Emerging Entrepreneurs

Aahaa! it’s easy to do indirect purchases now

Swathi Moorthy | Updated on January 09, 2018

Rajaraman Sundaresan (right), CEO, Aahaa Stores and Shri Harish Kannan, Chief Operating Officer   -  Bijoy Ghosh

B2B start-up helps in bringing down the cost of transaction and human capital

The word Aahaa is an expression of wonder or happiness in Tamil.

“We named our company Aahaa Stores because we wanted to create ‘wow’ moments,” says Rajaraman Sundaresan, Chief Executive Officer and co-founder, Aahaa Stores, a B2B procurement platform for indirect purchases.

What is an indirect purchase? Rajaraman defines it as any expense that does not figure in the operational cost such as stationery and uniforms. Most companies spend about 3-6 per cent of their total revenue on indirect purchases.

According to Asokan Sattanathan, Chairman and Founder, banking and financial sector spend on non-production expenditure is about 11-15 per cent of gross income.

Aahaa Stores was formed in 2013 to address the gap in this segment, which accounts for about ₹20,000 crore in India. “We are proposing to reduce the non-production expense by 20 per cent,” says Asokan.

How? Asokan says, ““Aahaa is like Amazon for B2B businesses.”

Aahaa Stores aggregates different vendors and purchases happen across the branches of a company under a single e-commerce platform.

How it works

Explains Shri Harish Kannan, Chief Operating Officer and co-founder: for instance a bank has 1,000 branches across India and all of them buy locally. If each branch prepares a separate invoice for each category of item purchased, say six invoices per branch per month, you have 6,000 invoices per month for the bank. “Imagine the cost of transaction and human capital for a full year,” he adds.

Instead, what a client can do is place an order from an assortment of 10,000 products available on the platform, which will go through the approval process mandated by the company. Once it is in place, the products are delivered to respective branches via Aahaa Stores’ delivery network.

Harish says the company has seven warehouses across India from where it delivers the orders to 2,000 locations. It has its own delivery channel and partners with courier and last-mile service providers for delivery. “This is how we bring down the cost on transaction and human capital.”

Aahaa has 120 clients with turnover in the range of ₹6,000 crore to ₹1.10 lakh crore , for whom, Harish says, the savings are significant.

But bulk of the savings comes from analytics platform, says Rajaraman. The platform uses machine learning and data analytics, which is used to identify consumption pattern in different branches, analyse and make decisions. “In the context of GST, it makes sense since all our vendors are GST-compliant and hence companies can claim input credit,” he adds.

Business models

Since the requirements for each client are different, the company uses three business models. First model is Full-Time Servicing, where it looks after the entire supply chain from procurement to managing their services, for which the company gets a margin from products sold. The margin varies for each product.

In the Managed Services model, where the company covers only part of the supply and logistics and manages overall services, the margin is fixed for all products. Asokan says there is a provision to avail of only the platform as well, for which the company will charge a licence fee.

Aahaa does about ₹3 crore transactions per month. Last fiscal the company registered a turnover of ₹65 crore. “We expect to close March 2018 with ₹100 crore,” says Asokan. “We are close to breaking even on a monthly basis,” he adds. Harish says the company plans to expand to more categories such as healthcare, aviation, education and retail.

With expansion on the cards, the company is looking for more funding. “How much we need depends on our revenue growth,” says Asokan. If the company manages a turn over of ₹500 crore in the next couple of years, it would need ₹70-80 crore investment. “This will increase based on revenue to cover the volume growth,” he adds. Majority of the funding will be used in technology, talent, warehousing and brand building.

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Published on August 21, 2017
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