Navigating the problem space
Preface
When we completed over 18 months of operations. We solved two novel uncertainties.
- Proved our hypothesis of logistical inefficiency in produce markets and how can we go about fixing it.
- Scoped about the entire problem space of post-harvest produce and supply chain marketpalces.
Since we had settled on the means and measures required to replicate this at a larger scale. I shifted my focus to solve problems we were facing which would stop us from achieving further growth.
Building the Value Proposition
In the past 1 year we had refined our sales pitch and funnel. It was very 1 on 1 because of the way we sell, we just don't buy and sell produce. We do it according to Grade. So, it involved sampling, physical visit and gradual conversion.
The process of sales and how to sell had reached a level of maturity and replicability. Our sales were driven by outbound. We had just a miniscule inboud requests cropping up due to the word of mouth from producers(farmers) we have procured in the past.
In order to mitigate this challenge, I had turned our focus into marketing. Marketing our core value proposition. This is the specific problem I was looking to solve.
Our Problem: Framing the Value prop we are building with Commodity Supply Chain logistics. Positioning, framing and growth modelling to take our thesis and give it wings in the real world.
Subjimandi.app was not competing with Agri-Tech startups in the mind share of Producers and Buyers. We were competing against the Local Mandi(s).
Our approach had been to commoditise the produce and classify its characteristics through grade. In essence, instead of aggregating at an owneship level of farmer. We did it a grade level.
In order to solve these market structure dominated by local mandi(s) we decided to build a new age mandi on produce. Produce becomes the core tenet of our functioning and everything else become subservient to this.
One point I specifically alluded to is "Transaction costs" in produce markets. On this day and age, it is too high. And to unlock the market we need to bring them down. We can do that by first unbundling the costs involved, one being risk and other being logistics.
Risk has to be accounted because people are buying unknown produce(non-standardised) from unknown people at a local mandi. Logistics can only be optimised when trade allows it. With current Mandi network, logistics cannot be optimised due to discovery and sale of produce happen at the same place and same time.
The solution we proposed was produce classification at source and bring buyers to production region. We also calculated the cost and process differential that produce supply chain can benefit from when Pipehaul does the logistics. (which we could have been further improved with employing our operations model at scale)
We were looking to deploy marketing in order to pitch Subjimandi.app as a working model in each produce and increase our inbounds through word of mouth referential marketing.
The end game was to build a produce marketplace where buyers and sellers transact to buy produce of their needs and wants. Meaning, the producer gets the same price as the buyer pays for produce the total cost will differ due to logistics involved in getting the produce to their location.
This presented us with a set of challenges when you think of it as marketing problem. We were basically creating a category marketplace where Graded produce is being sold not just produce. And, you as a buyer was paying for produce and cost of delivery seperately.
Making uncommon knowledge common
The larger trend we were looking to build with our operations was to shift the narrative of produce markets.
The often stated knowledge about produce markets comes with a lens of fairness being at its core. This leads to perverse incentives and benevolent nature of functioning. We focus on being beneficial to the people involved which doesn’t correlate to better price.
The Local Mandi(s) operate in a fixed structure of price discovery and produce sale. The information flow of price to other mandi(s) propagate and demand is generated by the consumption mandi. This is what we call trader driven logistics.
We wanted to build a marketplace that is more than fair. It should be beneficial. Just like how produce comes in different shapes and sizes , farmers who grow this produce come in different needs and wants.
Being beneficial forces you to being empathetic of your customers as a market place. Which led us to our biggest gap that we could fill, Produce markets need a marketplace that serves its actual customers compared to a local Mandi run on outsourced trader network.
In order to build a marketplace to serve the actual buyers and producers. We needed to share a referential information for both to trade between themselves. This was the core tenet behind buying and selling gradewise. We invested extensively in building the graded produce knowledge which was known to all but not standardised among them.
The unofficial motto of Subjimandi.app was “Sorrow to Smile” because as we moved the market to produce centricity by increasing the information flow of more than price. We were moving the value capture from the centre to edges as depicted in the smile curve.
Sorrow to Smile
When we look at the post harvest supply chain of produce and plot it against the value capture across the supply chain.
- It starts with the producers harvesting their produce yield. Yet, they sit at the bottom becauase of the market structure that puts them at a disadvantage.
- In the existing framework, traders dictate the trade and transporters serve the trade. They are gatekeepers of both price and access to produce.
- The current marketplaces works between two facilities as they prescribe the price and volume flow. These facilities are the local mandi(s).
- The Producers and Consumers are only privy to the price and produce that is available nearest to them.
- Subjimandi was looking to reverse the trend. we are looking to commoditise Logistics provision with our supply chain outlook of Pipehaul.
- In order to achieve it, we created a marketplace that allows buyers on the consumption region to cross trade with the producers in the production region.
Conclusion
We were focusing on these niche topics or seemingly insignificant aspects of produce markets because all other solutions have been tried and they don’t scale beyond a limit.
It is tough space to experiment but it was equally rewarding. We learned tons of insights and gained more perspective about the fundamental moving blocks of produce markets.
The challenge of building in produce markets is that it is essenial commodities market where the business you will build is non essential. So, the focus should tilt towards doing it the right way over getting it done.
Signing off till next time,
Vivek , thinking through the problem.