Ravi is a well-known grocery store owner called Kirana Store in a small town in Maharashtra. Every month, if the stock runs out, Ravi shuts down his store for 3-4 days and travels around 60 km to his nearest city to buy products for his store. In doing so he will lose thousands of rupees of business and it will also cost thousands of rupees to transport these goods from the city to his kirana store. This is not just about Ravi. There are about 12 million kirana stores in India, of which 10 million are in rural India, and people like Ravi are struggling to get products for their stores. The market is so small that none of the big FMCG companies are interested in reaching out to these small villages and towns.

But one Indian start-up is changing this - they're helping these kirana store owners sit in their stores and buy their groceries at the click of a button. They do this without owning delivery vehicles or warehouses. This company is a unicorn company and with a revenue of Rs 4,755 crore in FY 2023, they are revolutionizing the rural B2B commerce market in India. Today, they deliver to 600,000 kirana stores across 120,000 villages in India. This company is an elastic company. Let's take a look at how they achieved this success and what future entrepreneurs can learn from them.

Before we tell you what the founders of Elastic Run did to solve this problem of kirana store owners, let's try to understand the problem in a little more detail. We have already mentioned how the FMCG supply chain works in India. But I'll give you an example to make it clearer. Suppose there is a retail store owner 'Kishan' in a city like Pune. He sells FMCG products like Maggi, soap and biscuits. Now, if he wants to get more Maggi - call the wholesaler or distributor in his area who supplies Nestle products as Maggi is owned by Nestle and tell him that he wants 100 packets of Maggi. That particular distributor or wholesaler would have kept the Maggi in his warehouse, send their vehicle to Kishan's location and deliver the Maggi - it is a very simple process.

But suppose Kishan's store is in a village 100 km away from Pune - here the process is not so simple. Since there are no distributors or wholesalers anywhere near his village, Kishan will have to call the distributors in Pune, the nearest city from his village. Even if you call, you will get a response like "Sorry, we do not service this area - but you can come here and take the goods." Why has that happened? Why are these distributors and wholesalers not willing to deliver to a faraway village when they are willing to send the vehicle to Pune? The answer is easy to understand, the problem of demand and supply.

When a distributor decided to send his own truck to a place within the city, he was not delivering Maggi packets to Kishan. They could have more orders in the same area, all the orders put together and a truck was sent to service all the retail shops in Kishan's area. But, when it came to a remote village where the demand was less, a supplier would have to send someone to a village 100 km away for 100 Maggi packets which is not a profitable business. Transportation costs are more than just the products. If the distributor or wholesaler wants to set up a warehouse near this village then he will have to invest a lot of money on infrastructure like hiring people and buying delivery vehicles to make the operations viable. So there is a huge fixed cost here. That's the problem with the market. Due to low and unpredictable demand, high setup cost of warehouses, lack of delivery fleet, and low order value of these retailers in small villages, rural supply in India is almost at breaking point.

Let's take a look at how these three founders of Elastic Run went about solving this problem. Sandeep grew up in the small town of Buldhana, about 400 km from Pune. He was well aware of the problem of non-availability of products, which people in big cities take for granted. Sandeep's first job was with the logistics company DHL, where he met his future co-founders, Shittis Bansal and Saurabh Nigam. After their DHL work period, the three of them worked at different jobs for the next 10 years, but their passion for solving last-mile logistics brought them together in 2016. All three of them understood the problem of rural supply and understood that it was a huge opportunity.

At that time, 10 million of the country's 12 million retail stores were in rural India. While the urban retail market is growing at just 3-5%, the rural market is growing at 15% per annum. Despite such a huge opportunity, no one came forward to solve this supply problem, but due to their experience, these three realized that they are perfectly suited to solve this problem.

FMCG companies have traditionally had an asset-heavy distribution network. Basically, they have huge resources in the form of real estate, delivery vehicles and people, but these resources are underutilized most of the time. With the help of elastic run technology all these resources were tried to be put together so that the cost of all could be reduced.

This can be elucidated by an example. Suppose there is a small retailer in a village and he has some extra space in the shop. So, running Elastic, they partner with this shop owner - to use their extra space as their mini-warehouse. This allows both parties to share the cost of real estate, thus reducing costs for both. This is important because the problem in villages and small towns is that retailers are spread over vast distances, so it is difficult to approach them with a giant warehouse. Instead, what makes Elastic run is that it creates smaller partners, making it easier to reach these retailers. They then partner with local logistics companies to reach out to their vehicles and delivery people who are out of use most of the time. Instead of building a fully owned delivery fleet, they do it only on demand, which saves the fixed cost of the elastic run and enables these delivery companies to use their resources whenever they need to. That's how Elastic Run was able to create a network of micro-distributors and entrepreneurs who can help them build a flexible on-demand logistics network in rural India, without the need for real estate, delivery vehicles and full-time employees.

Through this process, they have been able to connect more than 6 lakh stores in more than 1 lakh villages of India.For these kirana owners, this process is effective and profitable.They now get their goods much faster and don't have to travel to a big city to buy their products.Just like shopping on Amazon and Flipkart, customers can click on the products they want to buy from Elastic Run's app and get them delivered to their doorstep.So distributors and retailers are happy with this solution.This is also what differentiates Elastic Run with other B2B suppliers like Udaan and JioMart.What companies like Udaan and JioMart are trying to do is cut out the middlemen by getting the supplier to source the products directly from the FMCG companies and give it to the retailers.On the other hand, Elastic Run isn't competing or trying to replace FMCG-distributor partnerships - in fact, they're trying to expand the reach of FMCG companies in places where their distributors can't reach.Next is the target market difference between them.While UDAN and JioMart mainly target large cities and towns, Elastic Run targets places where such infrastructure is not available.

And it's a very interesting thing. Despite focusing on big cities where the margins and opportunities are better, Udaan is recording heavy losses as compared to Elastic Run. Elastic run is also good in terms of income. In FY23, their revenue increased by 25% and UDAN's revenue actually decreased by 43%. So, here is a clear indication of how Elastic Run is moving towards a sustainable business.

In this section, let's take a look at what moves Elastic Run is making to move towards profitability. In addition to providing efficient logistics, Elastic Run aims to use their network to provide more services to their network partners such as FMCG companies and rural kirana store owners. Another very interesting thing that they are doing is enabling e-commerce companies like Flipkart and Meesho to reach out to these villages where they did not have a presence earlier, by which they are reducing the cost of these e-commerce companies by about 30%. 1 lakh villages and 6 lakh retailers have become users of Elastic Run and their purchase data and statistics are very valuable. The company is also using this data to increase sales to their FMCG partners.

Finally, they partner with NBFCs and banks to offer credit to their kirana store owners, as well as Elastic Run receives their money as soon as the product is delivered. Kirana stores sell products before they get their money back - this is an important way for the elastic run to be sustainable. In fact, the company has a very impressive zero-credit policy.

What future entrepreneurs will learn from this case study of elastic run. The biggest lesson is that solving a difficult problem helps build a strong MOAT. Because of this, it is difficult for anyone to compete with you. Elastic Run has taken on the enormous task of organizing rural supply in India, and although there are now enterprises trying to compete with it, in this market Elastic Run is virtually a monopoly.