Online milk delivery is a
welcome disruptor to hitherto boring traditional milk delivery system.
There are quite a few players who have come up in this space and is
seeing a healthy competition. However, there are lot of challenges to
scale up the business and even more, make it viable!
While India
is the largest milk market in the World and milk being most important
part of the food basket with highest household penetration, the sheer
market size and prospects make it quite mouth-watering. Further, Indian
consumers prefer getting their milk delivered fresh every morning at
their door-step. The idea of digitising the last mile delivery and
therefore, controlling the end consumers, looks quite solid. However,
players able to navigate following challenges would be able to sustain
the business:
1. Overall, milk is a low margin business and
especially the last mile delivery where average costing for traditional
deliveries works out to anywhere between Rs. 1 to 1.5 per litre. This
makes it almost impossible for stand-alone online delivery player to
compete. In order to mitigate this challenge, players have started
building a basket of products targetted towards these consumers and
branching out to near-by breakfast categories like eggs, vegetables,
bread, etc. to gain some margin and meet the cost of delivery. That
loses focus on core product.
2. Milk distribution is an intensive
distribution and it becomes viable only when you are able to target
consumers within a defined geography and establish reach to maximum no.
of consumers per sq. km. In case of online channels, it becomes
extremely difficult and takes lot of time to arrive at such a situation.
3.
Last-mile delivery is very small part and until & unless you
control the product per se; product quality, brand image, packaging,
etc.; efforts that you put into last-mile delivery would ultimately fail
as the end consumer is looking at the entire product.
4. Milk
itself is a generic category and within that, your ability to
differentiate against established players purely on delivery is not
going to work.
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As of now, most of the
online delivery players lack abilities to tackle above challenges and
therefore seem to be creating business on Build-to-sale model, by
creating a consumer base, a portfolio of few products and achieving
decent nos to make it attractive for investors or buyers but its
sustainability is doubtful.
On the other side, the disruption is
providing ideas to traditional milk delivery players to adapt their
business and last-mile delivery as per changing dynamics.
In this
fight of online v/s traditional milk delivery, winners would surely be
players from both sides who are able to successfully tackle the above
challenges and emerge stronger! Darwin's principle of survival of the
fittest would prevail!
What are your thoughts?
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