Sahaj CSC

SAHAJ VYAPAR
UDYOG – The B-Plan Competition
Team name: Shaktiman

Team leader: Ajay Lingwal Team member: Rajshree Mandal

E-mail: ajaymanage10@gmail.com E-mail: rajshreemanage10@gmail.com

Mob. No. +91-93934 90755 Mob. No. +91-93914 84248

Institute: MANAGE, Hyderabad

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 Contents
1. Executive Summary
2. Scouting for local flavor
3. Market viability
4. Business Model
5. Operational requirements
6. Technical viability (Technology partners)
7. Role of Sahaj & VLEs
8. Financial viability
9. Market environment
10. Competition
11. Association with government schemes
12. Regulation/Regional issues
13. Challenges to Scaling up and their solution
14. SWOT Analysis
15. Critical Risk Factors

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 Executive Summary

Opportunities unexplored
SREI-Sahaj has already created quite a revolution by offering a window for the rural masses to
the world. Sahaj CSCs (Common Service Centres) are operating in the vibrant rural geographies
of India and slowly bridging the gap in last mile delivery of services to rural populace. So far
CSCs have acted as connecting link between the rural people and rest of the world. Now the time
is ripe for Sahaj CSCs to take the revolution to the next level by exposing the rural potential to
the world. So, after taking the “world to the villages”, CSCs should now take the “villages to the
world” through their new business arm “Sahaj Vyapar”.

Villages of India are full of treasure so far unexplored. They are home to indigenous products
that if made available to a larger public, may generate sizeable income for the rural people. We
can look at the example of indigenous products that have earned a global name. For e.g. Italian
cheese, Swiss chocolates, French wine, etc. But Indian products which have had similar impact
on global scale are few. So, the need of the hour is marketing of these indigenous products. With
the advent of technology we have a unique opportunity to cater to a wide spectrum of consumers.
Using the internet platform we can draw both buyers and sellers, not only on a national scale but
also on a global scale. There is a huge untapped market too waiting to be catered to, especially in
case of khadi goods, handicrafts and other cottage industry products. Electronic platform is an
added advantage as it obviates or minimizes the need for any physical infrastructure for
marketing. This way there is a win-win-win situation for all the rural producers, customers as
well as the VLEs (Village Level Entrepreneurs).

Finding the local flavor

First step will be scouting for a number of local indigenous products which can be profitably
marketed or which can be used as a geographical indicator. This concept of geographical
indicator will help in building a distinct image for every locality and further strengthen the local
flavor which will translate into a unique brand image from marketing point of view. Given the
cultural and ethnic diversity of our nation it will not be difficult to carve out a distinct identity for

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any rural area. Once we start focusing on the uniqueness of every village, the concept will
definitely make sense. Also the need for more CSCs and VLEs will then automatically be
realized. So, this business model will help in both creation of new opportunities as well as
expansion of the already existing ones.

Business Model of “SAHAJ VYAPAR”

The proposed business model is based on concepts of infomediation and metamediation. Under
infomediation stream we will follow e-catalog model. More simply put the role of Sahaj in
business will be similar to that of a market maker and it will act as a bridge between the rural
producers and the potential customers. It will organize the rural producers into clusters and help
them to market their product.

This business model if effectively implemented across the country and in potential areas will
prove to be a game changer. The model should be followed with all fervor and support from all
parties concerned. Already the big industry players like Godrej, ITC, DSCL, etc. have realized
the importance of rural purchasing power. Now Sahaj must build on its strategic advantage to
give the rural people their rightful place as producers and marketers, not just as consumers. This
is an idea whose time has definitely come.

Scouting for local flavor

The work of scouting for the local flavor can be done by the VLE with support from experts
from KVIC. Following factors must be kept in mind while selecting a particular product:

• The product must be indigenously produced with the particular area having some
competitive advantage in its production. By default, most of the indigenous rural products
are of this nature. For e.g. Bamboo products are mostly produced in Assam and coir
products in Tamil Nadu as both these are in abundance in the respective regions.
• The product must have a potential market. So, all such products which have been selected
on a preliminary basis have to be screened before arriving at the final list. Because a
product is of no use if it doesn’t have a potential market or if its production cannot be
economically up scaled.

