tiffin! Comes third week & my hands deny to plunge Roti in the ocean of dal! By fourth week my tongue joins the mood of hand and declares – No taste at all buddy. Then comes the sinking feeling – Is this what I am earning for!

All this has prompted me to begin a new topic for discussion about the Tiffin! Though it’s a personal thing for me but I guess there are others who suffer like me but can’t raise the red flag! Intolerance haters might return their awards citing a conspiracy against “Tiffin”. Still I am writing with a hope that a sensible founder will read this and will think along. I am simply putting a seed.

History of Tiffin

Tiffin is a word with Indo-English origin which earlier refereed to a light meal. Its definition over the period of time has changed and now it’s a well known name for lunch boxes, and dinner boxes. It contains 3 to 4 small size boxes stacked together with help of a structure. This stacked structure is either used as it to deliver food or is kept in another shining plastic cover up box (whose color faded away earlier than the whistle of cooker).

Tiffin Content

What has to be kept in tiffin is fixed – a curry, chapatti and dal. Four boxes restrict the addition of any other content, though to the respite of Janta – curry could be either veg or non-veg as per demand. And in case you want something else, you need to get one of the contents replaced by the one of your own choice.

Famous Tiffin Service Providers

Mumbai dabbawalas are an organization which delivers homemade food in tiffin to the subscribers. Foodees and Spicebox are few more names in this domain. In every city you will fine hundreds of tiffin service providers and content everywhere is same – Dal Chawal Roti & curry.

FS Labs - Why not change the design of Tiffin

Now let us discuss why I felt like stopping the tiffin service after 4 weeks?

Tiffin service providers do a good job to provide a solution to the dinner and lunch; here are certain points which I noted down when I got served for dinner by Yadav Tiffin service

  • Tiffin has only four boxes, what if I want to have chutney or salad or a sweet or lassi or butter milk?
  • Most of the times I got mixed dal. There was nothing like a yellow dal or dal makhani ever on special days.
  • Curry (Veg) was same thrice a week and that too the cheapest item in the market.
  • I hated the way in which roti was kept. Folded and without butter. Sometimes I found it tough to chew that thing.
  • Plastic cover in which the tiffin was stacked often had a dull look. It was too dull in color to attract me to open the same.
  • And the amount charged for the service was decent enough – 100 Rs/Day.
  • There was never a call for feedback though they charged proactively at the beginning of month.
  • There was never a regular guy for delivery.

Considering the volume of the public which depends upon the tiffin service, it’s very difficult to digest the fact that there has never been any discussion on changing the size of tiffin. Why only four boxes? Even if there are four boxes then why not increasing size stacked one below other so that bottom most tiffin could accommodate more than one or two food items? And why none of the service providers ever try to serve something customer pleasing? Is it all about serving “cold, least tasty, just for serving, without any lure” type of food to those subscribers whose health is dependent on tiffin service?

So what is the scope of improvement in tiffin service?

[A] Changing the design of tiffin – From a classical “stacked 4 box kept in a plastic box“tiffin we could get only basic food requirement fulfilled. If we wish to make food delicious for the subscribers of the tiffin service, change in the design is need of hour.

A possible design can be – All four boxes have increasing size from top to bottom, and bottom two boxes with bigger size and partitioned into two half could possibly add two more compartments in a tiffin box. Salad and chutney along with some sprouts/ fruits could be included in the service. This will definitely add some value to the tiffin.

[B] Changing the menu – There are customers who are willing to pay good for a healthy and delicious food. Serving them with same curry thrice a week is like killing your own business. Nobody is stopping the service provider to look for veg or non-veg items which are in middle or top level of price chart. Planning the content for whole week in advance will help in managing the show in a better way. Customer will get variety and owner will be able to manage funds.

[C] Customer feedback is must – Nobody can force any product on customer. He is the king. Staying in touch of customer once in a week/ once biweekly will be suffice to keep the interest of customer intact on tiffin service provider. A little personal touch can do wonders to the tiffin delivery service.

[D] Add additional items in service menu – Health is dependent on food. Additional food items which are good for health could always be included in the tiffin service provided the service provider asks customer for preference.

[E] Special day should not be on the weekends – Most of the tiffin providers serve special food on weekends. Problem with this is – generally most of the crowd goes outdoors for parties etc on weekends. One Extra meal with too much luxury is not the requirement of customer. He will not be able to appreciate the content and neither will he be able to enjoy the food.

