We recently held a webinar with K Ganesh – co-founder of Big Basket, serial entrepreneur, and investor, Ananth Narayanan – co-founder & CEO of Medlife and former CEO of Myntra, and Helen Wong – Partner at Qiming Venture Capital, to get their advice on how founders should navigate uncertainty in a post-COVID19 world.
Here is a summary of the discussion:
GB: What is the on-ground situation in India today in essential categories such as pharma and grocery?
AN: For medicine delivery and diagnostics, demand has gone up by 1.5-2X. However, there are a number of challenges in terms of fulfilment. For instance, securing passes for on-ground mobility from local authorities has been a task, starting with warehouse staff all the way to delivery personnel. Manpower shortage has been another challenge and contributes to a large part of the problem.
Therefore, managing inventory levels to meet with the current surge in demand is hard. There are nuances across geographies – Tier 1 and metro cities are easier to solve than Tier 2/3 cities. 3rd party partnerships are working well for us e.g, Medlife is working with Vogo in some areas for last-mile delivery.
KG: Uptick in demand as well the key issues that Ananth has described translate to grocery as well. Fortunately though, the supply chain has held up so far and there is no supply shortage. Companies like BigBasket are adopting multiple approaches towards last-mile fulfilment, like delivering in bulk and combining neighbourhood orders to effectively manage last-mile logistics. Our biggest hurdle is arranging for employees to reach our warehouses for packaging, sorting, segregation etc.
TD: How are you working with the government to run your operations smoothly?
AN: While the government has been doing a fabulous job so far in managing the process in India, the complexity of the problem means that it cannot be solved using central policy alone. Each state is different and needs to be managed in a different way. At Medlife, a liaison team has been put in place in each district to directly coordinate with the local authorities of that area.
Organizing the approval process electronically with tele-passes, real-time updates, and making approvals time-bound would further help improve the process.
TD: Why are so many e-commerce companies pivoting to grocery? How equipped are new companies to make this pivot successfully?
KG: There is large unmet consumer demand today and any company that can provide grocery supply is currently king and has large customer demand. Opportunistic entrepreneurs who have flexible operating models that can support the grocery supply chain should find ways to enter the space. In this environment, convenience and access have taken precedence over pricing and discounting. Long-term, a fundamental shift in consumer behaviour is expected, with home delivery for all products and services across sectors being the norm. However, grocery is tough, and figuring out a profitable business model will be key.
GB: China is a few months ahead of us in this journey. What are we seeing across sectors there?
HW: COVID-19 has been a real wake up call for all offline businesses in China to start finding ways and means to digitize their models. There has been rapid and widespread adoption of online grocery, with demand increasing manifold. O2O (online-to-offline) models like Hippo Supermarket have gained traction. Offline retail and consumer brands are using digital channels like WeChat to keep customers engaged and drive sales.
Besides commerce, online education and online food delivery have seen significant uptake.
In terms of offline recovery, people are slowly returning to malls and restaurants, but traffic is still low – current demand is at 30% of pre-crisis levels but progress is slow especially in formerly high footfall venues such as malls and high-street retail.
TD: What is your advice to founders on how to keep their workforce safe and motivated during this challenging time?
AN: Founders need to increase spend dramatically on health and safety for all employees - PPEs, insurance, and other health and safety measures that are specific to their company and nature of business should be undertaken with no compromise.
For teams that are working from home, a good practice is doing informal video calls with team members where you talk about non-work related topics. It is important to over-communicate using virtual townhalls, and celebrate employee achievements. Team-bonding needs to become part of the WFH routine.
GB: We spoke about grocery and pharma. What is your advice for companies in non-essential categories?
AN/KG: Overall, try your best to not make any major irreversible moves in the face of uncertainty. At the same time, founders need to manage cash such that they have a runway for at least 2 years.
For 2021, plan for the worst in terms of demand, and work backwards to forecast supply and inventory, as well as other resources that would then come in to play.
Shifting into grocery, PPE etc. is a temporary pivot, long-term focus should remain on providing the core offering of your business and navigating a way to adapt and make it work in a post-COVID19 world.
The rebound period for all sectors in commerce will depend on how quickly they can adapt their business to a delivery and tech-based model. Recovery for businesses catering to the mass market should take place over the next 2 quarters, while the luxury market could take longer to recover.
GB: What is your advice to anyone looking to raise capital in the next 6-12 months:
HW: VC capital is available, but it is not a BAU situation and fundraising processes will happen keeping the current situation in mind e.g., as a VC it is hard to write large cheques without on-ground diligence and meeting teams in person.
Founders need to acknowledge that their revenues will either be zero or will tend towards zero for some period of time, and they need to rework their cost base from a grounds-up perspective accordingly to extend runway.
The good news is that across the board investors are being supportive and helping their portfolio companies navigate the environment. Entrepreneurs too need to be generous with ESOPs – it helps carry the team along in what is a challenging time.
TD: Consumer behaviour shifts that can be expected post COVID:
AN/KG/HW: Products and services coming home will be a fundamental consumer shift going forward, while convenience and access become more important than discounting. We expect demand for health and wellness products to increase. On the other hand, demand for ‘impulse’ categories will likely be muted until at least the end of the year.
In terms of other sectors, remote working, video conferencing, and online seminars such as this one will become more common and the new way of life. At the same time, localized experiences will start seeing more interest from consumers.
We hope those of you who joined the session live found it useful. As always, feel free to shoot questions and comments to the Matrix team at firstname.lastname@example.org