Gramophone: Building A Meesho-Like Model Through Amry Of Agri Entrpreneurs
"We built the core agronomy advisory as a starting point, developed a trust factor with the farmers, and built the last mile network through an army of Agri-entrepreneurs. The logistical reach, and the trust we have with farmers, are not easy to replicate" Tauseef Khan, Co-founder and CEO states
1. How did you come up with the idea? Tell us about the inception and the core idea of the venture.
We help farmers generate 50-60 per cent higher income. We do this through our multiple offerings of Farming Advisory, Input Business and Output Market Linkage. The reason this is more powerful than the traditional approach is that we have a data-driven, science-guided, tech platform, supported by micro-entrepreneurs at the last mile. This is highly scalable. We saw that the farming practices in India were based on heuristics; with retailers and OEMs in the supply chain playing an outsized role in the selection and usage of crop inputs. This leads to a clear conflict of interest - wherein the sellers are incentivised to push products that may not necessarily be in the farmers’ best interests.
Secondly, no single player has a holistic crop lifecycle management approach. Each player addresses his own product or offering (e.g. seed or fertiliser); bringing it all together is a white space opportunity. Thus, customised and scientific (data driven) support, along with genuine agri-inputs that can help farmers from sowing to harvest. In this regard, Gramophone offers a technology enabled platform driving efficiency across agri-input, and output business. By making available an optimal usage of farm inputs (seeds, crop nutrition, crop protection, etc.), and farm advisory from expert agronomists, Gramophone has been able to improve farmer yield by 30-40%, at the same time reducing input cost by 20%. The output market linkage was a natural business extension as we increased engagement with farmers; they were happy with the way we had helped them improve their yield, and now they needed our help to sell. Thanks to our efforts, we have been able to even double the farmer income, in certain cases.
2. What do you think are the current driving trends of the industry? How is this playing a crucial role in encouraging and practically supporting SMEs/MSMEs?
With rural/agri digital commerce companies expanding their footprint, an interesting opportunity is coming up for small businesses into manufacturing of Agri inputs. Given the strong distribution network of companies such as Gramophone, these small/regional businesses can go national now. Someone doing a 5-10 Cr business can grow to 100-150 Cr revenues. This is similar to the success seen by SME retailers/resellers on Flipkart or Amazon. In fact, as the overall agritech space is seeing more traction, we see many more positive trends. Finance is getting embedded into the trade. Alternative lending opportunities are popping up, thanks to the explosion of digital penetration. The new-age-lending options (i.e. fintech players and offerings) that were available to kirana stores in urban areas are opening up for agri retailers present in remote, rural areas now.
3. Talk about its USPs. How does it stand unique from your peer competitors?
Where we stand out against competition is our efforts at grassroots level. We built the core agronomy advisory as a starting point, developed a trust factor with the farmers, and built the last-mile-network through an army of Agri-entrepreneurs. The logistical reach, and the trust we have with farmers, are not easy to replicate.
4. How Gramophone is reducing customer acquisition cost by 1/3rd through its army of agri-entrepreneurs?
To reach the farmers in hinterland, organisations typically do one of 2 things:
● Set up physical infrastructure/brick-and-mortar stores near the farmer. Needless to say, this incurs huge costs upfront.
● Invest heavily into digital marketing… spend a lot of money through Facebook ads etc. to attract the users. Thereafter, to engage the customer long enough to execute 5 transactions (thereby building trust), a lot of marketing money is again spent. Another challenge with this approach is that the % of digital-savvy farmers who can be targeted thus is very miniscule. There are loads of marketers vying for their attention, thereby making it more difficult as well as more expensive to convert these farmers into customers.
We realised that to win the farmer's trust, some kind of a local contact is inevitable. However, to avoid a huge amount of capital costs, we chose a phygital approach, and came up with the idea of Village Representatives (VR). These VRs are essentially agri-entrepreneurs who have deep relations with the farmers in their community. These farmers trust the VR, and are happy to transact through him. These VRs are typically tech-savvy, and they help the farmers adopt our Gramophone app, GramKonnect. With such a model, we have seen farmers gradually shift from “fully assisted” to “fully independent” in 1-2 years. Over a period, these farmers have built an element of trust with Gramophone as a brand, and are comfortable in placing orders through our mobile application.
