Originally published in Linkedin
Often the marketplace solution providers in Agri space are confronted with the question on why they are developing something for which India is still not ready. The disorganised system, lack of trust, thousands of instances buyer-seller discussions going awry, strikes, logistical issues, farmers going back on their commitments to supply, buyers rejecting the consignment, delayed payments, partial payments, marketplaces taking the hit at the end to their reputation and finances… are some of the usual arguments. With overwhelming number of reasons staring at their faces; founders, to find more acceptability redesign the business model to give a semblance of a marketplace but not exactly what a marketplace should be.
I liked the way bredcrumb.vc has defined marketplace and how a full-stack marketplace should be. Besides defining marketplace, they define the full-stack or managed marketplace to be “more involved in the execution of transactions”. In India many agri marketplaces are already doing that. Again according to the definitions; most of the existing marketplaces fall into the category of Marketplace In Name Only (MINOs).
MINOs Vs None
Current marketplace models include procuring by self and selling to buyers after marking up the price. This is a favorite model with the buyers and the suppliers, as they enjoy several advantages with minimum risk. Few others have built a database of suppliers and buyers; matchmake; and assist in execution of transactions. The revenue source most of the times is a percentage of commission either from both sides or just one depending on the size and the pre-execution discussion. The information opacity is intentional from the marketplace for the fear of being bypassed.
To be “more involved…” most of the marketplaces have put their own equity money ( debt is too costly !! ) to procure and pray that they can sell the inventory at a profit. There seem not many more ways to be “more involved”.
Deploying capital is an easy and a stupid way to build a marketplace, especially when there are so many problems to be solved that can truly make a marketplace a “full-stack marketplace”. Indian Agriculture ecosystem has the capacity to absorb not one, but several full-stack marketplaces and if I can take the liberty; several “platforms”. I will touch on the reason of expanding the definition towards the end of this article.
Future of full-stack marketplaces
Starting from trust, quality, finding the right supplier and buyer, verifying and validating both, digitizing interactions, solving issues of storage, transportation, delivery, to collection
can all be individually provided or grouped as value-added solution/s from the marketplace. On input side of the business the list of issues is equally long and complex.
A true full-stack marketplace should focus on owning the “end to end process” and not “end to end solution” while solving at least one key problem on its own.
A full-stack marketplace can start as a matchmaker and onboard solutions for downstream problems that will arise in several stages of deal making. There are scores of solutions for each of the problems and every solution provider is basically going after the same set of customers. A full-stack marketplace need not provide all the answers to the problems on its own. The strength is in making a highly integrable marketplace. Onboarding a solution provider as a partner, connecting stakeholders, allowing the supplier / buyer to pick a service or product provider while executing a deal, opening the gateways for a seamless transaction can be great value-adds that will save lot of time, money and build trust.
Marketplaces are traditionally thought of as meeting places for suppliers and buyers with “network effect” as its sole biggest differentiator. If a marketplace were to deliver all that mentioned above, it must act as a “platform”.
Whoa.. what’s a platform ??
Things were already nebulous when we were debating between a MINO and a full-stack marketplace. Now it has got even murkier !! Let me try to demystify as much as possible, because there isn’t a single platform that I can call out to differentiate from the scores of MINOs.
Building a marketplace on a shopify like solution is far more easier than to conceptualise a platform that can act not only as a management solution, an automation platform, an integration interface, but also connect buyers and suppliers .
A platform makes a lot of sense when we are discussing a domain like Agri. We sometimes oversimplify the industry by dividing it into forward and backward linkage and demarcate the plays. Unlike other industries, the demarcation doesn’t work for many reasons. What happens behind the farmgate has profound effect on the downstream activities or business and subsequently the revenue.
If we consider just quality aspect of the product; the dependencies are on practices followed for growing to quality of inputs, harvesting, aggregation, storage to as simple as the number of hands through which the product moves. How can a disconnected marketplace solution assure an optimum price for a quality product and help the customer discern between great and ok quality?
One last point .. in-fact two
But as I mentioned earlier, India will need multiple platforms and when we are discussing the need for multiple platforms, interoperability among platforms will further boost trust among stakeholders, fine-tune fragmented processes and build sustainable business models.
The relevance of a platform is even more as we see the agricultural landscape in India changing from only farmers as producers to producer companies; from traditional methods to organised, contact and mechanised farming, managing the farms from just a piece of land to like that of a factory, buyer community being slowly replaced from middlemen and arthiyas only to corporates & large-scale processors. I am extremely optimistic about the role and the success of producer companies in the ecosystem and will dive deeper on how we see the problems firming up as they mature and solutions to their problems evolve.