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 • The chosen product should at least earn a minimum level of commission for the VLE &
Sahaj.
• There should not be any problem in ensuring constant supply of the chosen product.
• Location of the village or block should also be factored in while deciding on the product.
If the area is located nearer to a city, it may give a strategic advantage.
• Also for the pilot, a broad range of products may be selected and then depending on their
relative performance, later they can be finally chosen or eliminated.
• Wherever possible, we must choose product which can be produced throughout the year
and for which the manpower is available year round. But we must not be too rigid in case
of manpower because we must encourage even those who want to take it up as a part time
job initially. Later when they realize good income they would ultimately be inclined to
take it up full time.
This whole exercise of exploring the potential enterprises will mostly be a one time process but
may be done again depending on the initial success and the possible need for expanding the
product portfolio.

Market Viability
Customers-The customer base can be classified into three groups based on nature of end user.
• Business Market – It will facilitate the sale of the products to other companies or
organizations that in turn can resell them or use them as components in products or
services they offer. The potential markets for the B2B market can be chain stores,
wholesalers, retail stores, cottage emporiums and corporate houses. Sahaj can forge a
partnership with big retailers and specialty stores to sell these products and create a new
shelf space for such kind of product. Some handicraft products can be used as corporate
gift, attaching a transformational appeal to these products can help in creating a new
market space for them.
• Customer market: Although the customer market will be small but this service will
help in creating a close association with the customers and open the window for Sahaj to
enter into branding of these products in future. We can serve the customers with new &
latest products of different variety at competitive price & on time delivery.

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 • International market: There is relatively good international demand for the Indian
handicrafts. It will do a world of good to these artists if their products are made to suit to
international taste and designs. By exporting such product we will be able to put the local
artisans on the global radar.

Business Model

The proposed business model is based on concepts of infomediation and metamediation.

Infomediatory Model

The basic idea is to display a catalog to the interested users and web acts as a medium for
checking the catalog experience. This model helps in expanding the customer reach and provide
more penetration. Sahaj CSCs will function as infomediaries providing specialized information
on behalf of producers of goods and their potential customers. In this way the CSCs will provide
a platform to bring together the customers and the producers.

Metamediatory Model

Metamediation is a process that goes beyond aggregating vendors and products and includes
additional services required for facilitating transactions. Again in this model CSCs brings buyers
and sellers together to facilitate transactions. It can either be of Business to Business (B2B) type
or of Business to Consumer (B2C) type. Individual orders which are usually of low volume can
be placed through internet platform. These will constitute B2C transactions. Whereas, for big
institutional buyers or international customers (who want to market our products to different
geographies), we will have to follow a different route. Of course the first interface will be
through internet only. But subsequently we may have to send samples of our products, may have
to follow up and get into direct contact with them. We will also have to offer them deals based
on different terms than the regular B2C transaction. So, such transactions will constitute B2B
transactions.

Commission will be charged for each successful transaction. Commission will be pre-fixed for
each and every product depending on the kind of raw material, labour and the cost of production.
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After giving a remunerative price to the producers and a fair deal to the customers, whatever
remains will be the commission that will be shared between Sahaj and the VLE. So, we are
giving reasonable prices to producers as well as customers. For B2C transactions commission
will be shared equally between the VLE & Sahaj. This 50:50 sharing of profits will further
motivate VLEs to perform better. But for B2B transactions Sahaj will have to leverage its
industrial experience and standing. So, the role of VLEs will be a bit subdued in B2B
transactions. So, the commission for B2B transactions will be shared on 70:30 basis between
Sahaj & VLE respectively. Important aspects of this business such as the Cluster concept,
Cluster leader concept, role of VLE & Sahaj and Technological partnership are discussed in the
coming pages, which will further elucidate the business model of Sahaj Vyapar.

Key Technology

Technology is the key to success of our business model as the whole business revolves around
the might of internet and the emerging segment of online shopping in India. We have chosen
Rural Bazar as our technology partners due to unique software applications, especially designed
for marketing of rural products, that it offers. Rural Bazar is an innovative product of
Computerized Rural Information Systems Project (CRISP).

Formation of clusters and cluster leaders

Formation of clusters and appointment of cluster leaders is one of the fundamental requirements
for our business model to be effective. Various villages or blocks depending on their similarities
can be grouped into clusters for production of a certain type of products in which they may have
competitive advantage. This will bring in the cost advantage. Then for managing these blocks or
villages in a cluster, we will appoint Cluster leaders from among the best performing VLEs of
that cluster. Cluster leaders will act as content managers responsible for maintenance and
updation of data, product portfolio on the web site for their respective clusters. Training will
have to be given to these cluster leaders for handling the software required to do this. Cluster
leaders will have to be given some special incentives based on the performance of their clusters.

