Revolutionising the Cement Industry through cemX
Today, we have with us Ashutosh Kumar Jha and Sourav Chakraborty, from cemX, an online platform for cement sales. CemX is founded by Ashutosh, CEO, and Sourav Chakraborty, CBO.
“Whenever I used to have a conversation with anyone, they would say, ‘Start-up in the cement industry, that’s bizarre!’ But this is something which we always wanted to do; starting something in a different industry. A bit different from what crowds are doing,” told Ashutosh, talking about his start-up cemX, in an exclusive interview with Insellers.
Read ahead to know more about how cemX is transforming the orthodox cement industry, providing an open price market.
Insellers:
Who all were there in the founding team of cemX? And what was your idea behind getting into this business?
Ashutosh Kumar Jha:
This idea first initiated in my mind when I came back from the United States to India; it was March 2019. I am actually from Bihar. In another district where my father had a new apartment, there was an inauguration ceremony going on; meanwhile, I talked to my dad regarding the industry about how exactly it works because he has the business in this industry for the last 25 years. I found certain loopholes that I felt I would like to work on.
I thought of doing market research, and I did that in my hometown. I thought, why don’t we make something in an orthodox industry where we can use the digital transformations and newer technologies to enhance this industry and have more flexibility to an open price market. Based on that, we registered our company name and launched our first prototype version of the company in June 2019. Right after the launching day, the second or third day, we got our first order of cheques which was around Rs. 20,000–30,000, as far as I remember.
After one month, in July, I was scheduled to meet the one who turned out as a co-founder later on. We were actually about to discuss our research topic and a research paper in Kolkata. He was in Kolkata at that time. I was in Bihar, and then I traveled to Kolkata in the later weeks of July, I guess. Then, he had actually come back from London at that time because he was doing his Master’s from Imperial College of London. Before that, he graduated from Boston University in the US and has some work experience in Italy. He liked the idea. He discussed it with his family members also. Then we collaborated as the co-founders.
From then onwards, we started building the team. We got a CFO on board. He is a CA and having company secretary experience as well. We welcomed him on board, and gradually the team-building process got started, and we formed a board in October. Right now, we have four board members, and all are having great profiles like they are from Harvard Business School and Imperial College of London. This is how things were going on till October or November last year. Till December, we were living only in Sitamarhi in Bihar. Maybe, I will be answering more of your questions in this go itself.
In January, we started our operations in Kolkata, and then till March, we have been doing these things parallelly in two cities. After that, the lockdowns happened. We were at high risk, and then for two months, we kept our operations on hold, and we started again in June or May. Then it was like a sudden upsurge in the revenues. We had more orders. Since the constructions were on hold and then suddenly when the lockdowns got lifted, we realised that people started ordering back to back. We started with 50 bags of cement last June, and last month, we closed with 3,000 bags. It was more than a 5,000% growth rate in the revenues.
Insellers:
That already covers some of our questions. Next, we would like to get an idea about how you segment your market and how you approach them?
Sourav Chakraborty :
The building materials market is huge. It’s not only limited to cement itself. You need to buy cement, bricks, stone chips, sand, iron rods, etc. You need to buy a lot of things to build a house like tiles, marbles, sanitary products. We chose cement specifically because the other markets like sands or stone chips are like a really dirty market. Even the cement industry is led by the cartel, to be more specific. The problem in other building material products is that there are some syndicates and local level mafias involved. When it comes to cement, it’s easy to synchronize.
Let’s say you have placed an order of thirty bags, so it’s just a mathematical count when we will be delivering your order, we just have to count 1, 2, 3, …, 30, order delivered successfully. The discrepancy of miscalculation is really low as compared to other building material products. So, that’s why we have chosen cement specifically as compared to other building materials. And that’s why we have only segmented to cement. Probably in the future, we may expand our operations in the other domains as well but not anytime soon.
Insellers:
What is your Go-to-Market strategy? And what is your break-up of sales through direct, indirect, or mediators and the online vs. offline sales you would be doing?
Ashutosh Kumar Jha & Sourav Chakraborty :
We kept both the options open. We have an online store where it’s really easy. Let’s say if you have your hometown in Bihar, and you are right now in Rohtak. If you want to order from Rohtak, you can do it immediately. Back then, it was not possible; in a typical old orthodox style, you have to visit a nearby brick and mortar shop and then negotiate the price. We kept that price transparency. It’s really an open market. You can order from Rohtak to your hometown in Bihar. It’s really easy.
