This bootstrapped B2B ecommerce startup aims to make operations simple for electrical retailers
While working at her previous peer-to-peer lending startups CreditMonk and Loanstockexchange, Ridhi Doongursee faced a challenge — the government-mandated P2P norms made it difficult for her to run the business.
Soon after, she started looking at different opportunities and came across her friend Yashonandhan Mundhra (Yash), who was just starting up in the industrial maintenance sector.
The duo collaborated and researched further on the space. They realised that the highly under-served electrical retailers (electrical /hardware shops) are similar to that of the FMCG retailers (kirana stores), pharma retailers (chemists), and electronics/appliances stores, in opportunity size.
However, the sector domain knowledge along with credit requirements and SKU complexity made it harder for new entrants in this niche market. To help fill this gap, Yash and Ridhi started Industricals in 2019.
The Mumbai-based electrical retail startup provides end-to-end supply chain solutions for electrical and property improvement retailers in India. The startup operates an electrical and hardware B2B app, where retailers can order their electrical supplies online.
A market in need of technology
“When I was working with CreditMonk, Yash was working on industrial maintenance and exports, and we worked together on Google Analytics and Adwords to build on the export data online enquiries made a few years back. Since we saw a massive opportunity in digitised retail distribution, as well as we had a complementary skillset, and liked working with each other, we decided to launch Industricals Retail Distribution together,” says Ridhi.
The startup predominantly operates two models where it either stocks up on products and sells it, or sources it from a dealer and sells it. Additionally, during the COVID times, it is also facilitating sales between brand authorised distributors and retailers so that no order or payment is lost due to the paucity of manpower, and other COVID-19-based restrictions.
The retailers can place orders on the Industricals app, where brands control the products, the content, the pricing, the terms, and most importantly, which distributor the order should go to for fulfilment.
Being interested in the human-computer interaction and information systems, Ridhi knew that tech would be a big benefit for the segment. She had found that there were no options for consolidated supplies. At present, each brand and category of products is from a different offline supplier. Moreover, there is no scheme transparency, no repository for brands and products that are newly launched or available, as well as flexibility in supply.
Ridhi explains that everything had to be manually checked — starting from the product, its prices, stock availability, co-ordinating delivery, placing the order, confirming receipts, making payments, and more.
“To validate our thoughts, initially we did some research on the ground in the market, and got a positive response. We saw large brands building tech capabilities or online ordering, which were appreciated and caused a surge in their valuation,” Ridhi adds.
These brands, which earlier sold their products through online means only, didn’t help the retailer as he had to download multiple apps to get its delivery. Industricals claims that it has managed to cater to the market demand as it has seen 75 percent repeat online ordering by customers since its launch.
“We receive organic customers set up requests in and outside Mumbai almost daily. We also offer domain expertise, tech capability, and there is a proven market-fit in the city we launched in, which we now need to expand on,” says Ridhi.
Building a consolidated supply chain
Through Industricals, retailers have a single-point consolidated online supply for all their electrical needs. There is less dependency on-ground sales team, especially during the COVID-19 pandemic.
“A large part of the market share of the electrical supplies is captured by small retailers in India that are currently offline and unorganised. Retailers account for 50 percent of sales in India in this sector,” explains Ridhi.
Most of the time, the retailers purchase their supplies from local distributors on credit via offline orders through an on-ground sales team. This prevents them from getting the benefits from the large organised suppliers.
The manual process and lack of economies cause loss of efficiencies, higher human errors, and longer turnaround time, Ridhi claims. To help change this, Industricals is offering specialised technology.
“We are simplifying the manual coordination of retailers with 30+ suppliers, to a single online point of purchase,” she adds. The startup currently has a team of 17 employees.
The problems in the space
Yash’s family has been in the electrical supply business for quite some time and has seen the market gap that could only be filed by technology. The startup realised that traditional distributors would not be able to fix it, as they found it difficult to adapt it.
On the other hand, there were very few large distributors in India who could make a sizeable investment for developing specialised technology and have a team to run the same.
“All the current distributors are brand-focused and have exclusivity with large brands that do not offer competition to each other. Hence, they would not be allowed to build a brand agnostic platform that offers a consolidated supply like ours,” Ridhi explains.
At present, Industricals is getting close to 40 orders per day. The team claims the platform saw double-digit growth in the past year, besides the two slower months during the lockdown.
Bootstrapped since inception, the startup has been working on rolling out its app to 500+ category A retailers in Mumbai. In fact, it also claims to have crossed Rs 1.5 crore net month sales and partner mobile app orders in the last few months.
“Retailers are a large group of highly under-served SMEs. Getting them to order is an achievement, especially if they place repeat orders. Further, they have appreciated the ease of use and the organisation this app brings to their supplies, which till now, was manual and cumbersome,” Ridhi adds.
The B2B ecommerce market place is fast-growing with several players. In the packaging segment, there is Accel Partners-backed Bizongo. In the grocery and essentials segment, there are players like Udaan, DealShare, and Jumbotail. And, in the industrial vertical space, there are startups like Now Purchase.
According to rough industry estimates, B2B ecommerce is a $500 million global market, which is in its early stages in India. There are over 4.8 crore SMEs that need bulk supplies, and that's a much bigger opportunity than B2C ecommerce.
Industricals claims to have made revenue of $2.6 million in January this year. Explaining its margins and unit economics, Ridhi says,
“Our margins at scale include supply chain margins, which are five to 10 percent, followed by private label margins, which are an additional 10-15 percent, franchise margins of 10-30 percent, and channel finance margins when we take the lending in-house. Commissions, membership fees, and advertising revenues are add-on options we have seen interest growing in. Since we currently are introducing a new concept of online consolidated ordering and taking over market share, we have reduced our margins to lower single-digit numbers,” Ridhi explains.
The startup is looking at selling private brand labels on its network, make current retailers part of its franchise, and set up an automated channel finance process for its retailers. The co-founders will be focussing on these since they have fintech background and domain expertise to make this a profitable and NPA-free business.
“These retailers have a thin file with not much banking history. Since we have a lot of data of their regular transactions with us, as well as complete on-ground information, we can safely give credit/SME loans,” says Ridhi.
Edited by Suman Singh