All Agritech Marketplaces Are Not Created Equal
How does one see the forest of full-stack agritech marketplaces along with the trees? How do you differentiate full stack agritech marketplaces when everyone is becoming full-stack?
Few weeks ago, I made this meme for a subscriber-only newsletter piece that I wrote on agritech 1.0 as vapourware. It promptly went viral.
That is, among the agritech circles who got the insider joke.
Agtech/Agribusiness folks started sharing it in whatsapp with their entrepreneur/trader friends. One week later, a startup had included this meme in their pitch deck, while talking about what makes them a true agritech platform™.
It also triggered poignant reflections, especially from someone I respect, Amith Agarwal, CEO Agribazaar.
Meme jokes apart, I have genuine respect for agritech founders patiently building marketplaces to do the work Adam Smith theorised, many moons ago, in his 1776 magnum opus, An Inquiry into the Nature and Causes of the Wealth of Nations,
“Every workman has a great quantity of his own work to dispose of beyond what he himself has occasion for; and every other workman being exactly in the same situation, he is enabled to exchange a great quantity of his own goods for a great quantity, or, what comes to the same thing, for the price of a great quantity of theirs. He supplies them abundantly with what they have occasion for, and they accommodate him as amply with what he has occasion for, and a general plenty diffuses itself through all the different ranks of society.
Mind you, it is fucking difficult to build online marketplaces in a domain like agriculture, especially in large smallholding countries, where the following unsaid rules of friction more or less exists.
In traditional markets, supply and demand are matched by finding the market price that balances both sides. In the domain of agriculture, matching markets rule the roost where buyers and sellers have strong preferences (driven by tangible but less noticed factors like logistics, credit, risk and intangible social factors like caste, longstanding familial relationships) and the allocation – i.e. who gets what – is NOT driven by price.
Marketplaces are easier to build when there are fragmented suppliers in the markets. But what do you do when you have both fragmented and concentrated suppliers in both ends of the value chain?
Largely concentrated suppliers exist in the agri-input supply chain (although you do see fragmented suppliers in the case of a few inputs) and fragmented suppliers exist in the agri-output supply chain (although you do see concentrated suppliers in the case of few niche commodities)
Value chain relationships that have been built over decades have optimised the market operating conditions for fairness over efficiency and effectiveness. (Thank you Vivek!)
Value Chain players trust the players who are dealing with the produce rather than the merit of the produce. In no other industry you will find this bizarre situation where the commodity is incidental to the trade transaction happening between the parties.
Transaction layers are illegible to the players outside the trade ecosystem.
Have we figured out the playbook for building agritech marketplaces in agriculture contexts of large smallholding farmers?
We are in the early stages of writing “Hello World!” for agricultural marketplace systems in these parts of the world.
In the early days of Agtech 1.0, we are leveraging inherent value chain networks and building standardised transaction layers on top of them. Incase you are curious, not all of these transaction layers are digital, although they may seem so from outside.
During Season 2 of my newsletter, for the subscribers of this newsletter, I delved into the individual strategic gameplay of agri-output marketplace players like Ninjacart, Agribazaar, Dehaat, Gramophone, PayAgri, Vegrow and Farmart, alongside input focused marketplace players such as BharatAgri, Plantix, Amazon (I, II)
In the meanwhile, newer players emerged and several players pivoted their gameplays, in response to dynamic market conditions. Since ‘permission less’ leverage of capital is being offered to full stackers, most agritech marketplaces are becoming fullstack players, with Fasal being the latest entrant.
The crucial thing to note here is that trading has become the default lubricant that drives the innovation potential and future bidirectional adoption of the marketplaces among consumers and suppliers.
As I set the ground for Season 3 of this newsletter, I want to do one consolidated take that strings together the latest developments happening in agritech marketplaces.
Scientists who study the origins and salient mysteries of life, have talked about a spectacular event that palaeontologists call the Cambrian Explosion, which happened half-billion years ago, where in a relatively short span of few million years, the biological diversity that represent life on the planet today, were invented in a frenzy of evolutionary innovation.
Today, we are witnessing an agritech marketplace “Cambrian Explosion” moment, with a similar explosion of mind-boggling diversity of agritech marketplace business models.
Can ONE framework map and help you make sense of almost every other agritech marketplace business models that we are seeing in large smallholding countries?
Can ONE framework show which business model categories are still blue oceans and which of them are becoming red seas with massive cut-throat competition?
Can ONE framework be used to show how the strategy of agritech marketplaces have evolved over time?
These are the questions I am taking up with hand-cackling glee for this last subscriber-only post for the month of May before I go for vacation.
Programming Note: Agribusiness Matters will be on vacation from 14th May to 1st June. The next Saturday Sprouting Reads would be published in the first week of June. Since most posts are written for long shelf lives, now is a good time to catch up with my previous posts in the archives.