#86- Understanding sales & distribution
Navigating market fragmentation by Yann Schuermans
Yann Schuermans is the co-founder & CEO of Baskit.app, an Indonesian supply chain company providing a complete ecosystem for offline distribution businesses for brands, wholesalers & distributors. He has spent half a decade solving complex supply chain problems at AB InBev in roles like FP&A Director, Chief of Staff to the CEO, Regional Head, and Director of M&A & Strategy.
I spoke to Yann when Baskit raised its $1.5mn pre seed in March led by Forge Ventures with participation from Sketchnote Partners, DS/X Ventures, Prasetia Ventures, and angels.
Today, Baskit.app announced a $3.3mn seed round led by Betatron Venture Group.
My friends at Sketchnote (thanks Francisco!) were happy to introduce me to Yann earlier this year as I was eager to learn more about the sales & distribution supply chain industry. We’re closing in on a term sheet in the space and any input is worth its weight in gold.
I take this as an opportunity to congratulate the team & share Yann’s unfiltered thoughts on the industry.
Fragmentation as a Control Mechanism
In the quest to sustain your business, reducing the cost to serve is crucial. Brands love fragmented markets because it allows them to prop up pockets of inventory that drive their business. However, when these pockets become too dominant, they gain bargaining power and eat into your margins. To counter this, fragmentation becomes a way to control the market dynamics.
Traditionally, distributors held territorial control, but due to thin margins, they couldn't cover the entire territory. This led to the emergence of wholesalers who filled the gaps in distribution. While this fragmentation may seem chaotic, it's a necessary evil to ensure coverage and profitability. Brands often lack visibility and influence beyond the distributor level, making it challenging to steer the market in their favor.
Data: Visibility with Influence
Visibility alone isn't valuable to brands unless it enables them to influence the market dynamics. Having data is essential, but its true worth lies in the brand's ability to utilize it effectively and make real-time or timely decisions. Brands need to change pricing, shape the route to market, and influence the chain in ways that align with their strategies. However, only those at the top of the food chain, with deep pockets and resources, can invest in solutions that provide comprehensive visibility and influence.
Commercial Firepower: Fulfilling the Gaps
Below the distributor level, commercial capabilities often become inadequate. Wholesalers lack proper category management, route planning, stock analysis, and pricing strategies. By offering solutions that enable wholesalers to enhance their commercial capabilities, startups can create a unique value proposition. This includes providing tools for efficient sales execution, offering commercial models that align incentives, and even temporarily subsidizing resources like salespersons to build trust.
Access to Capital: Navigating Price Transparency
In today's post-pandemic, inflationary environment, price transparency has heightened, and customers have become more price-sensitive. Low margins create challenges for the supply chain, leaving little room for error. If a traditional business faces stock-related issues, it can have catastrophic consequences, as it affects credit terms and overall trust within the supply chain. Hence, access to capital or credit becomes critical to ensure smooth operations and mitigate risks.
Summing it Up: Insights, Execution, and Capital
To summarize, successful startups in this space need to focus on three key aspects. Firstly, providing valuable insights and visibility to brand owners, enabling them to have oversight and endorse necessary actions. Secondly, executing these insights by equipping wholesalers with the tools and capabilities to optimize their operations. Finally, facilitating access to capital or credit to ensure the smooth functioning of the supply chain.
Closing remarks
Navigating fragmentation in the market is no easy task, but armed with the right insights and strategies, we can unlock immense opportunities
It's not just about building a tool for brands; it's about positioning yourself as a valuable partner and driving outcomes
Success in this space often lies at the intersection of valuable insights, seamless execution, and the availability of capital.
Stay tuned for some exciting news from us in this space!