On the other hand if special day is on middle of the week, customer will be able to enjoy the food to the fullest.

[F] Plastic Box could be made attractive – What is being noticed first by customer is the Plastic cover box. The cover box could be made more attractive for the purpose of keeping customer’s hunger alive.  Its cleanliness is again a mood maker for the customer. Small things count and this will ensure that service provider will not lose customer in 4 weeks.

[G] Let customer decide what to eat – Another extension could be to get menu from customers beforehand. But the demand should always be from the variety of items present in your menu. Service provider will be able to plan his inventory in a better way and will be able to serve customer as per the requirement. This way the association between customer and service provider gains better bonding.

So as per FS Labs outlook, for Tiffin service providers it’s important to keep service interactive. Any side misses the interaction; chances of long term association are very less.

Flipkart Acquisition Trend – Lessons for Small Startups

Flipkart Acquisition Trend – Lessons for Small Startups

Every idea is a seed. It has got potential to transform into a big tree of success. Whenever an entrepreneur starts working on an idea, first and foremost question which he faces is how his idea will perform? Would he be able to stand in the category of few “Bansals of India” or would be consumed by big startups in the phase of evolution.

Founder’s target:

Aim of every startup coming at the horizon can be summarized in two broad categories:

  1. Startup will evolve into big success and will lead its segment. Like – Filpkart, Amazon, Apple, Google etc.
  2. Startup will develop into an expert in particular segment/practice/technology and will be later acquired by bigger startups as part of their business model.

Every founder thinks big. As per them, their idea could be the next big hit in market. But phases of evolution and time shape the future of every startup.

Here is FS Lab’s analysis about Flipkart Acquisition trend, which highlights how Flipkart has carefully planned its success story on the map of Indian E-Retail market.

Let us take a short dive in the fairytale rise of Flipkart-

Consider the evolution of Flipkart from “Online Book Sellers” to a $15 billion E retailer company. Founders of Flipkart were initially trying to make a price comparison platform but as not many e commerce websites were present at that time, they decided to make one E-commerce company. Flipkart began its service in India in 2007. It all started with book named “Leaving Microsoft to change the World”. Initial investment of $8000 for making website and customer interface domain was all they invested. Within 3 years they were able to attract large customer base which was previously content with buying books from stores.

Book plus Electronics item sale was next target. Funding and careful planning supported by better customer service was mantra for smooth changeover of Flipkart-The book seller to Flipkart-The E retailer. In mean time to switch over its initial image to E retailer, Flipkart acquired number of companies. These acquisitions were carefully chosen and all of them coincide clearly with “what next Flipkart is planning to sell”.

Flipkart Acquisition – Pattern

FS labs Flipkart Acquisition - Bigger is Better

1. We Read : 2011 (Flipkart sold books; had 800 Employees. Potential Target – Getting socially connected to its customers and get traffic from social media) A social book discovery engine and enabled users to recommend and discover books, search for authors, rate and review books as well as share and network with other book lovers. It was registered widget on Facebook, Hi5, Myspace, Yahoo and Orkut. It boasted a registered reader base of 3 million and had listed 60 million books. Most troublesome feature pre Flipkart acquisition was that it directed customers to Amazon.com.

Through acquisition of We read, Flipkart were able to connect to its customers socially. It ensured presence of Flipkart on every social media platform. And of course a lot of traffic to Flipkart website which was previously diverted to somewhere else.

2.Mime360: 2011 (Flipkart sold books, handsets, consumer electronics & movies; had 1500 Employees. Potential Target –Online Music Store)

An online digital media exchange platform that connected content owners such as artists and musicians with content publishers. It resolved common issues such as piracy, varied pricing and revenue collection for the users and had a revenue share and licensing based business model. Flipkart wanted to build out its B2C story. It was already selling music CDs and DVDs on the site and now they wanted to open a business vertical to distribute music & games online.

In October 2011, Flipkart launched an online paid music download store – Flyte, with an aim to control legal music download and hence generate revenue by selling paid music download. Later this venture failed as it was not able to compete with free music download industry.

Mime360 had around 11-12 people, and the technology team eventually shifted to Bangalore, while the business team remained in Mumbai. Sameer Nigam, CEO of Mime360, joined as head to lead Flipkart’s digital distribution business.