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Promotion
Initially for promotion we would use free social networking sites and generate awareness about
the indigenous products and the potential boost to the rural economy that the business is
providing. Word of mouth publicity will be a key and our business aims to thrive on positive
referrals from our key potential customers, especially the institutional, corporate clients. The
social angle in business has to be leveraged and can even be presented as a form of corporate
social responsibilities.

Pricing
Pricing is a very tricky issue because of the fact that so far most of the rural indigenous products
have been overpriced on account of low volumes and a niche market. But keeping in mind the
revolution that we plan to unleash we must start from pricing our products reasonably to increase
the volumes. In fact we need to fully leverage the power of internet and offer innovative products
like offering basket of products of a particular region or choice from an assortment of products.
Gradually as we discover the demand for a particular category of products, then we can offer
more related products to cater to the growing market.

Operational requirements

The CSCs are already equipped with the basic infrastructure required to operationalize this
business model. Along with this other operational requirements are as follows:

• Technical requirements like software and computers along with internet connectivity are
pre-requisites for this business. Software will be provided by Rural Bazar and will need
to be installed at server sites, i.e. at the CSC where cluster leader operates from.

• Training to VLEs (Cluster leaders) has to be given as they need to act as the link between
the customers and the producers. Also their role becomes more important as they will
have to handle additional responsibilities like ensuring the delivery of products from
producers and following up with the logistics department, maintaining product profile.

• Keeping in mind the future possibilities of developing the logistics component, Hub and
Spoke model will be adopted for ease of operations and for smooth supply chain

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 management. Cluster of villages will be formed and encouraged to develop cottage
industries. These clusters will be developed to support the hub and spoke model with
respect to product or category as well as location. For e.g. Marthandam region in Tamil
Nadu is a hub of honey production and is on a border location to Kerala. So, it can act as
a hub for supplying honey to 2 states i.e. Tamil Nadu & Kerala.

• Warehousing and logistic support can be outsourced initially and later when the project
gains steam, it can be handled by Sahaj itself.

• Cluster development of villages is essential for operational efficiency and for ensuring
the viability of scaling up. So, clusters for various products will be identified and
promoted.

• Order fulfillment is the key step to ensure customer satisfaction and will have to be
monitored by the VLEs at their end and by the logistics party at their end.

• Credit verification will be done and various modes of online payment like Debit/Credit
card can be used.

Technology Partners
The technology plays a vital role in our business and therefore our technological partners must
be chosen with utmost care. Computerized Rural Information Systems Project (CRISP) will be
our partners for providing software solution, i.e., Rural Bazar software which forms the
foundation of our business. Though we may develop our own software in the long term, initially
we can depend on Rural Bazar which can be easily customized as per our requirements.
The Rural Bazar application software consists of two applications:
• Rural Bazar web site which is a server side application
• Rural Bazar Client Software which is a client side application
The server-side web site will be one which will be browsed by the customers and the Rural
Bazar Client software will provide an interface for content updation in terms of product profile,
producer details, store details etc. Rural Bazar web site will be hosted on a server machine and
Rural Bazar Client software may be installed in CSCs where the VLEs will use it for data entry

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and content updation. It may be noted here that CRISP is actually a part of National Informatics
Services Centre Inc.(NISCI).
NISCI will provide continuous technical support throughout the implementation phase in the
form of:
• Installation and commissioning support will be provided for the first time installation for
free and subsequent installations will be charged as specified by NISCI.
• Adaptive maintenance and customization will be provided by NISCI as per our
requirements.
• Technical training will be given to VLEs by NISCI.
Following services will be offered by Rural Bazar to the customers:
• Allowing a customer to browse the product ctalog either online or offline.
• Accepting orders and payment online by Credit/Debit cards, Net banking,etc.
• Allowing the customer to track their request and confirmation of order through Email.
• Taking customer feedback and maintaining customer data on profile, preferences, billing
and shipping address. Providing customized services based on customer preference and
profile.
Following services will be offered by Rural Bazar to the rural producers:
• Intimation of any new order placed to the respective producer through VLE.
• Once the payment is received and the delivery has been made, the amount left after
deducting the VLE’s commission will automatically be credited into the account of the
producer.
• Conducting an online survey either by direct questions to the customers or by using
customer profile, preferences and previous transactions data. Data thus collected can be
analyzed and demand for a particular product or category can be known.
• Launching advertising and discount campaigns for the products.
(Please note that the details of the technology partnership have been suitably modified
from the concept paper available at Rural Bazar website and complete details can be
accessed there )

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Role of Sahaj & VLEs

Sahaj in association with Rural Bazar, will be responsible for developing and maintaining of the
catalog and website. It will extend support on maintenance of the software and provide necessary
training to the VLEs (Cluster leaders). Sahaj will also play a proactive role in facilitating credit
for various entrepreneurs and SHGs in the identified clusters. Sahaj will have to utilize its
association with the government to bring the identified clusters under the umbrella of various
government sponsored schemes for self employment and cottage industry development.