Since these VRs not only sell the materials but also take care of fulfillment, our overall logistics cost also comes down. These VRs are also gamifying the purchase, bringing group-buying and mass discounts to the fray. Such efforts increase the basket size and make our business more profitable per transaction. All this, together, makes the VR channel extremely cost effective - we spend, through VRs, roughly 1/3rd of what we spend on other channels, for acquiring a customer. Overall, we have seen some of the other agri start-ups spending ~10X what we spend, to build a similar scale.
5. What were the key challenges that Gramophone encountered? How helpful were they for your business development?
It was certainly a struggle in the early days. It took time and patience to build confidence and credibility in the customer’s minds. Farmers would refuse to follow our advice and rather do as some local person’s suggestion. Slowly, a few people tried us; and they saw their yield improving. Once we had a few success stories, word spread…and slowly our scale increased. Also, it took time for the large Agri Input companies to appreciate the real-time data that we share with them, as well as the scale of reach we can build directly with farmers. Needless to say, we are also professional in our dealings and avoid price cutting or other such malpractices prevalent among wholesalers and retailers in this business.
Problems do come up; but, as our engagement has strengthened across multiple levels of the organisation, we have been able to prove ourselves as valuable partners. One of the largest Agri input businesses in India recently appointed as a preferred partner for parts of MP.
6. In terms of market reach, how would you mark the venture's performance till now?
○ We are present in MP, Chhattisgarh, Maharashtra, Rajasthan and UP
○ We have 700+ VRs across these markets
○ There are 1.8mn+ farmers on our platform
○ We raised $10mn funding in Oct 2021
○ Average revenue per retained customer grew by 3X over past 3 years
○ We grew our revenues by ~4X in FY22; targeting 5X growth in FY23
7. How does Gramophone plan to develop further? What are your next big plans?
First, let me explain our 'micro-markets' approach. Each micro-market (typically a district) we start working in, has USD 500-600mn+ TAM (Total Addressable Market) for Input + output business. Within such a tight cluster, we pursue high density, large business volumes. It leads to low logistics cost and low CAC (Customer Acquisition Cost). In our old markets, we are in an operational break-even stage
Next, let me explain how we build deep relations with buyers. For e.g.:
- INR 35,000 Cr + worth of soybean processed in MP
- We are partnered with 10+ top-tier processors
- Already doing INR 10 Cr+ annual business with each of them
- Each of them has INR 100 Cr+ potential
Now, we are replicating the same in other crops
Hence, our next steps include:
■ Going deeper into the markets we are already present in (across MP, Chhattisgarh, Rajasthan, Maharashtra, UP)
■ Replicating the soybean story in other commodities
■ Thereby, improving the profitability of the business
8. What is your monetisation model? Also, share about the funding status.
In the input business, we sell seeds, crop protection materials, crop nutrition items and equipment, we make a commission fee on the trade. We help small, regional players make a nation-wide impact. We work with them through exclusive partnerships, and leverage our distribution network to scale there as well as our business. These partnerships help us make better margins too.
In the output business, when we enable trade between a farmer and a large food processing company, we make commission income. Our strong farmer network gives an edge on the sourcing side, and helps us build strong, ongoing relations with the large processing companies. Associating with us also gives farmers the comfort of end-to-end support (from arranging inputs to helping them sell their produce). The 2 sides of the business (input and output) feed each other and strengthen each other. We have raised ~USD 20mn so far. Our last round (10 MN USD) happened in Oct 2021.
9. As an entrepreneur, what has been your biggest learning so far? What part of your work do you enjoy the most?
My biggest learning has been that one should work on 'first principles'. One has to solve problems, rather than go with a predefined model. For instance, we realised fulfillment would be a challenge in remote areas. Instead of trying to convince logistics partners to start operating in those areas, we decided to build our own network of people, vehicles, routes… everything. We did it because we were clear it was a need of the market + we knew it could be our moat.
What I enjoy the most is the Impact we are creating. We see farmers transforming their hard soil, bringing back earthworms, truly enhancing the soil quality. The joy on their faces brings me an immense sense of satisfaction that is difficult to elaborate. We know farmers who have bought additional farmlands, built larger houses, bought a car….all thanks to their perseverance and our assistance. When I see this kind of an impact, I feel energised; I have more conviction in what we are doing, and I am determined to carry on, and bring forth more such success stories.
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