3.Chakpak : 2011 (Flipkart sold books, handsets, consumer electronics & movies; had 1500 Employees. Potential Target – Online digital store for movies)

Chakpak was a content portal around films, covering Bollywood, Tamil and Telugu films, with movie timing, movie information, film reviews, a stars directory, video clips, wallpapers and film news. Flipkart acquired only content from Chakpak. This move was in line with the acquisition of Mime360. Probably Flipkart had a vision to include paid film download in its “Flyte” digital store.

Critics saw this move of Flipkart to be in line with the acquisition of IMDb by Amazon, to benefit from its dedicated ad inventory for driving online sales of movies, music and merchandise.

Among its founders, Gaurav Singh kushwaha went ahead with new ventures while Nitin Rajpoot joined Flipkart. Chakpak.com (website) was later acquired by Trivone digital services.

4.Letsbuy : 2012 (Flipkart sold books, handsets, consumer electronics & movies; had 2500 Employees. Potential target – to be undisputed king of online electronics sale market)

LetsBuy was launched in July 2009, and primarily focused on retailing consumer electronics; communications and computer goods, later expanded its product portfolio to include toys, sports, healthcare, watches and stationary. At the time of acquisition Letsbuy.com was making around 150 Cr annually as compared to 500 Cr of Flipkart. These two were the leading online electronics seller and the segment was actually struggling for customer loyalty.

This acquisition gave Flipkart an edge in electronics market. It in a way consolidated the E retail market and redefined the size of Flipkart. It also prepared Flipkart for a duel with Amazon which had just entered into India market.

The acquisition was a combination of cash and equity. Founders of Letsbuy, along with their 350-plus team, continued to function independently with the added advantage of being able to access Flipkart’s superior technology platform and supply chain capabilities

 With This move Flipkart clearly had had consolidated its position in two verticals – Books and consumer goods, while in third – Digital store, its performance was OK-ish.

FS labs Flipkart Acquisition - Introduction of New Verticals

5.Myntra : 2014 (Flipkart sold books, handsets, consumer electronics & movies, apparel; had 20000 Employees. Potential target – to be leaders in online apparel market)

Leader of fashion and lifestyle – Myntra was the next grab for Flipkart. With looming threat from Amazon and eminent entry of Walmart led to consolidation of apparel industry as well. At the time of acquisition, Myntra was values at $204 Million and combined with flipkart it was holding 40-50% of online apparel industry market share.

This acquisition came as a blessing to both E retailers. In year 2013 both had booked a net loss close to $350-400 million. Consolidating the business will help them as now both will be able to share the supply chain and operations. This move again prepared Flipkart for forthcoming duel with Amazon, E-bay and Walmart.

Myntra co-founder and chief executive Mukesh Bansal got the role of head of fashion business of both Myntra and Flipkart. Despite this acquisition, as per terms agreed by Flipkart & Myntra, both still sold apparels independently.

6.Adiquity : 2015 (Flipkart sold books, handsets, consumer electronics & movies, apparel; had 33000 Employees. Potential target – Online marketing space)

Adiquity started in year 2006 as a search engine named Guruji.com. By 2015 company has changed into a mobile ad network that allows app developers and mobile publishers to earn revenue through their mobile inventory. It also facilitates ad agencies, ad networks and other industry buyers to acquire global quality mobile traffic.

Adiquity’s technology will help Flipkart provide online marketing services to the sellers on its site, an online marketplace, helping them improve their chances of reaching a wider and more relevant audience, including that are served up with searches and social networking posts. With Adiquity, Flipkart can help its vendors by taking the burden of effective online marketing off of their shoulders, for a fee. It would also ensure the vendors are tied to Flipkart’s ecosystem more firmly at a time of intense competition.

This Move is in line with the search of more inorganic route of revenue generation. Adiquity CEO – Anurag Dod joined Flipkart initially but resigned 6 months thereafter.

7.Appiterate : 2015 (Flipkart sold books, handsets, consumer electronics & movies, apparel; had 33000 Employees. Potential target – precise marketing through mobile app)

Appiterate was basically an A/B testing tool for mobiles. A/B testing is a methodology to test out two variants and experiment to find out which version works better with the audience. Appiterate in the past has helped e-commerce companies in targeting their customers in more specific manner by using big data, push notifications and in-app messages. Appiterate was delivering more than 100 million personalized notifications each month through its platform for leading e-commerce companies

Appiterate’s mobile marketing automation platform will be integrated into Flipkart’s mobile app and will be used to drive up revenue through precise targeting of users based on their activity on the app and website.

