#StartupsVsCovid19: How Startups Are Fulfilling Tier 2-3 Essentials Needs?

As the country is set to enter the third phase of the nation-wide lockdown, its testing times ahead for ecommerce and kiranas to keep the supply of essentials running.  While it is comparatively easier to fulfil demands in tier 1 cities, where ecommere has been growing strongly over the last few years, the supply of essentials has been hard in Tier 2 and 3 cities which have restrictions on movement as well.

The first phase of lockdown saw even tier 1 cities buckle. Individuals and support groups helped deliver essentials to eldery stuck at homes with limited resources and no access to markets. However, in  Tier 2 and 3 cities, the onus has been taken up by several startups.

Slowly but surely, the shift is visible on-ground with a spike in the number of online transactions (growing at 2.1X), rise in the number of hyperlocal users (3X) and a three-fold growth in the number of ecommerce users. 

Several B2B as well as B2C ecommerce platforms Inc42 spoke to emphasised that the shift is palpable as demand has spurred in smaller towns. For instance, Odisha-based Grozip founder and CEO Ananda Mishra told that on average, the company received more than 1,200 orders/day and it has increased by 40% on a daily basis and demand mostly included groceries and dairy products.

Mishra said the company has extended its services from the online platform and has started receiving orders over telephone, WhatsApp and Facebook messenger. “We have collaborated with more than 700 small kirana stores across the state to ensure timely delivery and help them increase their sales and stocks due to the Covid-19 crisis,” Mishra said.

In Punjab, the HumHain app, which follows a model similar to Dunzo, has seen an uptick in demand from 150 orders per day to around 1000 orders per day. HumHain founder Milind Kwatra said that the app has operations in Ludhiana, Amritsar and Jalandhar and has served over 1 Lakh people. It is also launching delivery of essential goods in Chandigarh. The company has been offering pick up and drop services as well as delivery of essentials during the lockdown.

Kwatra explained that the company has an online shopping cart model and now has onboarded several new stores to serve nearly 12-13K customers. Its product list includes groceries, medicines, bakery goods and personal protective types equipment like sanitizers, masks and PPE Kits.

Similarly, Indore-based B2B platform ShopKirana has strengthened its B2B approach to B2C approach in cities. ShopKirana founder and CEO Tanutejas Saraswat said that the company has launched a B2C app- Zaruri in Indore to help fulfil essential needs from kiranas through its own logistics channels.

Essentially a B2B ecommerce platform, ShopKirana manages supply to mom and pop stores. But with lockdown in place, the company reached out to the government and arranged over 500 passes with licenses for suppliers and manufacturers. But when its home ground Indore became a red zone, the company tied up with the government to launch Zaruri app in seven days to connect kiranas with customers. It hosts nearly 50K retailer stores by enabling them on Zaroori platform to sustain the business. 

Saraswat said that the application was launched in Jaipur, Bhopal and Indore, with plans of launch in Agra. He also highlighted that the initial challenges were manpower constraints as well as restrictions of ecommerce, which were in addition to operational challenges like maintaining sanitisation.

He said that one good part of being in Tier 2 cities is that it is easy to connect with the government and local authorities and identify solutions. To address the hiccups, the company hired almost 150 people in every city as temporary staff and third party workers.

For supply chain constraints, it has tied up with big manufacturers to set up a supply chain through collaboration. As a result, the company has seen huge adoption, where Saraswat said that in 10 days, they signed up 10K new retailers and saw 400 to 500 orders in every city.

In Karnataka, Boonbox, in collaboration with Deshpande Foundation is reaching out to 2,000 villages. “We are in the process of reaching out to the governments in Tamil Nadu and Odisha to be their distribution partner in villages. We have already reached out to eighty corporates to collaborate in their CSR efforts and direct them to providing relief at villages,” Boonbox founder Ramachandran Ramanathan said.

The company has collaborated with state and central governments, development financial institutions, corporate foundations and trusts for the launch of ‘Mission Lifeline Bharat’ programme. It helps in supplying medicines, FMCG goods, sanitisation products as well as groceries. 

Another Madhya Pradesh-based startup Cinfy Systems has launched Jabalpur Mart app which provides a platform for people to connect with the vendors/supply to ensure that local economical cash flow could go as usual and essential items should be made available to people on time.  

The app intends to expand operations to other Tier 3 cities of Madhya Pradesh from June 2020. Launched by government collaboration at Jabalpur Incubation Centre (a project of Jabalpur Smart City), the app was created in 10 days. The app facilitates the needs for issues like electrician, carpenter, water purifier and air conditioner repair as well. In terms of the supply chain for essentials, the app helps supply grocery, fruits, vegetables and milk to people in Jabalpur. 

The company says that there is no minimum amount clause during lockdown and the delivery will be done the next day.

Further, in Jammu and Kashmir, Agritech startup efruitmandi provides end-to-end supply chain solutions to farmers. It allows them to connect with buyers directly, avoiding the need for middlemen. The company is trying to provide fruits to the residents during Ramazan and is looking to transport fresh produce worth INR 50 Lakh during the 40-day period of fasting.

Efuitmandi cofounder Ubair Shah had told Inc42 that orders can be delivered to the customer’s doorstep within 3 to 5 days in Srinagar, Anantnag and Baramulla. It is also in talks with authorities to get travel passes for other regions to expand operations. The operation is logistically backed by Srinagar-based Fastbeetle and Anantnag-based Elanmart.

Customers can place an order through phone calls, WhatsApp messages or just fill a Google form. With patchy mobile-data and broadband services in the region, Shah says that a Google form is easily accessible on 2G mobile internet as well, and is better suited than a mobile app.

DataLabs by Inc42’s Annual Indian Tech Startup Funding Report, 2019, had noted that growth of funding amount in Tier 2 and 3 cities is faster — over $1 Bn was invested in startups from Tier 2 and 3 cities between 2014 and 2019.

Overall, the growth rate is good in terms of funding amount, but that just means that investors are betting bigger on startups in smaller cities. While startup funding amount in Tier 1 cities grew by 8% CAGR, mid-tier cities outpaced them with a 12% growth rate (2015-2019).

With just 1.9% of total funding in 2019, mid-tier cities raised $243 Mn across 32 deals for the year. This was a 31% Y-o-Y fall in terms of funding amount for Tier 2 and beyond cities. Further, according to 2014-2019 data, mid-tier cities recorded mere 196 deals of the total 5,011 deals recorded during the said period.

With the Covid-19 crisis bringing to light the innovation and problem-solving businesses of mid-tier cities, if the small-town startups can get investor interest amid tightened purses would be an interesting watch.