Imagine you are just about to leave your office and you receive a call from your wife to bring 3 eggs from from the nearby market on way to home. It’s certainly a headache, especially when you are tired. RainCan, a Pune-based startup, just wants to change that and make your life easier.
RainCan is an interesting story in many ways. They are a hyperlocal online grocery company, bootstrapped, operationally cash positive from the day it started, they think and act more like a supply chain when it comes to delivering services, but keep a deeply consumer oriented approach. All of these traits are rare to find in a single online hyperlocal grocery firm.
All of this sounds too good to be true, but RainCan is making it possible. They certainly have challenges, but what is more interesting is the unique value proposition they offer. The business model is so exciting and unique that it has potential to disrupt the whole hyperlocal space.
How the idea was born
In 2011-12, Abhijeet Kumar and his friend Munendra, passout of IIT Bombay, set up a poly house near Kota. They were producing cut flowers and putting into market. Munendra says:
“Either we were selling into Mandi or exporting it in Delhi. While doing the project we realized that getting customers in retail is quite difficult. There were also supply side issues as well, but it’s actually the retail side which is more challenging. Most of the price markups happen at the retail side due to fragmented and complex supply chain. ”
It’s where they thought to sell their own produce to retail side. They set up RainCan, a bootstrap e-commerce startup in Pune in 2015 in Pune. As a supplier, you worry about all your supplies to get sold at the best possible price.
“Retail is more about footfalls or visitors. A shop at street always have curious visitors who come and experience your offerings. If you offer good product, price, and quality, your customer will love you.
“A street can have limited shops and limited buyers. This is not true in the case of online commerce. Here the rules of game are different. If you don’t market, you will not have visitors. We have millions of websites and everyone does its bit to reach customers. How customers know that you exist and others don’t.” says Abhijeet Kumar.
“Also, even customer comes across your website why will they buy from you and not from others. This is where we define market segments and make sure that customers visit and have a good reason to buy.” he adds.
A consumer needs essential breakfast items, such as milk, vegetables and many other things for regular use. However, often they don’t have time to purchase because of their hectic life. It’s normal that working people gets the SMS to bring a piece of bread on way to home.
“Sometimes, your wife gives you a list of things to bring it to home. We do those things for you on daily basis. Customers can subscribe to products based on their requirements.” says Abhijeet Kumar.
Take the example of daily milk, your nearby kirana shop may deliver milk, but they will not deliver a piece of bread or egg. You cannot specify that you need one piece of cauliflower tomorrow or a tender coconut after two days. You can choose the amount of product, date of delivery and frequency of delivery. Even you can modify your order.
The unique deep penetration hyperlocal model and not ‘deep discount’
If 90’s was the era of IT outsourcing companies, this is the era of e-commerce. India is witnessing a flurry of online commerce and grocery startups eager to disrupt the market. They are solving different problems in different manners. However, the problem with the hyperlocal space is that the market is extremely competitive and margins are quite low, so most of them are bleeding badly.
Getting repeat customers on recurring basis has been one of the biggest problems of e-tailors or online shopping portals. They also need a certain kind of threshold ticket size for delivery each time they deliver.
Many supermarkets or big grocery stores do provide home delivery as they need a certain order size. It’s difficult for them to deliver half a dozen bananas or a piece of bread or 4 eggs. It’s where the RainCan model is really unique.
The prepaid subscription driven e-commerce model allows RainCan with positive working capital from the very first day. This is unique as a majority of hyperlocal online shopping portals have negative working capital.
“As customers can recharge 100 Rs or can come after some time and recharge another 100 rupees; it’s completely their own choice. First time customers are often skeptical about the service and payment system. However, the trust level builds with time. ” says Abhijeet Kumar.
Therefore, it offers a trial period which gives them opportunity to try out the company’s services and products and when their trust level is created. We are also trying to diversify our offerings. Once consumers see that delivery is fast , the quality is good, and there are no billings or payment related issues, customers trust build.
Another advantage with this model is that when company started operations, they don’t just have to put their own money, but they have the money from customers which helped a lot in running routine operations.
This model is more evolved and matured hyperlocal model than the existing e-commerce models. RainCan tries to penetrate deeply in the specific area of operation. Their penetration is so deep that they have almost 90 percent people in a particular society as their customers and all of them are recurring customers.
Abhijeet Kumar says, “We don’t have cash on delivery as our delivery boys never collect cash. However, there are a few customers who have problems in recharge or does not have the app, we offer them opportunity to recharge in cash. But their numbers are a few and far between.
The curious case of supply chain management
Supply chain is usually costly for hyperlocal players. RainCan depends on the economies of scale. Since they deliver even one bread, from the same society they get the orders for 10 breads that lowers the cost of operations. The overall size of the basket for delivery boys makes it possible to deliver at a low cost. There are 2000 orders per day in the 2 kilometers area where the company operates.
There are many interesting aspect of this model. It may sound premature, but even at risk of proving wrong, we can safely say that it’s going to be really big in future taking other players completely by surprise.
Vikash Kumar, the editor of XING Magazine, talked to Abhijeet Kumar, the co-founder, on a range of areas related to the unique startup model in a free-wheeling talk for an hour.
Which are the ways customers can order and what are your offerings?
A customer can order either via subscription or using top up at RainCan app. Subscription allows them to place order for certain products you need on the regular basis. For example, milk or bread, that you can subscribe for daily, alternate day or every third day. Customer has an option on the app to pause or start or change quantity. They can manage it in a couple of clicks.
