At the other end of the chain, there are benefits for FMCGs as well. Thanks to India’s three-tier retail structure—where brands sell to distributors, who, in turn, sell to retailers—FMCGs end up with no direct visibility of buyer behavior at the Kirana level. Companies like SnapBizz let the PoS become a pair of eyes for the FMCG companies, serving as a window to buyer behavior in Kirana stores.
The simplest way that SnapBizz allows this is by giving FMCGs an aggregation of all the store data collected through the PoS. The companies, in return, pay them for it.
But SnapBizz can also help brands increase their own visibility. It does this through its Snap Vision program. The company installs TV screens in stores, which allows brands to push specific campaigns and promotions to customers. “Usually brands have about 50-80 promotions happening at any moment, but because Kirana stores don’t have the place to display it, they go unnoticed, and the brand and Kirana store lose sales,” says SnapBizz CEO Prem Kumar. He also says that this medium is particularly effective at increasing the sales of new products.
This combination of Snap Vision and PoS, Kumar claims, increases sales for kiranas by 18%. He wants to improve this to 25%.
In all of this, SnapBizz earns from the Kirana store (who pay Rs 45,000 or $657 for the PoS and display) as well as the brand. It seems like a winning formula until you consider its scale. All the PoS companies put together don’t amount to more than 7,000 stores. SnapBizz only has a presence in about 3,000 stores in Mumbai, Pune, Gujarat, and Delhi combined. While Kumar believes that one million of India’s Kirana stores can afford this solution (both in terms of cost and space available), the sheer lack of scale has left FMCGs largely indifferent to the idea.
At least for now, FMCG companies’ engagement with PoS startups is, at best, a half-hearted experiment. At top FMCG companies, innovation budgets account for about 5% of the overall promotional expenses. When you consider that Hindustan Unilever spent Rs 4,105 crore ($599 million) on advertising and promotion in FY18, their confidence in PoS startups is summed up by the fact that they are not spending more than a few lakhs on working with PoS startups.
“We have fairly granular sales data from every store. And this is a good surrogate for what is being bought. So there is no real value in the real-time data PoS-based startups want to bring, for now,” says the senior executive of a multinational FMCG. Additionally, he doesn’t believe that there’s much scope to influence consumers at Kirana stores.
For other FMCG companies like Reckitt Benckiser (the maker of Harpic and Dettol), working with startups is also about priorities. “We have a limited budget. Am I going to spend it on startups working with Kirana stores moving the needle only slightly, or work with e-commerce where we are seeing a 400-500% growth year-on-year,” asks a senior executive from Reckitt Benckiser.
A way for the PoS startups
However, there is a way for PoS startups to become valuable to FMCGs. “Instead of wooing us, they should focus on adding value to the retailer,” says the multinational FMCG executive. The minute lakhs of Kirana stores adopt PoS, FMCG companies will automatically want insight into this data. SnapBizz is targeting expanding to 100,000 stores by 2019.
None of this, however, is to say that FMCG companies are completely ignoring startups. In fact, they are wary about a few startup offerings which have the potential to cause havoc.
Apart from the PoS group, there’s a class of startups that are looking at far greater change. They believe that the best way to make kiranas efficient is to help them source better from distributors. Bengaluru-based StoreKing is the largest in this space, servicing nearly 40,000 retailers in rural areas across 10 states.