Questions

Below are the details of our business model. Backend. We have successfully created a strong supply chain of farmers in the backend and now are looking to create the front end. Front end. We operate in a tier 2 city like Cochin and below are the challenges and advantages that we have. Challenges 1. Consumers are used buying vegetables and groceries offline. The internet penetration is there but there is no big player who delivers online. 2. Consumers have developed a long relationship with the offline stores. Advantages. 1. We are able to offer the freshest produces within 2-3 hours of plucking from the plant to the consumer table. 2. There is a strong grassroot movement in the entire state for organic vegetables where media, government and consumer sentiment are at a high. We are trying to decide of whether we should work on a model of b2c or b2b model. In B2C we have a customer acquisition cost and an entry barrier. However there is a greater margin of profit. In B2B we are planning to sell the organic food products to the offline stores where they don't have a supply chain for this. Getting to work on a b2c model would take a long time including the logistics cost. In contrast a b2b model offers more stable revenues and lesser logistical headaches.

If B2B, who is the other B?

There are two choices of what business you could be in:

1. Do you want to be in the retail business and eliminate the local stores (from whom consumers buy) and the distributors (from whom the restaurants and grocery stores buy)? If so, then you want a B2C model.

2. Do you want to be in the distribution business and market directly to the distributors above? If so, you want a B2B model.

It seems to me that you haven't decided what business you want to be in. Decide that first, then decide on a model for customer acquisition.

I have a bit of experience in your business. A old friend started a business where he'd go directly to the docks and buy the freshest fish right off the boats. That's how he got his product. But, he wanted to be in the B2C business so he acquired a lot of high end consumers who wanted to buy the freshest fish possible and were willing to pay 30%+ more than they'd pay in the local grocery or fish store. His CAC was very high. After two years he had to close this business as his delivery costs were too high.

So, instead he decided to sell to the distributors. His value proposition was freshness. Now his business is flourishing. The problem is that a consumer can not get his fish now, as the distributors had too much demand from restaurants and had nothing left over for the average store. He sells out of product every day and the distributors plead with him for more product.

The moral of the story is that, in the USA at least, distributors control the food business. They have the relationships with the stores and restaurants. You will have a tough go at it if you want to go B2C.


Answered 5 years ago

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