Serving fresh food at the lowest prices in a limited time has enabled many Agritech players to mark their position in the Indian Supply Chain and Market Linkage segment [VK1] - Ken Research
In India, the agritech sector has
explored the key gaps in the traditional chain. Taking advantage of the issues
in the existing methods players have been working to improve the shortcomings
such as waste percentage reduction, quick delivery, and improved quality checks
by moving the products directly from the farm to the end-users. Otipy is one
such player that has worked on these challenges and tried to bring a profitable
model that helps the end-user in receiving premium quality highly perishable
goods, especially in the daily essential segment.
In conversation with Varun
Khurana, Founder and CEO Otipy (operated by Crofarm Agriproducts Pvt Ltd),
we attempted to seek his opinion and understand his side of the story about the
changing fortunes of the Agritech Industry and how are companies gearing up for
it.
Q1. What has
been your company journey as an Agritech player?
The company was incorporated in
May 2016 and successfully created a 6-year streak. The idea behind starting the
business was to solve a problem in the fresh food category, which stemmed from
my experience and learning from "Grofers. After "Grofers," I
spent time at the farms, which made me realize that there is a huge gap between
the quality required by the end-users and the quality produced at the farm
level. Additionally, wastages are enormous, resulting in consumers having to
pay a very high premium compared with the price at which a farmer sells.
We started as a B2B company and
realized that margins in the business are low, credit periods are often high,
and cash collection issues are prevalent. After spending four years in the B2B
business, we launched Otipy, a B2B2C model for fresh produce where community
leaders/resellers would generate demand and perform last-mile delivery.
Additionally, the supply chain was designed for speed so that produce spends
minimum time in the supply chain and hence undergoes minimum degradation and
minimum wastage.
Q2. What
have been your challenges as an Agritech Player in the market?
Dealing with fresh food comes
with various challenges. While at Grofers, we saw that the revenue from fresh
food contributed 2-3% while the complaints for the same category were more than
20%.
Managing quality in fresh produce
is difficult given that it is not a standardized product and because the
produce degrades rapidly. By building a speedy supply chain, we have been able
to crack this reasonably.
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Additionally, leveraging the
reseller model to perform consistent deliveries is a challenge. We have used technology
to solve this.
Q3. What
were the advantages of your current selling model? What is the value
proposition offered by Otipy?
Better product quality at lower
prices started resonating and helped us in scalability. We received a huge
appreciation from the end-users in terms of the freshness and quality of the
products and secondly, we managed to tackle the wastage percent which is
generally around 35%, while for Otipy it is only 4%. This method has allowed us
to offer lower prices compared to the other places.
Q4. How many
users are connected to Otipy? Why is the churn rate higher for Otipy compared
to other platforms in the same vertical?
We currently have 5 lakhs
consumers and ~16-17,000 daily orders in Delhi NCR where each order is about 6
Kgs in volume. We move almost 100-110 tonnes of fresh commodities into the
market daily.
Retention rate becomes high
usually when a customer has placed an order more than 3-4 times but it comes
with various challenges for example perishable commodities see a seasonal
variation. Providing a standardized product throughout the year is difficult.
These challenges are taken care of by changing the source of supply.
A good example would be Tomato.
Now the tomato for Delhi NCR is sourced locally during the season, and after a
couple of months, it is sourced from Bangalore.
Q5. What are
the geographies captured by Otipy so far?
Otipy has been operating in Delhi
NCR majorly but we have also expanded to Mumbai recently. In Mumbai, we first
started our operations in the Thane area.
Q6. How does
Otipy source its commodities?
The sourcing belt in India is
huge. A lot of seasonal items are sourced from nearby belts, for example – in
Haryana we would source from Panipat and Sonepat, in UP we would source from
Hapur and Garh. Commodities such as Onion, Pomegranate, Oranges, and Grapes are
sourced from Maharashtra We also source from Andhra which includes Watermelon
as well as Papaya that serves Delhi throughout the year.
Q7. Otipy
manages to deliver products very efficiently, how do you manage to supply good
quality products on time? Does Otipy maintain inventory?
The supply chain is maintained on
the Prediction Based Method. Items are procured as per prediction,
and the app allows booking basis the same prediction; we don’t maintain any
inventory. Most of the items come and go on the same day. Regarding the
timeline, the goods reach us at 9:00 pm, and the packaging process starts at
9:30 pm. At 11:30 pm, most orders are packed, and at 3:00 am, all products are
ready to dispatch.
Q8. Unlike
other start-ups why did Otipy initiate from a rural-urban region?
Delhi market is tough and
witnesses maximum seasonal variations. Otipy faced a lot of challenges
initially but over a period of time, we overcame most of them.
Q9. Is Otipy
willing to expand to other verticals?
Yes, broadly, our focus remains
on the "daily essential items" but we have also included our
own private label for bread. We will soon be adding other categories.
Q10. What is
your plan in terms of deploying your recent funding?
Most of the funding would be used
in corporate payroll, marketing and expansion.
Q11. How do
you manage to keep your logistic cost so low which is ~INR 2-3/kg while other
companies charge more? Do you think you can operate as an Omni player?
One of the primary reasons is the
reseller model. Secondly, compared to the quick commerce where orders are
placed throughout the day our orders are concentrated in 2 hours which brings
an advantage to managing lower last mile logistic costs.
Operating as an Omni player is a
debatable topic for us. Our wastage percentage goes for a toss. We don't want
to start holding inventory. Out of 35% wastage percentage, 20% could be seen in
the neighborhood stores. This process will hinder the fundamentals of our
business model.
Q12. Do you
think the quick commerce model is sustainable in the future? Do you think
consolidation will help in future by charging a premium from the customer?
The burn rate is very high in
this model. Considering the same model among other global players, funding
becomes a problem over a period of time. Most investors lose interest which
limits the overall funding for the lucrative operations.
Players may increase the delivery
charges to sustain their model to back their finances. The moment the delivery charge
increases, the end-user market will start to shrink; since the percentage of
Indians paying for convenience is very low, the model may face difficulty
sustaining in the future.
Consolidation may occur, but it
doesn't guarantee that the model will thrive.
Q13. What is
the short to medium future plan of Otipy?
Our value proposition is designed
for value conscious people. We optimize for wastage and other
supply chain challenges. We are trying to provide goods at low enough prices
without burning a hole in our pocket. Despite that, we are operating a 33%
gross margin. All of our revenue is prepaid, we don't indulge in COD at all. We
continue to march around that similar charter.
We will continue to expand in
terms of offered categories. We will be expanding to other geographies as well
very soon.
For any
queries or feedback, reach out to the author at Namit@kenresearch.com
To Find More
on Agritech Market Research Reports, refer to these links:-
https://www.kenresearch.com/agriculture-and-animal-care/farming/india-agritech-market-outlook-to-2025/434138-104.html
https://www.kenresearch.com/agriculture-and-animal-care/farming/indonesia-agritech-market-outlook-to-2026/536294-104.html
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