Escorts’ Traxi bet
The tractor and farm equipment manufacturer is trying to transform itself from a pure-play product firm
The farm gear manufacturer is trying to transform itself from a pure-play product firm into a service company. SANGEETA TANWAR writes SPECIALS
With the launch of Traxi, a service platform to aggregate farm equipment (including tractors) demand, Escorts Ltd is hoping to transform itself into the next Uber/Ola of the agriculture segment. Escorts’ rental service targets medium and small farmers who cannot afford to make heavy investment in an essential farming asset like a tractor.
Making a business case for launching the Traxi service, Shenu Agarwal, chief executive, agri machinery (S&M) and emerging business at Escorts Limited, points out the country has about 5 million tractors. A lot of these tractors are deployed in a farm only for 500 hours a year. The rest of the time, they lay idle. At the same time, 85 to 90 per cent of farmers in the country own land holding below 5 acres and cannot afford to invest upwards of ~800,000 in a tractor. “With Traxi we are bringing value to farmers through aggregation of demand for farm equipment including tractors. The business proposition is that those who own tractors can rent out their machines, make them work for more hours and earn more money. In a sense, we are offering marginal farmers affordable tractor services,” explains Shenu.
The goal is to make farm equipment affordable and bring in more precision to farm-related activities, thereby increasing productivity and crop yield for the farmers.
Seven months into the launch, the company is offering the service to farmers in select clusters in states such as Haryana, western and central Uttar Pradesh, and Madhya Pradesh. The phased launch has given the company some interesting insights.
For instance, the company initially urged farmers with tractors to come on board and upgrade to smartphones to stay connected. Over time, the team realised many of the farmers were either simply reluctant or dropped out of the ecosystem as they failed to upgrade to smart devices. Post this experience, Escorts offers smartphones to farmers who owned tractors to facilitate their integration into the ecosystem.
The company offers a wide array of services and farm equipment starting from ~400, going up to ~2,500. Depending on the nature of the job and the type of equipment in use, it charges farmers on per acre or per hour basis.
Now the issue of revenue share. Shenu says as yet no fixed revenue model is in place for the Traxi service. It varies from market to market and is dictated by the farmers’ ability to pay and local market conditions. For instance, there are regions where Escorts follows a subscription model charging ~10,000 from farmers instead of going for a revenue share model. In other places, the company takes a fixed amount from the total revenue generated from renting of tractors. There are markets where the team collects money on behalf of tractor partners directly from farmers availing of the services. A flexible revenue model is aimed at widening the net of Traxi and ensuring the service continues to be affordable.
One of the key challenges that Escorts faces is tweaking its processes to adapt to a service culture.
Rini Dutta, co-founder and principal, Centric Brand Advisors, says consumers evaluate a product company on certain factors like product quality, functional benefits, brand value etc. When an organisation moves from being a product company into a services firm, an additional layer of evaluation sets in. Consumers begin to look at it through parameters like trust and security.
“The real challenge is to acquire soft skills to manage an ongoing customer relationship. With digital solutions on offer, the focus shifts to agility and speed,” says Dutta.
She points out that a legacy company like Escorts has a lot going in its favour: it enjoys a certain level of consumer trust, it commands great brand value, has expertise in handling big equipment sales and has experience in managing after-sales services. Given that, Escorts should find it relatively easy to manage unique and complex customer service relationships as it scales up the Traxi offering.
As of now, Escorts is working with own-brand tractors on the Traxi platform. Going forward, as the business scales up, the company plans to be brand agnostic.