Another way a customer can buy from us is in form of top up where he can buy even a single item at a time. For example, you open the fridge in morning and find juice getting over, you can just top up that juice on RainCan right away. During the day you may find potatoes are about to over or something else by evening, you can top up them at RainCan.
It will deliver you these goods before next time you need them. Top up concept is catching up fast in our customers as no minimum order amount with few clicks to book really makes life simpler for customer. You don’t need to worry about payment when you are topping up so you don’t have to fill payment forms and extra headache for order. Just top up and relax.
How customer pays to you?
We have prepaid mechanism via RainCan wallet recharge. You can recharge with us upfront and keep buying for your requirements. Customer recharges for 10,000 and spend it over a month before second recharge. We show your consumption on rolling basis in calendar view on RainCan app which really gives you comfort of right billing compared to any other online selling website.
Let’s talk about supply chain logistics. How do you manage that?
We have our own logistics and we don’t depend on third-party service provider. We have a mix of part- time and full time delivery boys which constitute our delivery fleet. Our delivery process is extremely agile and fast. We believe that unless and until you don’t have control over the supply chain, you can’t ensure quality.
But supply chain logistics is something not your core strength. Even big players have tried that but they soon realized that they should focus on their core model.
We think and act like a supply chain logistics company, and this gives us unique advantage over other players. Other key feature is that our delivery is really very fast. Logistics can make or break any hyperlocal company. Most of the delivery happens in the morning where we have mostly part-time delivery boys. Interesting thing is that when the normal office time starts, our normal office time ends.
Apart from that, RainCan has its own logistics and it does not depend on the third party logistics services provider. This gives us a full-control on the delivery process. We don’t have our inventory, we purchase most of the goods from companies and margins can vary on different products.
So how do you ensure reliability with part-time delivery boys?
Our part-time is not like a normal part-time, but it’s more like a full-time. Part –time delivery boys are working a few hours daily. So it’s very much like fixed- time per day. There are certain issues such as absence, but this is normal for any workplace setup. To deal with that we have back up plan and the compensation structure has been devised that way. We have supervisor and operations managers who look into such issues.
What’s the biggest advantage of your subscription based e-commerce model?
We don’t suffer from the demand led uncertainties as we have a clear picture how much demand is for tomorrow and how much we have to supply. This is a big headache for most of the hyperlocal companies India. It’s a none issue at all. Apart from that, we have zero inventory model. Everything we procure is based on subscription. For example, if we have to deliver 1500 liters of milk tomorrow; we procure it in the morning and deliver it that day.
But here we see a problem. For perishable items such as vegetables or fruits, wholesale traders don’t sell below a particular volume. For example, if you need 5 dozens of banana or 5 kg apple, they probably don’t sell such amount.
We obviously source it from the nearby wholesale mandi. However, traders give us margins based on the volume. If we buy more, we get more margins and vice versa.
You have consciously chosen the asset light model. Unlike big basket which has an asset heavy model. Don’t you feel that once your area of operation increases and scale increases you will have keep at least a limited amount of inventory?
Some problem will always be there, but this will not be more than 1% of total operations. In the current model, we don’t see that we will need to maintain the inventory as we have a clear picture for coming orders. As of now, our focus is on dairy and bakery products and all fresh products with 2-3 days of shelf life.
How do you ensure quality as fresh perishable items are concerned?
If you deal with large volume of such stuffs, some problem may be there. However, our quality control process is so strict that it does not exceed a particular volume. Also we keep improving our system so that error percentage keeps coming down. Another advantage we offer that we can even supply 1 apple, 2 eggs or 4 bananas. It’s a big advantage as customers don’t need certain threshold stuff.
So do you know any other online grocery company that works on the same model?
So far as I know there are none. There are marketplace companies that are collaborating with vendors. However, when you depend on vendors you lose control on the quality. You can never be sure what they are delivering to your customer, you don’t have an eye on that.
So we don’t own the inventory, but certainly we own the whole supply chain. It helps us to get more margins than the vendor model.
What was the biggest challenge in terms of supply chain management and how did you tackle it?
Our concern was always to create an effective delivery platform and fortunately we have been able to do. We have two centers right now with total 40-45 part-time delivery boys. We were initially skeptical on how we will be able to deal with them, but now it’s working for us. There were also payment structure related issues. However, we are constantly learning and improving.
We have to devise penalties and incentives for them, and many other things. All of this has been challenging. We can satisfactorily say that our operating error is extremely low in the areas we serve.
So RainCan is a bootstrap..
We are a bootstrap and we have an angel round from Solidarity Investment Advisors. We have raised 1 crore recently. We will spend this amount across various departments.
Technology has played a vital role in our routine operations and we are also trying to improve this further. We have in-house developers for that matter and I am also looking into the technology side. We are also investing on improving the logistics operations as it’s our biggest strength. Apart from that, we will also be spending on marketing to raise our customer base.
Tell something about your team.
We have a team of 30 people at our office across various departments. Including delivery boys on centers, we have around 90-95 working people.
How has been growth so far?
In terms of GMV, I am not sure to disclose it right now. But we are growing fast. We have grown 10 times in the last six month. We are targeting to 3 to 4 times from the current stage. We are looking to reach 8-10 thousands order per day. We will need another round of funding from here to achieve that scale and we are also in talk with few investors.