This acquisition was in line with Flipkart’s “Mobile first” approach.

Apart from these acquisitions Flipkart in 2014 has bought a sizable share in NgPay to strengthen its mobile payment platform.  Appiterate CEO – Tanuj Mendiratta joined Flipkart initially but resigned 4 months thereafter.

What will be the next potential acquisition by Flipkart!

FS labs Flipkart Acquisition - Lessons for Small Startups

Flipkart has now established into the biggest Indian E retail seller. To consolidate its position at the top it must be broadening its horizon from time to time. FS Labs has listed down few prospective areas where Flipkart could make next acquisition-

  1. Grocery Delivery.
  2. Better last mile delivery.
  3. Better warehousing / Inventory management solution.
  4. Mobile wallet service provider.
  5. Spectacle and lens makers.
  6. Customer Relationship Management Platforms.

There are more areas which will be added to E retail market and will pose a new challenge in front of giants of the market. Till then happy reading.

Stay tuned for more analysis.

Read here about the betterment of existing setup of “Flipkart”. (An analysis by FS Labs dated 26th July 2015).

Read here about the betterment of existing setup of “Myntra”. (An analysis by FS Labs dated 6th October 2015).

Mayo War – Unilever tamed by a startup!

Mayonnaise is a thick, creamy sauce often used as a condiment. As per Wikipedia” A condiment is a spice, sauce, or other food preparation that is added to food to impart a particular flavor, to enhance its flavor, or in some cultures, to complement the dish. The term originally described pickled or preserved foods, but has shifted meaning over time.” Unilever had been the Giants holding king size market share for Mayonnaise sale. Then there was arrival of Hampton creek and it’s “Just Mayo”. True to the definition of condiment Hellmen’s Mayonnaise sales dropped making way for Just Mayo. Unilever lost a handsome market share to Hampton creek.

Loosing share of business in a segment came as a blow to Unilever. That blow began something very interesting – A Mayo War. It began around October’14 and ended in December’14 with Unilever dropping the suit against “Just Mayo”.

In the war Unilever stood against Hampton creek – a startup with mere $120 million funding.

Mayo War

Here is an analysis of “Mayo War” by FS Labs.

  • Condiment market before “Just Mayo”: Unilever’s Hellman Mayonnaise was the market leaders. With 45% market share in $2Billion US market, Mayonnaise was unfazed as for as any competition was concerned. As per USA FDA rules, any product categorized as Mayonnaise should contain egg & 65% oil content. Against Hellmen’s Mayonnaise there were lot of vegan product which labeled themselves as Mayo or Mayonnaise but these products were more targeted toward health conscious consumers.
  • Entry of Hampton Creek: Hampton creek entered the condiment market with an alternate to egg based mayonnaise. Their product “Just Mayo” was a vegan substitute to Mayonnaise. Emblem on the product jar – a plant on egg shape background depicted the thinking behind product. Based on consumers feedback Hampton creek announced that their product was better in taste than old Mayonnaise. Hampton purposefully never marketed their product being vegan and in this way they were able to target a larger customer base – a mix of vegetarian & non-vegetarian.
  • Just Mayo: Hampton creek is attempting to create a new breed of plant based food, which would be healthier and more eco friendly. Regular Mayonnaises are made by mixing oil & egg, but Just Mayo uses pea’s oil & spices only. As per the founders, production of eggs is more expensive & less eco friendly than growing peas and some spices. Founders avoided naming it as another mayonnaise. They used pea’s oil as replacement of egg. And because of its eggless nature they named their product- Just Mayo.
  • Just Mayo sale picked up: Within 10 months of launch, just mayo was instant hit. Due to clever marketing it was getting sold in at least 22000 stores across the USA. Just mayo targeted regular grocery stores like Walmart, Safeway, Target, ShopRite, The Dollar Tree, Costco, Whole Foods, Kroger which were earlier used to be forte for Mayonnaise. Price wise it was also cheaper than the competition.
  • Unilever‘s unease & case filing: Losing market share to a startup like Hampton creek was unacceptable to the market giant. In an attempt to check the sale of Just Mayo, Unilever filed a case against Hampton creek for false advertizing and alleged that Just mayo spread was no real Mayonnaise as it did not contain egg. Unilever showed concerns over competitive marketing tactics of Hampton creek. Unilever accused Just mayo of damaging the entire product category, which has strived for decades for a consistent definition of ‘mayonnaise’ that fits with consumer expectations.

