The global grocery industry is dominated by mass-market retail chains. At the national level in
many countries, a large share of the grocery market is frequently in the hands of few retailers.
While some amounts of buyer power are understandable and simply desirable for competitive
advantage, the high level of concentration causes a growing imbalance of buyer power within
the supply chain.
Exerting buyer power is natural when not abused. It is understandable that any industry
participant would seek bigger volumes as a tool for negotiating better prices. But retailers push
the limits of what is fair. Grocery retailers are perpetually and aggressively extracting better
terms from already squeezed manufacturers, going far beyond the benefits a player should
receive for attaining economies of scale.
Large or small, no manufacturer has enough power. Global constituents, such as Procter &
Gamble, Nestle, and Unilever, do play a role in the industry and have more negotiating power
than small manufacturers. Still, these companies simply are no match for the extensive control
retailers have on end-customers throughout the supply chain. For example, Wal-Mart’s sales are
approximately 5 times greater than those of its largest supplier, Procter & Gamble. Wal-Mart
6
accounted for 16% of Procter & Gamble sales in 2016.
7
Retailer buyer abuse extends beyond normal pressure. The explanation of this pressure is
abuse of buyer power. Such power allows retailers to determine what will and will not be
stocked, and on what terms, such as sources, quantity, quality, delivery schedules, packaging,
returns policy, and above all, price and payment conditions. Indeed, a supermarket company
wields an important bargaining chip, namely the threat to stop selling one or more products.
Evidence of retail power abuse - The Competition Commission in the UK, for example, did find
that major retailers enjoy a price advantage that exceeds the cost difference. Additional
departures from proper retail conduct included: delaying payments to manufacturers beyond
6 . ) Source: MIT Sloan Review, Rebuilding the Relationship Between Manufacturers and Retailers (2013).
7 . ) Source: Procter & Gamble Annual Report (2017).
the terms in the contracts; and changing quantities or product-quality specifications at less than
three days’ notice, and without paying compensation to manufacturer. The figure below offers
- )
specific evidence of retail buyer power abuse and lack of adherence to codes of conduct, which
was covered in various news outlets.
SUPPLY CHAIN INEFFICIENCIES
High distances between manufacture and consumption. The average meal in the US travels
about 1,500 miles to get from farm to plate. This problem is relevant for many countries and
9
leads to acute financial and ecological consequences with significant adverse impact in the
long-term. Food miles, the distance food travels from the place it has been grown to where it is
ultimately consumed or purchased, increase significantly when buyers import food from other
parts of the country, region or world.
10
Waste in various areas of the supply chain. In distribution centers and on grocery store shelves,
food is being wasted. Every night, some perishable items must be thrown out. According to a
recent survey, 400 million pounds of food is served by supermarkets, yet nearly a third of it is
wasted annually. Unfortunately, current retail systems are designed to reduce stock-outs
11
rather than measure and manage food waste. Therefore, managers optimize to ensure food is
left over on the shelf.
12
INS will decrease food miles, enabling consumers to unimpededly access local
manufacturers, including farmers. INS will implement the effective "pull" system
to reduce inventories and out-of-stocks that would decrease the food waste.
TRADE PROMOTIONS ARE INEFFECTIVE, COSTLY AND OUTDATED
Grocery manufacturers spend up to 17% of their sales on trade promotions. Trade promotions
comprise a growing category of manufacturer expenses directed to wholesale and retail
distributors rather than to consumers. Manufacturers spend more than $500 billion on trade
promotions annually , and according to some reports 66% of that spend generates negative
13
returns and leads to higher grocery prices.
INS is targeting to replace trade promotions with a more personalized, direct
and efficient marketing, thus driving grocery prices down and facilitating the
effective direct interaction between manufacturers and consumers.
INS founders gained a first-hand and practical experience in the grocery industry while
developing and growing Instamart, the largest venture-backed grocery delivery operator in
Russia. Instamart employs over 200 people, has signed contracts with the largest retailers in the
country, and works with the leading grocery manufacturers.
Four years of operating experience in the grocery retail sector helped to identify major
inefficiencies and abuses in the industry’s current construct. INS pursue a large opportunity to
disrupt the global grocery retail market via establishing a decentralized and fair ecosystem that
directly connects manufacturers and consumers.