But let’s consider your parents or your grandparents or whoever the person. They are not digitally that much tech-savvy or advanced when ordering something online, specifically cement it’s hard. So that’s why we have an offline extension retail store in the local cities as well. Right now, we are full-fledged live in four cities. Considering Sitamarhi, which is my hometown in Bihar, we have almost ten different offline extension stores. You can locate these stores on our website and reach them out. They will place an order on your behalf so that you have local support. It’s a mediator, kind of an agent; we have them. So, we have kept all the options open: offline as well as online.
Insellers:
You already discussed a bit about the revenue part. Could you give a brief idea about what portion of it is spent on sales and marketing at cemX?
Ashutosh Kumar Jha & Sourav Chakraborty :
Since we have not raised any funds from an outside source, we are still bootstrapping. There are certain investors with whom our negotiations are going on. So, we spend a small amount on the marketing part. Most of it is from the word-of-mouth and cheap labour marketing strategies like cross-business promotions, mutual recommendations, or something like that. So yes, not much amount to be more specific.
Insellers:
You already told us that there is already a challenge in the cement market that people usually don’t buy cement online. So, what are some of the other challenges that you faced in making sales at cemX?
Ashutosh Kumar Jha & Sourav Chakraborty :
The one major challenge is that when you see an online advertisement of cement, people wonder that if cement is sold online; maybe there is some discrepancy, the cement would be duplicate or something like that; I would better visit a shop and buy cement. That’s why we are not running any advertisements. We are outsourcing in tie-up with the companies and local warehouses. There is a possibility when you buy it from the local shop because you never know where they are procuring, but we are procuring the cement from manufacturers directly. Directly doing it from the local level warehouse of that particular company leaves no possibility of duplicity and all. That’s why we are trying to gain the trust of the customer here. So, the major challenge is the duplicity of the cement, which we have to maintain in the future. By gaining trust, it would be easy to get along with.
Insellers:
Are there any major competitors right now in this industry?
Ashutosh Kumar Jha & Sourav Chakraborty :
There are few indirect competitors of ours, but they are dealing with all the building materials and not only cement. I would say that there is no direct competition in the market so far, but we are competing with the local level dealers and all. Technically we are killing their business, the way Uber did. We are considering them as a competitor as compared to the big e-commerce platforms. They are our indirect competition when it comes to comparing ourselves with other e-commerce platforms.
Insellers:
Do you feel that there are any other substitutes as well for your products/ services?
Ashutosh Kumar Jha & Sourav Chakraborty :
What we are providing is the best price. Let’s say you will go to your nearby shop there in Rohtak, and then you come to know that a particular X cement cost you around Rs. 340. When you check on cemX in the Rohtak region, you will get to see that the cement costs Rs. 330 here. And for one house you have to buy at least 1,000 bags of cement, for instance. You are saving Rs. 10 per bag. You are typically saving Rs. 10,000, and in Indian society, it’s much. Everyone is looking for the best price. We are competing with the price.
This apart, this industry is led on credit specifically like you buy cement, and you will ask your seller to allow you some time to pay them back. There, we are playing really well because we recently did a tie-up with one of the best NBFCs called Zest Money. They have tie-ups with all the big brands like Amazon, Flipkart. We partnered with them to provide loans of up to Rs. 2 lacs. Now, you can buy cement with the flexibility of paying us in the next 12 months. You can take Rs. 2 lacs of cement, and then you can pay us on a monthly EMI basis in 12 months. It’s like 1 month — 12 months, from Rs. 5,000–2 lacs, you can take advantage. So, we are playing with the cost advantage specifically.
Insellers:
Do you feel that any technological change has helped cemX in any way?
Ashutosh Kumar Jha & Sourav Chakraborty :
We have recently settled down our research and development team. They are working on some patented technologies. I think this is not the ideal time to reveal what we are working on, but we will use this buzzword ‘Technologies’ like AI and all to analyse the patterns in the future. We are already doing it. Our research team and marketing team are analysing what the parameters are, how customers are rating.
