The Yarn Bazaar aims to bring in more transparency, flexibility, and ease of trading in the Indian yarn market. Pratik Gadia, Founder & CEO, The Yarn Bazaar talks about the challenges of digitising a very traditional business, and his plans going forward.
You started The Yarn Bazaar in July 2019. What kind of growth have you witnessed since then?
We have been extremely fortunate with a warm reception by the industry. In less than two years, we have already processed/delivered orders worth over Rs 160 crore, all on 100% advance payment in an industry which has traditionally been accustomed to credit.
The pandemic made it easier for the industry to accept a digital platform, would you say? What obstacles or barriers did you face (and continue to face) in this very traditional market?
The major obstacle we had to face during the start of our business was the issue of trust and credibility. There were some common concerns of many buyers and suppliers like what if there is a quality issue? What if yarn price increases or decreases and the supplier or buyer fails to honour their commitment? Why should we buy in advance when we already get credit? How can we process payment to you?
But as we kept growing our business on a monthly basis, we noticed that these obstacles went away and we are now facing a different set of issues. Yes of course the pandemic and lockdown had a positive impact on our business model.
The Indian yarn market is prone to speculations, so we see a lot of ups and downs in prices. Have you created a buffer to protect your clients and your business from sharp price movements?
Yarn market and especially cotton yarn is extremely speculative and the percentage of volatility has increased over the last six months. It was actually one of the reasons behind the idea of The Yarn Bazaar. We want to empower yarn buyers and suppliers to better predict this speculative scenario so that they can grow their business, both topline and bottomline. We have a market intelligence team that is able to better predict this movement and we are able to give unbiased advice to our buyers and suppliers based on this.
You offer end-to-end solutions – from placement of orders to delivery of orders. Why did you opt to move into the logistics segment of this business? What benefits does a customer get, given that there is already an established logistics network that mills and traders have?
Many mills especially in Southern India offer ex-mill rates and it is the responsibility of the buyer to arrange transport. In addition to that, most of these dispatches are not covered by insurance and many of the weavers especially in the unorganised segment do not have transit insurance either.
The idea of The Yarn Bazaar was always to create a holistic platform where we can offer convenience to our customers. We assist them by arranging transport and insurance and we are able to provide reliable services with proper updates and timely tracking. So even if a buyer wants 50 bags or any part load from any location, we are able to arrange it at the best price and shortest lead time.
Tell us about your customers – are they from the MSME, SME, sectors, and/or from the organised sector? Did the smaller companies need hand-holding?
We are mainly catering to the unorganised segment i.e. mostly SMEs and would soon be targeting corporates and exports too. Transition from offline to online is not an overnight process and will definitely take time. We want to operate a multi-channel platform where our customers can interact with us via different modes as convenient to them and slowly as our app becomes more convenient, more and more people will shift to online.
You also offer financial services to your customers. How competitive is the capital cost if sourced from you?
Textile trade is completely on credit which is risky. In addition to that, there is a cost of receivables and follow-ups for all suppliers. We only operate on a 100% advance payment model. But many buyers don’t have the cash flow for advance payment. So we provide flexible purchase finance which eases cash flow not just for them but for our suppliers too. This is a better source of funds for buyers compared to the traditional way of financing by suppliers because in a flexible purchase finance, you get charged for the number of days of utilisation of funds. So if you have funds to pay within 15 or 20 days, you are being charged for that compared to a traditional process where the sale price had factored in 25 to 30 days of credit. In addition to that, it brings more financial discipline to companies since these funds can only be utilised for yarn purchases which allows you to take advantage of cash discount (CD) offered by suppliers for early payments.
Have you managed to disrupt the traditional way of doing business?
Production process in textiles has always witnessed a technological advancement i.e. machinery upgradation has brought higher productivity, efficiency and lesser reliance on labour.
But processes like procurement, marketing or sales have been left behind. Our goal is to disrupt this by providing a convenient way of buying and selling yarn and bringing more transparency and efficiency. This will ensure growth for the industry and it is extremely important for weavers to grow for the rest of the value chain to grow especially RMG. Our vision is to create a one-stop yarn solution and there are so many things that need to be done in order to achieve that. We are exploring other value propositions now to serve our buyers and suppliers which are in line with our vision and very soon you will see some important updates.