GLOBAL GROCERY MARKET
❖ The grocery market is one of the largest consumer markets in the world: it is expected
to reach $8.5 trillion by 2020 with up to 50% share of a customer’s wallet
❖ Grocery retailers have acquired a dominant market share and high concentration: up to
90% of the market in many countries is controlled by a handful of retailers
❖ The grocery industry is reaching a digital tipping point, with much of its growth
expected to come from online
A VERY LARGE MARKET WITH EXTENSIVE IMPACT
The global grocery industry is forecasted to grow at a 6.1% annually from 2016 to 2020,
reaching an estimated $8.5 trillion in 2020. The grocery market is a defensive one which
14
means that it tends to stay stable in good and bad economic times, given there will always be a
demand for food.
One of the biggest segments of retail and comprising a significant share of the consumer’s
wallet, the industry has a deep impact on grocery sector stakeholders, particularly
manufacturers and consumers. As an example of the consumer impact, the figure below shows
the portion of consumers’ household spending on food in a variety of countries.
ABSTRACT
This white paper explores global grocery market challenges, a technology paradigm shift
offering transformative potential, and the business and technical aspects of the solution INS is
developing for capitalizing on this potential. Highlights of the paper follow below:
The grocery market, one of the largest consumer markets in the world, is forecast to reach $8.5
trillion by 2020. It is reaching a digital tipping point, with much of its growth to come from
online. Online grocery, being the target segment for INS, is expected to grow from $98 billion in
2015 to $290 billion in 2020, according to IDG estimates.
Despite the tremendous growth, the grocery market has two large interrelated
problems - abuse by grocery retailers and ineffective trade promotions.
The grocery market dominated by retailers. Retail chains capture a very high share of grocery
revenue and have a huge influence over manufacturers, causing deep impact on consumers
worldwide. Retailers dictate what food is grown and how it is processed, packaged, priced and
promoted. As an example, in the UK, four retailers serve as a slim conduit for 7,000
manufactures to sell their products to 25 million households , which demonstrates how the
1
existence of retailer abuse in the grocery industry has not only been allowed to develop but also
thrived.
Ineffective, costly and outdated trade promotions practice. Trade promotion spending
represent 17% of manufacturer’s sales . Each year, over $50 billion on trade promotions never
2 3
reaches the consumer. Unfairness in today’s promotion-laden atmosphere go hand in hand with
the rising costs of promotions and the inefficiencies they produce. 95% of manufacturers admit
that trade promotions inefficiency is an extremely important issue.
4
INS is implementing a decentralized ecosystem enabling consumers to save up
to 30% on everyday shopping buying directly from grocery manufacturers.
5
Direct interaction between consumers and manufacturers. Bypassing retailers and wholesalers
means a more personalized and transparent grocery shopping experience at lower prices.
Сonsumers will be able to decide which brands they want and goods they need. We call it
“Consumption 2.0” since 21st century customers are tired from a one-way street type of
communication, whereby retailers push goods onto them that maximize retailer’s profit - not
what consumers really want. We also want consumers to have unimpeded access to
independent and local manufacturers, including farmers, that do not fit retailer supply chain or
procurement terms and can’t get their goods on retail shelves.
Enabling manufacturers to market their goods directly to the consumers. No more costly and
inefficient trade promotions grabbed by retailers and wholesalers. INS will enable
manufacturers to create bespoke marketing programs to reward their customers directly. These
programs run on smart contracts and powered by the INS token as a means of reward. It is
similar to miles-based reward programs of many airlines, but more advanced, cheaper to run
and personalized thanks to smart contracts behind them. This was hardly possible before the
blockchain and smart contract era.
INS has the prerequisites to perform an ambitious task of disrupting the grocery
industry based on our deep industry knowledge and confirmed interest from the
largest grocery manufacturers in the world.
More than 4 years of grocery industry track record. INS is founded by veterans of the online
grocery industry, using the knowledge and experience acquired since 2013. We have built strong
relationships manufacturers and gained valuable feedback from consumers.
INS received strong interest from both large and small consumer goods manufacturers in the
world. Selected logos of manufacturers that expressed interest to sign up (on a global or
regional basis) are provided below.
GROCERY MARKET CHALLENGES
ABUSES OF BUYER POWER BY RETAILERS
The global grocery industry is dominated by mass-market retail chains. At the national level in
many countries, a large share of the grocery market is frequently in the hands of few retailers.
