Despite a very handsome CV littered with impressive names including Harvard Business School, Goldman Sachs and Baring Vostock Capital Partners, Peter Fedchenkov, founder of the INS Ecosystem, insists he is a grocer at heart and that the grocery trade is in his genes.
His grandfather had a wholesale grocery business when, just after the collapse of the USSR in 1993, his retail distribution channels disappeared, As a result his grandfather was forced into selling groceries directly to consumers at small market stalls, Then he discovered the approach of placing ads in regional newspapers to sell goods directly to his customers; thereby creating an early mail-order grocery business where he no longer relied on the middle man.
Four years ago Fedchenkov put his education and genes into practice, and co-founded Instamart in Moscow – an upgraded internet of things approach to his grandfather’s business. Today Instamart is the largest online grocery delivery business in Russia, with 100,000 orders processed every day.
Instamart possesses no stock, warehouses or fleet but picks fresh produce to order from a number of key grocery outlets and ships it to the customer the same day. Compared to the UK where online food orders account for 5% of total food purchases, Russia consumers only order online 0.02 % of the total retail food market. It would appear there is room for growth.
Next up, Fedchenkov set his sights on global grocery dominance, this time co-founding the INS Ecosystem which bills itself as the first decentralised, global ecosystem directly connecting grocery manufacturers and consumers.
According to the website, the INS Ecosystem is a scalable, blockchain-based platform that enables consumers to buy groceries conveniently and directly from manufacturers at lower prices.
Its ICO begins on December 4th with the hard cap set at 60k Eth, which as Fedchekov acknowledges the rising market has changed the target from $18 million to $24 million in recent weeks.
The global grocery business is estimated to be worth $8.5 trillion. Retailers, on average mark-up manufactured goods by 50% and what is even more telling, the retail market is controlled by a very small number of corporations. In the UK alone 4 major multiples control more than 75% of the entire retail outlets.
‘’This market is ripe for decentralisation,’ says Fedchenkov. ‘Whenever I speak with a manufacturing company they are all keen to get to customers directly. There is a real appetite to cut out the middleman.’
Fedchenkov sees the demand for disintermediation for a number of reasons. ‘Manufacturers can see a drop in bricks and mortar traffic. Increasingly people are buying online and manufacturers want to take that away from middlemen retailers,’ he says.
‘Secondly there is question of consumer data. Currently retailers hold that information and use it for their own promotions or loyalty programmes. It is not fed back to the manufacturers and retailers can even use this data to replace branded goods with their own, reducing the manufacturers’ market share.
‘Finally, our research shows us that manufacturers spend a huge proportion of their budgets on advertising that never reaches the end consumer. In fact, statistics show they spend as much on trade marketing as it costs to produce the food in the first place. We want to help manufacturers reach their customers directly, reduce this wasted spend, and benefit directly from the consumer feedback.’
Blockchain technology is a crucial part of the INS Ecosystem model. On November 21, INS announced a partnership with Ambrosus, a blockchain-based ecosystem for the supplychain. Given that the INS Ecosystem is a platform and will not hold stock, it has to be able to provide transparency and provenance for the food supplied. Fedchenkov argues that the underpinning technology and assurance provided by Ambrosus will be much more rigorous than existing traditional audit trails.
‘The data captured by blockchain is immutable and transparent. It is perfect for recording high volume, low margin transactions. This is a good fit.’
FedchenKov also maintains that traditional supply chain validation can take days to confirm an audit trail, whereas data held on the blockchain can be validated within minutes. ‘Ít is safer all round,’ he says.
The INS Ecosystem will partner with third party fleet operations to fulfil distribution. Asked if it has the potential to replace multiples and then become a monster in its own right, Fedchenkov says it is not possible.
‘For example, each manufacturer will develop their own loyalty programme with their customers using smart contracts so that when customer behaviour reaches certain agreed targets or sets of actions, rewards are automatically released. They, the manufacturer, will know their own customer, not us.’
In terms of revenue, Fedchenkov will impose a straight levy of 1% based on volume for manufacturers and the same on third party fleet operators. He is sanguine about the use of the INS token as currency. ‘No, I expect people to buy their groceries in fiat currencies,’ he says. ‘However, rewards will be denominated in our token creating a value and liquidity as people use the token generated in the Ecosystem to buy more food or redeem rewards.’
So far, seven of the top 20 global FMCG manufacturers, including Reckitt Benckiser, Valio, FrieslandCampa, Capebe and Borjorni, have lent their names to the project and have expressed interest in joining the platform. It would appear to be a win win for manufacturers as well as consumers – providing lower costs and greater choice.
Fedchenkov is feeling optimistic at this stage. A mixture of traditional marketing and blockchain marketing has produced results so far. A feature in the UK Telegraph brought in five new multinational manufactures. Now it’s just a question if the ICO traders are as excited as well.