In India, we are so diverse with multiple regions, multiple festivals. Something is going on every day, whether it’s on the Hinduism side or the Islamic side or whatever it is. We have realised certain patterns. When it comes to Hindu’s regions, let’s say there is one-month when people do not buy or do not start any new construction work because of certain hypotheses, which I say. We are also analysing those patterns. It’s interesting to analyse them. Let’s see; maybe once we have a certain amount of data, we will probably let you know how exactly it is that customers are reacting.
Insellers:
What are your future plans for growth? Where do you think the industry is headed in the future?
Ashutosh Kumar Jha & Sourav Chakraborty :
India stands for around 250 million productions, and last year India was the second largest producer of cement. By 2025 India would be somewhere around 550 million tons per year. The Indian government is now focusing on building smart cities and all. So, the construction industry is something that is never going to be out of the plan. Demand will always be there. Probably the growth root is there. Let’s see where exactly we will fit in.
Insellers:
Have you ever outsourced any verticals like sales, marketing, finance anytime at cemX?
Ashutosh Kumar Jha & Sourav Chakraborty :
Not yet, exactly! We did the technological part, but now everything is in-house. Even we had a problem with the delivery system, so we even bought our in-house vehicle in Sitamarhi for faster and reliable delivery. So, we have our in-house transportation system to gain our customer’s trust in the end. We are doing the end to end procurement.
It’s interesting to mention here that usually you have seen that Zomato’s boy delivering with the full attire, it’s nothing new now. Still, when it comes to cement, your driver will deliver your product with a kind of dress code, and then your entire transportation has your cement’s advertisements. It’s new, specifically in the tier-3 and tier-4 towns, where people have never seen these things yet. That’s why we have got our in-house transportation system. So, nothing is outsourced.
Insellers:
Do you have any plans to outsource in the future?
Ashutosh Kumar Jha & Sourav Chakraborty :
We will see. There is probably something fundamental to consider; if you try to do everything in-house, you have to spend a lot of money. Maybe we will consider something to outsource but not sure what exactly would be that stuff.
’ View on cemX
CemX is a start-up working in the orthodox cement industry, providing a platform for online sales of cement. It has seen good growth in its revenues since its inception in June 2019. It has a tie-up with an NBFC, Zest Money through which it provides a credit facility to its users with an option to avail up to Rs. 2 lacs on credit for a maximum of 12 months. It also plans to use Artificial Intelligence for cement sales in the future. The major challenge in front of cemX is that the online sale of cement being an entirely new concept; consumers are skeptical that it might not be authentic and therefore do not trust its quality. CemX is trying to gain the trust of its target customers.
Our advice for growth opportunities would be the following
- New market Opportunity — As, There is no cartelization in Southern India therefore cemX could also expand to other South Indian locations like Hyderabad, Telangana, and other metro-cities where it could focus on the non-retail consumers while working on better margins with a cost leadership model. So, cemX could focus on price competitiveness and higher quality products there as the number of competitors is more in the South.
- Channel Partnership — As word-of-mouth plays a significant role in the cement industry. CemX could do a B2B collaboration with architects, contractors, interior designers, and consultants as they can help in influencing the target customer to opt for our services.
- Technological Innovation — They can integrate Machine Learning (ML) and Artificial Intelligence (AI) in their business. For instance, they may provide an option to their customers to put the built up area with predesigned templates provided by cemX, and then the ML & AI algorithms would estimate the number of bags of cement required in the construction of the building.
With time, they can integrate an option for the submission of construction designs as well. which can also be used to refer the contacts of architects, builders, and other professionals associated with cemX, to its customers thus positioning cemX as a one-stop solution for house construction with all the contacts details and raw materials availability on the same platform.
- Digital marketing and advertising could also help in building the trust of its target customers on cemX while positioning itself as a trusted brand in the market. In the beginning, they should not focus on lead generation but rather on branding so as to focus on brand image elements of marketing.
- Diversification — As cement cannot be used as a standalone product so cemX can diversify into 3rd party services of architect, contractors etc and related product categories such as iron rods, stone chips, bricks etc particularly in the segment where quality of the product can be standardized and controlled.
Implementing a mix of the above strategies could help cemX become a one-stop solution for all customer needs related to construction. It could tell everything right from how much cement to purchase, which one to purchase, how much it would cost, to suggesting the contacts of architects, builders, and other professionals essential in the construction of a building.
We wish Ashutosh Kumar Jha and Sourav Chakraborty good luck for the future and hope that they reach the targets they have set for themselves!
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