While some amounts of buyer power are understandable and simply desirable for competitive
advantage, the high level of concentration causes a growing imbalance of buyer power within
the supply chain.
Exerting buyer power is natural when not abused. It is understandable that any industry
participant would seek bigger volumes as a tool for negotiating better prices. But retailers push
the limits of what is fair. Grocery retailers are perpetually and aggressively extracting better
terms from already squeezed manufacturers, going far beyond the benefits a player should
receive for attaining economies of scale.
Large or small, no manufacturer has enough power. Global constituents, such as Procter &
Gamble, Nestle, and Unilever, do play a role in the industry and have more negotiating power
than small manufacturers. Still, these companies simply are no match for the extensive control
retailers have on end-customers throughout the supply chain. For example, Wal-Mart’s sales are
approximately 5 times greater than those of its largest supplier, Procter & Gamble. Wal-Mart
accounted for 16% of Procter & Gamble sales in 2016.
Retailer buyer abuse extends beyond normal pressure. The explanation of this pressure is
abuse of buyer power. Such power allows retailers to determine what will and will not be
stocked, and on what terms, such as sources, quantity, quality, delivery schedules, packaging,
returns policy, and above all, price and payment conditions. Indeed, a supermarket company
wields an important bargaining chip, namely the threat to stop selling one or more products.
Evidence of retail power abuse - The Competition Commission in the UK, for example, did find
that major retailers enjoy a price advantage that exceeds the cost difference. Additional
departures from proper retail conduct included: delaying payments to manufacturers beyond
the terms in the contracts; and changing quantities or product-quality specifications at less than
three days’ notice, and without paying compensation to manufacturer. The figure below offers
specific evidence of retail buyer power abuse and lack of adherence to codes of conduct, which
was covered in various news outlets.
BLOCKCHAIN & SMART CONTRACTS
Blockchain is a shared-database technology, mostly popular for underpinning bitcoin digital
currency. It works with linked databases that update digital ledgers unceasingly.
Smart contracts are self-executing contracts with the terms of the agreement between buyer
and seller being directly written into lines of code. The code and the agreements contained
therein exist across a distributed, decentralized blockchain network. Smart contracts permit
trusted transactions and agreements to be carried out among disparate, anonymous parties
without the need for a central authority, legal system, or external enforcement mechanism. They
render transactions traceable, transparent, and irreversible.
The INS platform is designed as a very high-load system. The market potential for the INS
ecosystem consists of millions of users, each of them making dozens of orders per year. The
main focus is on performance, in which we seek smart contracts support, predictability, stability,
and ease of use. We plan to use the most proven and scalable open source technologies and
constantly monitor alternative technical implementations.
As the existing blockchain platforms such as Ethereum have inherent limitation in transaction
bandwidth (currently limiting to a dozen tx/sec), and prospective platforms and frameworks are
only in the development stage, we also consider designing and developing our own INS
blockchain platform in the future, where nodes are selected from a semi-trusted set of
supporters. Given the trust in the nodes, we will implement one of much faster consensus
algorithms from the BFT family (HoneyBadgerBFT/Zyzzyva/others), enabling up to thousands
transactions per second. A smart contract virtual machine will run on top of the consensus
algorithm. The state of the INS blockchain will be regularly anchored to the most popular smart
contract ledgers (at least ETH) so that proofs of state and proofs of transaction (within INS) can
be verified by Ethereum smart contracts (like it is currently done in BTCRelay or will be done in
the future in Plasma). Common optimization techniques such as state sharding and payment
channels will be also implemented.
BLOCKCHAIN APPLICATIONS IN INS
● Smart contracts
● Payments
● Supply chain management
Useful links :
Bitcointalk ANN Thread : https://bitcointalk.org/index.php?topic=2208591.0
Website : https://ins.world/
White paper : https://ins.world/INS-ICO-Whitepaper.pdf
Official Blog : https://blog.ins.world/
Official Telegram : https://t.me/ins_ecosystem
Reddit Link : https://www.reddit.com/r/INS_Ecosystem/
Twitter Link : https://twitter.com/ins_ecosystem
Facebook Link : https://www.facebook.com/ins.ecosystem/
Bitcointalk profile : https://bitcointalk.org/index.php?action=profile;u=1243626
Eth address : 0x70c3F234Fa177d5cE875D506EbDee43045560676