Unilever suit acted as blessings in disguise for Hampton creek.

  • Hampton became hit in media & among customer: The suit generated a enormous response from media for otherwise unknown Hampton creak. Hampton creek boasted a financial backing from Microsoft’s Bill Gates & Li-Ka Shing (Richest Asian tycoon). “It’s been incredibly powerful to tell our story to millions of people,” said Josh Tetrick, founder and chief executive of Hampton Creek.
  • Critics supported Hampton creek: Critics acclaimed Hampton creek for bringing innovation in mayonnaise market. Citing Just mayo’s evolution as a technological leap in condiment market, critics declared the action of Unilever as childish and lacking professionalism. They accused Unilever of trying to push the competitor out of market through wrong means.
  • Just Mayo Image splashed everywhere: It gave Just mayo a grand marketing. Every big news paper/ books carried out the story about “Big Mayo” bullying “Just Mayo” for capturing its market share. Further aiding Hampton Creek’s cause, many articles ended with a reference to the “orgpetition started by celebrity chef Andrew Zimmern. Petition with title, “Stop Bullying Sustainable Food Companies” were also used in some articles. Just mayo received massive support from customers. Quotes like “Thanks Unilever. I had never heard of this Mayo, now I can’t wait to try it” flooded social media.
  • Mayonnaise failed the FDA regulation: An unusual twist took place when some of the Unilever led Mayonnaise was not containing enough oil (65%) to meet FDA regulation. This led to more shame to Unilever and they changed product description on their website.
  • Unilever’s Loss was Hampton creek’s gain: Harder Unilever tried, more consolidated position Hampton creek gained. After 2 months, Unilever dropped the suit against Just mayo and advised them to label products more carefully. By then Hampton creek had gained support from enough customer base which would keep them busy for long time.

Further Development in Mayo War

Recently in August’15 FDA sent a warning to Hampton creek asking them to drop term “Mayo” from their product as it was not in compliance with FDA regulation. In a time when free market and technological innovation are basis of development, such ban on a product will definitely hamper the confidence of more such companies.

Hampton Creek has definitely shown that there is still lot of improvement scope in our food items and customers are open to experimentation. For that its duty of government to provide such startups enough support. Without that our taste buds would not be able to explore the new flavors.

This was small analysis of mayo war by FS Labs. Stay tuned for more updates.

War of Mobile Payment – Softcard Failure Analysis

Mobile Payment Service Domain is getting more and more attention day by day. Giants like Apple, Google are trying their heart out to grab the available market base. Electronic fund transfer companies like Visa, MasterCard, PayPal and lots of startups are trying for partnerships with these technological giants.

Those who have exited this lucrative market are MSN Wallet, Yahoo! Wallet, AOL Wallet, Wallet365 etc. The next name making the exit was Softcard. Google bought it and integrated it with Google wallet in Feb’15 which has now been replaced by Android Wallet. At the helm of all this turmoil is the mobile based $650Billion payment. Day by day more and more customers are opting for this mode of payment.

Here is an analysis by FS Labs for why Softcard ran out of steam just in 18 months after its launch!!

