Emerging Entrepreneurs

Crafting a tech-enabled supply chain for rural kirana stores

Vishwanath Kulkarni | Updated on April 27, 2020

VilCart provides sourcing, logistic and marketing support to kirana stores

For Prasanna Kumar C, a chartered accountant, the daily commute to college in Mysuru from his village, did help gain an insight into the complex grocery supply chain.

“I used to see the village kirana shop owners struggle in sourcing their weekly or fortnightly supplies. They would travel in the morning bus to Mysuru, spend the whole day purchasing their stocks and return in the evening. Of course, these days private transport is available, but the model of operations remains the same. Kirana shop owners have to depend on wholesale markets in cities for their supplies,” he says.

The urge to do something connected with the rural economy gave Prasanna the idea to build a rural grocery supply chain. “I studied the rural supply chain and consumer behaviour for almost seven years, before starting VilCart – an inventory-based model that connects village kirana shops ensuring regular supplies, two years ago,” he adds. Thus Vilcart Solutions Private Ltd came into existence.

“We procure staples and other items, repack and sell to kirana stores in rural areas. The kirana stores in rural areas cannot afford to buy in large quantities. They buy multiple times and in lower volumes. We repack according to their requirements in smaller quantities and deliver thrice every week at their doorsteps,” Prasanna adds.

On an average there is a small kirana shop for every 250 members in a village. “Our reach extends from taluks to smaller towns and villages. We deliver even if there is a single shop in a village and all category of items that are supposed to be in a kirana shop,” he adds.

The business model

VilCart’s business model is something like this. Grocery shop owners in villages, who are enrolled with the company, can place their orders through the VilCart mobile app or through telecalling and their orders are delivered within a day or two. The VilCart app is available for registered customers only.

“We have reached grocery stores in around 750 villages in the old Mysuru region. There are over 2,000 billable customers now,” Prasanna adds. VilCart operates in Mandya, Mysuru, Chikkaballapura and Ramnagara districts of south Karntaka and proposes to expand its network to northern districts such as Belgavi and Bidar this year. “We are also looking at expanding in two districts each of Tamil Nadu and Andhra Pradesh by this year-end and the entire South India by 2023,” says Prasanna.

Local sourcing

The company follows a local sourcing strategy. VilCart sources products such as atta, sooji and other flours from mills in the districts. Some of the FMCG items are sourced directly from factories and from local distributors.

Before VilCart reached out to the kirana stores, the shop owners in villages used to go to the nearest towns or taluk headquarters to source their supplies, incurring additional logistics costs. They wouldn’t get all the items at one place. They used to buy from four or six of the wholesalers and arrange their own transport or even on their two wheelers to take the goods to their villages. Such risks of transportation and the distribution layers in between have reduced now.

“Depending on their purchase cycle, they used to buy it for every 10–15 days. Now, we are delivering them every three days. As a result, they are buying now for their weekly requirement. Our model has helped them reduce their working capital investments on inventory, which they are investing on buying additional products or trying new products,” Prasanna says, adding the company operates on a cash delivery model.

Harish, a shop owner at Kyatanahalli, says VilCart has helped reduce his market visits. “I now visit the wholesale market in Mysuru only to purchase goods such as cosmetics,” he adds. “VilCart operates on cash and carry model and though they have a wide range of SKUs, I would still prefer to work with traders in Mysuru, who offer credit facility. Many customers in villages prefer to buy on credit and I need to keep that cycle going.”

To address the issues of credit cycle, Vilcart is in talks with fintech companies and financial institutions to provide credit linkages to retail shop owners.

VilCart sells about 2,300 SKUs currently, 68 per cent of which is sourced from local players. “Except for onion, potato and eggs, we sell all other products to the kirana shops. Now we plan to add stationery and cattle feed to the SKUs,” he adds.

The average monthly billing for each kirana shop registered with VilCart is around ₹22,000, which can go up to ₹60-70,000, he adds.

“The VilCart model has helped me expand my market reach while eliminating middlemen,” says Basavaraju of LV Agro Tech, a rice miller in Manvi. The farmer, from whom he purchases directly and rural consumers are benefited, he adds. Similarly, Praveen a flour miller in Mysuru, says VilCart has helped take his brand of products to the interiors, while reducing marketing costs.

The rural market in India is dominated by local brands. “About 48 per cent of the brands sold in rural areas are from local producers,” says Prasanna, adding that in a category like detergents, about 92 per cent of the sales is local brands. “Preferences vary every 30 km,” he adds. “Our app helps the shop owners manage their inventory andcustomers’ credit flow. Vilcart app is a complete end-to-end management app, which has an inbuilt bar code scanner. They need not invest additionally on devices such as bar code scanner or POS,” Prasanna adds.

Administration charges

VilCart charges a small administration fee and a small profit margin, while the doorstep delivery of goods is free. The shops save 6-8 per cent on the landed costs.

The company has four delivery vehicles of its own and has leased 12 from local individuals.

VilCart has aggregated talent from companies such as Bigbasket and IBM, while the operational team of telecalling and delivery is largely local. The operational team consisting of packers, telecallers and logistics exceeds 65 and has the potential to increase as the company expands its operations. VilCart clocked a monthly turnover of ₹3.5 crore and expects to double soon. VilCart, which follows the business model of its urban counterparts such as Jumbotail and ShopKirana, raised about ₹2 crore in early-stage funding. Prashant Prakash of Accel Partners, Jyothirmayee of HiveMinds and Anand Banka, Head of Investments at Vedanta, have invested in their personal capacity. The company is in talks with venture capitalists to raise ₹20 crore.

When it comes to the non branded items such as atta, sooji and flours, there are multiple layers in the distribution network, which are often lengthy. As a result the prices turn expensive. For example, if an urban consumer pays ₹36 per kg of sugar, the rural consumer shells out ₹42 for the same product, because of the multiple layers, he adds.

“Our intervention has helped eliminate the layers between manufacturers and rural consumers. For products such as atta, sooji and sugar, Vilcart has eliminated about three layers in the distribution network. In the case of branded products, we have been able to reduce about four layers because of our tie up with manufacturers and their distributors.”

Published on April 27, 2020

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