Following will be the functions of VLEs as content managers:

• Updation and maintenance of the product catalog such as modifying the price and
other info about products
• Updation and maintenance of producer information
• Once an order is placed arrangements must be made to intimate the producer about
the order requirements.

• Also the payment due to the producer must be made in time subject to the delivery of
the product.

Financial Viability

Pilot clusters

For testing the financial feasibility and level to which this model can be upscaled to, we will
conduct pilot in one cluster each in all the six states where CSCs are functional. The business
model is certainly profitable and is a win-win proposition for all. For e.g. 1 kg honey costs Rs. 90
if purchased directly from co-operatives in Marthandam (Tamil Nadu). Whereas the market price
for the same bottle is Rs.160, if purchased from the wholesalers. The advantage that we enjoy in
this business model over conventional retailing is that we get the product from the producers
directly at a relatively lower price. The producer enjoys greater price realization for the product
and the customers too get the product at reasonable price. Likewise for different products the
margin will be different but undoubtedly much better than what we get in the market. Most
importantly the electronic platform significantly reduces the cost of transaction.

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Costs to Sahaj

Costs to Sahaj involve the cost in formation of clusters and organizing producers for individual
enterprises. Another significant cost will be that of the technological support and training cost.
But all these are onetime costs and can be covered easily by keeping the margin for the
producers and VLEs thin for initial period.

Market Environment

Microenvironment

Producers- The rural artisan, unemployed youth and women can be encouraged to go for self
employment. There are various government schemes like SFURTI, PMREG which provides
necessary technical and financial support to start up a new micro enterprise and development of
cluster in particular areas. VLE’s main job will be identifying, encouraging and organizing the
rural producers.

Intermediaries

1) Financial intermediaries: The credit verification and payment will be done through payment
gateway. Sahaj can leverage its association with major banks like SBI, PNB to ensure that all the
transactions are smooth.

2) Physical distribution intermediaries: To ensure fast, reliable delivery of the order Sahaj can
associate with major logistic service providers like Gati, First Flight, Bluedart.

Macroenvironment

Government policies-There are many government schemes going on under the aegis of
Ministry of Medium and Small and rural development which our business can associate with.

Technological-The technology is fast advancing and Sahaj Vyapar will be in a perfect position
to utilize these to the fullest.

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Socio-economic -This initiative will promote cultural diversity by strengthening the capacity
of rural industries to produce and distribute goods and help them gain access to national and
international markets. For many people belonging to a particular community it may be their
family occupation and this will help in nurturing their age old culture and simultaneously make a
decent living for themselves and their family.

Competition

The best thing about this business model is that there is no real existing competition in the
segment which we will operate in and neither is there any immediate threat due to the unique
advantage of Sahaj CSCs. Basically no other competitor is having such wide network of CSCs
which can be leveraged so effectively. And by the time competitors copy our business, we would
have made much headway and further fine-tuned our existing model.
Similar businesses like Industrial Extension Cottage (INDEXT-C) and Central Cottage Industries
Emporium will rather be our customers and partners than competitors. All these are government
supported platforms for promotion of rural handicrafts and other products, whereas our business
deals in more variety of products and from more varied geographies. Above all these businesses
lacked private partnership which is the driving force behind our model of business.

Association with government schemes

For the success of this model on a large scale, government support is indispensable. We need to
associate with a number of related schemes to fully utilize government provisions and ensure
active participation of both state and central government. One such scheme is Scheme of Fund
for Regeneration of Traditional Industries (SFURTI) which is being implemented by Union
Ministry of Agro and Rural Industries (ARI). Main objective of the scheme is to make the
traditional industries more productive and competitive and facilitating their sustainable
development. Another such related scheme is Rural Industry Service Centre (RISC) which aims
at development and promotion of Village Industrial clusters (V.I. clusters). Under this scheme
backward and forward linkages are provided to Khadi and V.I. activities in a cluster. Services
like raw material support, skill up-gradation, training, Quality Control, Testing facilities,
marketing promotion, design & product development are also provided in order to strengthen the

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rural clusters. KVIC, KVIB, National level / State level Khadi and V.I. Federations are the
implementing agencies.