softcard

About Softcard

  • Inception: Started as Isis Wallet, with a backing of AT&T, T-Mobile & Verizon, it was an attempt to compete mobile payment firms – PayPal & Google Wallet. Trio of the mobile carriers blocked Google’s attempt to enter into mobile payment service by using NFC and started Isis Wallet with an aim to control Secure Pin technology.
  • Product on offering: An Isis App would enable customer’s Smartphone to be their banker in all regular Sears & Roebucks. Customers obedience in carrying Smartphone everywhere would be utilized for more swift payments at regular goods & service at point of sales location equipped with NFC. It enabled a contactless communication through a simple waving of Smartphone over NFC compatible devices for send information. Customers Wallet was always secure in their pocket.
  • How innovative it was ? Bills would be paid without taking out actual card or time consuming card swapping and then waiting for payment to happen- this was the intend. Credit card numbers would never be shared with the merchants , thereby reducing risk of frauds. Merely by saving the credentials on App would make customer ready for mobile based payment. Few voted for it as very innovative but it lacked the loyal customer base like that of apple or android.
  • Was this product a problem solver ? Few would argue if Isis Wallet solved any real life problem. All it did was solving a non-existent problem. At the time of launch of Isis Wallet, customers were quite happy in paying though cards. By contrast unawareness of how to use Isis Wallet platform on mobile lead customers to make payment through Isis wallet a time consuming option.
  • Growth of Isis Wallet: Initial backing of Isis wallet by Telco’s was the basis that it would compete against likes of Visa & MasterCard. Major mobile manufacturers supported it and ensured including Isis platform in all mobiles at manufacturing stage. In fact Google was blocked by Telco’s for providing Isis Wallet an unparallel growth.
  • Reach in customer base : For attracting customers and educating them about NFC technology , one million complimentary Jamba Juices were given away to Softcard users. Despite these efforts, the adoption rate of Softcard was not good enough to sustain the business. It always remained last proffered option among the mobile payment service providers.

Why it failed ?

As Hsuan-hua Chang puts it “After all, a vision has to be either supported by a market demand or inspiring enough to create a new market entirely. Isis Wallet never did that.”

  • Limited reach and Deviating the initially decided path – Initiated by the trio of Telco’s as a payment method that would compete against Visa and MasterCard, Isis Wallet lost the battle as soon as it lost its conviction to compete. Softcard was initially limited to a handful of Android devices from the three carriers and required a distinct app specific to each one of those carriers. The moment that ISIS decided to just become a mobile wallet (with no value proposition) that would incorporate payment methods such as Visa, MC and Amex, was the turning point which made it stand last in the list of many payment gateways.
  • Controversial Name & Re-branding – Remember Isis ? Oh well , it’s the great Islamic state active in wars against all in middle east. Faring badly in grabbing customer base and already tight in revenue making, Isis Wallet was struck with lightening when Islamic state of Iraq & Syria rose. Isis Wallet re-branded itself and got a new name ” Softcard”. Already leaking heavy money in day to day operations, re-branding took a toll as it involved a lot of marketing activity.
  • Poor marketing tactics – Softcard never disclosed actual data about its reach or number of customers using its app for mobile based payment. It never published any data about its acceptance to pubic. Actually data related to ” who is using it” acts as a opinion maker for crowd. It gives an simple information to customer about what is the trend. People always go by trend. Softcard failed to market its product properly. The confusing mess of device, carrier, credit card, and retail support did nothing to help Softcard.
  • Not a solution to problem & No education to customer: Softcard never solved any existing problem rather it was altogether a new domain with lack of consumer education and insufficient incentive. It was tedious as compared to basic card based payments. Apple has recently launched Apple Pay and first step for making it wide spread has been giving proper education to customers regarding the usage of product.
  • Lack of Pure tech DNA – Populated with carrier personnel ( Less tech or product oriented and more of service provider DNA) Isis Wallet never had courage to develop a cutting edge, brand new, revolutionary product. It never had a pure tech talent needed for such a product. Organization was dependent on its partners and vendors for any kind of engineering and development. All of this led to a real soft card with no wow factor.
  • Controlling the ecosystem: Why Android is a success ? Because Google never tried to force it on the customers. This OS along with a loads of imperfection is still the top choice among costumers. Google has always supported an open approach to this OS and a whole ecosystem has got developed around Android.
  • Isis wallet and Trio of Telco’s aimed at controlling secure element, branding and device requirements, but had based the business case on everyone else in the ecosystem blindly embracing this closed model that everyone else was expected to contribute to. No wonder, Isis never made any friends, except the consultants, PR companies and lawyers.
  •  Better future with Google :The carriers desperately want something that can compete with Apple Pay. With broader availability across most new Android devices and support from all four major carriers, the combined Softcard-Google Wallet service has a better chance to tackle Apple Pay. (There’s still some question about credit card support for Google Wallet, but we’ll pretend that banks will warm up to the idea.) From a marketing standpoint, all the entities here are in a much stronger position.

Softcard Sold. Old Rivals Google and Apple have squared again in fiercest forthcoming battle.

That’s all from FS Labs. Stay tuned for more..

Your suggestions for improvement are welcome. We would love to read your comments and mails. Adios.

 

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