Dairy 2.0 – The Merchant Story

Dairy 2.0 – The Merchant Story
Dairy 2.0 – The Merchant Story

As mentioned in the last article, Dairy as an industry is undergoing massive transformation both on consumer & merchant side.

There are 2 models through which Dairies distribute their products:

  • Company owned outlets or Booths
  • Multi retail outlets (any Kirana store, super stores, etc.)

There are 5 major stakeholders in the Dairy value chain:

  1. Farmers
  2. Village level co-operative (mostly managed by farmers)
  3. Dairy Company
  4. Distributor
  5. Retailer / Booth Owner
  6. End Consumer

There’s generally a seventh stakeholder as well which is the distributor appointed agents.

These agents play a crucial role in the ecosystem as their job includes but is not limited to the following:

  1. Visiting each retailer / booth owner in a particular assigned area to note the next day / periodic requirement of each
  2. Payment collection for the products delivered a day ago or on the morning of the same day
  3. In some cases agents are also the people delivering the products to retailers & booth owners early morning every day

While working with Dairy companies for various products & services, following are the major areas where there is a significant scope for improvement:

  1. Digitizing the entire value chain right up to the farmers
  2. Smart POS for agents to capture demand & payments
  3. Inventory management solution for retailers / booth owners
  4. Lending / working capital loans for channel partners
  5. Utilizing the channel of carts to build home delivery model

We shall now discuss each one of them in detail:

Digitization of Value Chain

There’s a requirement of digitizing the entire value chain starting with the Dairy farmer to the co-operative, then Dairy company / retailer and the end consumer. A large number of Dairy companies have automated the farmer payments making automatic payments to their registered bank account in cycles of 7 / 10 / 15 days.

Retailer / distributor payments to Dairy companies are equally divided between cash & online payments. ~80% end consumers payments are still cash driven.

Although portions of the channel have been digitized, there are 2 opportunities here:

  1. Improvement in digitization percentage
  2. A single player providing end to end digital payments & payouts solution

This is where companies like Paytm play a major role since Paytm provides a full stack payments solution including QR, EDC machine, payment gateway and payouts solution.

Smart POS for Agents to Capture Payments & Demand

The current indent capture & payment collection process has a scope for improvement.

Agents collect payments for morning / previous day supply from retailers either in the form of cash or a P2P / QR payment.

Concurrently they also note down the retailer’s requirement for the next day. At day end these retailers visit the nearest Dairy company office, deposit cash / payment received and also submit the supply requirement.

However, this process can be fully automated with backward integration to Dairy company’s ERP system if the agent is given a Smart POS.

In such a scenario, the agent would open the Indent App of the Dairy company on his / her Smart POS and capture the demand of the respective retailer against retailer code which gets updated in the company’s ERP system in real time.

The agent also gets the option of payment collection against open invoices for the retailer which again gets instantly updated in the company ERP.

Thus, issues related to incorrect demand capture, payment to invoice mapping & retailer level view of demand get resolved.

In order to make this system efficient, a Loyalty Program can also be designed to motivate both the retailer & agent.

Paytm has already implemented such solutions for couple of State Dairy Co-operatives.

Inventory Management Solution for Retailers / Booth Owners

Order & payments have traditionally been 2 independent activities when at a Dairy outlet.

These 2 processes can be integrated into a single process to give a holistic view of the order and would also help in minimizing pilferages & improving demand supply cycle.

If every order tagged to a payment can also be mapped to a consumer then it becomes a closed loop mapping of consumer-order-payment that will not just help in demand supply but will also be helpful in demand forecasting & predictive analysis.

This again can be achieved by introducing an end consumer Loyalty program to motivate the customers to share their details at every order (just like they do at a Shoppers Stop, etc.)

Lending / Working Capital Loans for Channel Partners

A major problem that channel partners face while seeking working capital loans is absence of their digital transaction history which results in low or non-availability of their CIBIL score.

Thus, they do not qualify in the loan criteria for most lending institutions and the sources through which they receive loans charge heavy interest rates from them.

Automating ordering / inventory with payments and promoting digital payments helps in building the channel partner’s digital profile which in turn translates to possibilities of extending credit facility to them at more affordable rates.

Since Paytm as an ecosystem has all the above services (inventory management, payment collection & lending) available at one place, Paytm becomes a one stop solution for such channel partners.

Utilizing the Channel of Carts to Build Home Delivery Model

Offline point of sale (POS) channel for most Dairies comprises of Booths, Multi-retail points and Carts / Fleet on Wheels (FOW).

While Booths & multi-brand retail points are the brick & mortar and fixed points of sales, the cart channel is mobile and generally traverses within an assigned territory or region (assigned by distributor).

With the emergence of online grocery players (Country Delight, Big Basket, etc.) along with the e-commerce players likes of Flipkart & Amazon focusing on Grocery, it becomes important for the traditional Dairy players to start building booking & delivery models of their own.

One way is to partner with Zomato, Swiggy or Dunzo like players for delivery while the other way is to utilize their existing channel of carts for deliveries.

Carts typically have demand surge during evening hours while during the day time and specifically during afternoon hours the carts relatively have few customer walk-ins. During these lean hours, the carts can be utilized for making deliveries in their near catchment areas.

This would have the following advantages:

  1. Additional revenue source for cart owners
  2. Dairy companies having their own dedicated delivery channel for online orders
  3. Giving more revenue sources to their cart owners means creating Loyalty / stickiness amongst the cart owners for the respective Dairy brands. This reduces cart churn which is a consistent problem for Dairy companies.

Above are few of the opportunities that we as Paytm are seeing & working upon in the Dairy industry. For collaborating on any of the above areas or exploring new opportunities please drop a mail to kaustubh.rana@paytm.com / udit1.bhatnagar@paytm.com

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