For encouraging self employment we can associate with Prime Minister’s Employment
Generation Programme (PMEGP). The Scheme is implemented by Khadi and Village Industries
Commission (KVIC) .The main objectives of this programme is to generate employment
opportunities in rural areas of the country by setting up of new self-employment
ventures/projects/microenterprises and bring together widely dispersed traditional artisans ,rural
unemployed youth and give them self-employment opportunities to the extent possible, at their
place. The beneficiary can be individual, SHG’s, Production , Cooperative societies and can get
up to Rs.10 lakh in the manufacturing sector and above Rs. 5 lakh in the service sector.

Regional Issues
There will definitely be some regional issues associated with the business as each and every state
is diverse in itself.
• There may be some logistics related problem in case of remote villages. The time lag
between the date of ordering and that of delivery may increase and ultimately affect
service quality.
• Also the local politics can be a factor while identification of clusters or appointment of
cluster leaders. Even, there may be a mad rush among people to avail of this golden
opportunity. So, some ombudsman will have to look after the fairness of the whole
process.
Challenges to Scaling up
• It will be difficult to scale up in all the product categories as the demand will be variable
and also the conditions will be diverse in each category, being produced in diverse areas.
• There can’t be ‘one size fits all’ approach. There will have to be different strategies for
different regions, even within a state.
• Most of the production related activities will be seasonal or cyclic subject to either
availability of raw material or man power. Because in case of processed agro products the
availability of raw material can’t be ensured throughout the year. Also we can’t be
guaranteed of man power because some of the producers may be taking up this as a part
time activity.

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Key to Scaling up
In spite of all these challenges, there is a solution which will nullify all the reservations regarding
the scaling up of the business, i.e. Cluster approach. If we look at each and every village or block
in isolation it appears a very mammoth task to take the business to the next level. But at the same
time if we adopt cluster approach across the product categories and locations, our job becomes
infinitely easier.
SWOT Analysis

STRENGTHS

• Presence of Sahaj CSC’s in states which are having a rich cultural heritage and wider
network of CSCs.

• Abundant manpower availability and raw material which can provide a good source of
income to the rural people. For example jute in West Bengal, Lac in Bihar, bamboo in
Assam, coir in Tamil Nadu.

• This initiative will create a platform on which Government support and Sahaj’s
professionalism can be channelized in proper manner.

WEAKNESS

• It requires a great effort on part of VLEs to identify the resources which can be used as
product offering and mobilize the rural people.

• The quality and design that can match the standard are very difficult to maintain.

• It may not be possible for every CSC’s to start this business and the gestation period may
be very long for cluster development.

• The delay in implementation of Government support and tedious paperwork required to

get benefits of the schemes.

OPPORTUNITY

• Potential for employment generation and in particular it can include the women and old
age people also.

• It can help in preservation of rich cultural heritage which is on verge of extinction.

• The Government policies and schemes are favorable for getting the technical and
financial support required.

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 • Economic development of the backward region.

Threats are covered under critical risks

Critical risk factors

• Most important risk factor will be the motivation of VLEs to do that extra bit. Although
the average monthly income of VLEs may seem low, the relatively better to do VLEs
may be difficult to motivate, to take on extra workload. Healthy commission and
consequent increase in income will act as motivators. Also the leader VLEs for individual
clusters will play an important role in motivating the fellow VLEs in their cluster.
• Quality control can be problematic as the VLEs may not be well versed in determining
the quality of product. So, adequate training has to be given to VLEs so that they are able
to ensure that only quality products are delivered.
• Order fulfillment will always remain a risk due to the nature of business. So we have to
create an efficient groundwork and make our rural producers strong enough to deal with
any contingency. They must be assured of some minimum business and in turn be
responsible for fulfilling an order. Producers, once confident and assured of the returns
will be able to make a long term commitment and make the business sustainable.
• Connectivity failure or slow speed of internet is also a very serious risk and will have to
be countered with appropriate technological measures. One possible solution is Wimax
technology which provides greater coverage and speed, but it requires high level of
investment.

Conclusion

Despite all these potential risks, Sahaj has the wherewithal to take a plunge and test the deep
waters itself. The opportunity cost of not taking this plunge is rather too high if Sahaj wants to
optimize the resource base in form of CSCs that it has built. On the other hand with measured
risk taking approach Sahaj Vyapar will become one of the most defining instruments in India’s
e-revolution.

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