For the switch to B2C, Tanihub had to quickly restructure its warehouses. The frequently ordered items needed to be placed so that pickers can reach them immediately. Tanihub has six warehouses in several cities and they were initially laid out to handle some 100-150 bulk orders a day, which can take a longer time to pack. Now, they were peaking at 2,000 to 3,000 of individual orders a day.
By buying directly from farmers and introducing a higher level of transparency into the system, Tanihub can keep prices more stable.
Right now, it sells 5kg of medium-grade rice for IDR 57,000 (US$3.8)— IDR 11,400 (US$0.76) per kg—on its platform, with free shipping for orders above IDR 100,000 (US$6.70). The market price in Jakarta for the same grade is currently at IDR 13,900 (US$0.93) per kg.
Adapting to circumstance
Some innovations Tanihub has introduced in its supply chain have helped it get there:
Farmers like to work with Tanihub because it’s one destination that buys the whole range of products—from grade A to F—from them at a fair price. Indonesian farmers don’t use the best seeds and don’t have the best fertilisers or techniques, according to Wineka. This results in varying quality: some apples may have a different colour; the skin of an avocado could have a mark; an egg might not be the right size. In the conventional system, a buyer would give the farmer a fixed, usually low, price for the entire harvest, no matter what quality. Tanihub sorts the harvest by grade and pays the farmer accordingly. A Grade-A apple fetches more, but Tanihub also buys the lesser apples and sells those to food processing companies.
Like Sayurbox, Tanihub also organises its own logistics because it’s more reliable and provides transparency in the whole chain. Tanihub has six warehouses near the cities it services, and several packing facilities near its farms. Farmers let Tanihub know a few days ahead of the harvest how much to expect; and Tanihub informs them when there’s a demand surge or lull for certain products from its clients.
A lasting change
Venture-capital backing also means startups like Tanihub and Sayurbox can afford to resist the heavy price fluctuations, while simultaneously offering farmers and customers a better deal.
“For some commodities where Sayurbox has secured good supply sources, they are able to pay farmers higher prices and sell at a slightly lower price than comparable modern markets, and make better margins too,” says an early investor in the firm who asked to remain anonymous.
Profitability, however, will only come at scale, the investor adds. Which is why harnessing the Covid-19 opportunity just right is so important for these companies. Never have the costs of customer acquisition been this low.
Tanihub secured US$17 million in venture capital amid the pandemic. Sayurbox hasn’t disclosed funding, but it’s reportedly backed by Indonesia’s largest e-commerce platform, Tokopedia.
Both companies are experimenting to reach new buyers. Tanihub is learning to harness the B2C space, while Sayurbox is currently trying to capture resellers. The latter is offering a model in which one person can buy in bulk to supply to a group of people in a neighbourhood.