Grofers and other startups like PepperTap, ZopNow and LocalBanya are challenging established grocery retailers by delivering groceries from neighborhood stores within hours. They have raised hundreds of crores in funding, pursuing a hyper-local strategy through partnerships with local grocers. While this model saves on capital versus warehouses, established player BigBasket maintains an advantage with its inventory control and fill rates. However, valuations of hyperlocal startups are soaring as consolidation begins in the hotly competitive online grocery segment.

1. RACING TO DELIVER
In India's hottest ecommerce segment--on-demand delivery-a slew of
startups are bagging tonnes of money as they challenge the
established models of larger and older companies, find Evelyn Fok &
Aditi Shrivastava

3. Contd..
Albinder Dhindsa and Saurabh Kumar were bouncing off business ideas two years ago
when they observed how while ecommerce had transformed India's retail sector for
electronics and apparel, grocery was a different ball game customers made repeat
purchases every week, and yet only a few online players were able to crack the segment.
“The experience of a customer buying a lot of groceries online is not that great,“ said
Dhindsa, 32, former head of international operations at Zomato who cofounded online
grocery delivery startup Grofers along with Kumar at the end of 2013. “If we standardized
(grocery sales), it would really disrupt the way local retail is done right now.“ Dhindsa and
Kumar had been colleagues previously at another company.
Fast forward to 2015, when Grofers and its peers PepperTap, ZopNow and LocalBanya have
raised hundreds of crore in what has become India's hottest ecommerce segment. These
startups run on a simple model: They deliver from neighbourhood stores for a fee and do
not own any inventory, posing a serious challenge to pioneering Internet grocer BigBasket,
which sources and maintains its own inventory.

4. Contd..
Groceries and household staples represent the last challenge to bringing India's retail sector online
a $338 billion industry that makes up 69% of India's retail wallet and which has established supply
chains that are particularly difficult to disrupt. Delivering food and other perishables at scale is
fraught with difficulties and is capitalintensive. Stock-keeping units, or product lines, figure in the
tens of thousands, and have special requirements for storage and delivery. Such hurdles exist even
for the new wave of online grocers, who pursue a hyper-local strategy through tie-ups with local
grocers and promise to deliver within an hour or two.
“You have to set up the right kind of infrastructure for cold chain products and fresh produce, which
are temperature-sensitive. You also have to get across enough range and rates to make sure you can
deliver all the products to consumers,“ said Karan Mehrotra, cofounder and chief executive of two-
year-old LocalBanya, which sources from local grocers and packs the goods in a central facility for
dispatch.
Bengaluru-based BigBasket, founded in 2011, has had a stronghold on the online grocery segment
with a warehouse-based model that guarantees control over customer experience and allows for a
nearperfect fillrate, a measure of how effective it is in fulfilling orders. “Single point stocking helps
control shrinkage and write-off, and direct buying helps us with advertising income,“ said Hari
Menon, cofounder and CEO of BigBasket, who previously cofounded Indian ecommerce pioneer
Fabmall.

5. Contd..
Even so, BigBasket, too, is buying into the hyperlocal strategy. Recently, the
company announced partnerships with 1,800 neighbourhood stores across
the country to deliver goods in under an hour.The stores double as pick-up
points for customers.
“Customers buy most of their monthly needs in the beginning of every
month, followed by `top-ups' through the month. It is very unlikely that this
behaviour is going to change, unless you throw money at it,“ Menon said.
While BigBasket is still far ahead of the pack it receives more than 10,000
orders a day, compared with an average 1,000 or fewer for its younger rivals
the valuations of new-age grocers have soared disproportionately. Grofers'
valuation tripled to about `728 crore in six months; BigBasket is valued at
`1,519 crore.

6. Contd..
Their hyper-local business model is lauded for saving not only time but also capital ZopNow
has been able to expand to three more cities spending less than $20,000 (`12.6 lakh) at
each.This also translates into benefits for customers, said Mukesh Singh, the company's
cofounder and CEO, a PhD dropout from the Massachusetts Institute of Technology who
previously held top positions at MakeMyTrip and Amazon India.“Our warehouse was
carrying around 10,000 products, but HyperCity stores (ZopNow's onground partner) carry
over 100,000,“ he said.Amazon's grocery initiative does not hold any stock either. Its
recently launched `Kirana Now' programme allows neighbourhood stores to list their
inventory on its website.
“The next generation of ecommerce is hyper-local mobile commerce for frequent-use
cases such as groceries and food,“ said Shailendra Singh, managing director of Sequoia
Capital India, which backs PepperTap and Grofers as well as their American counterpart
Instacart. “Larger portfolio companies such as Ola and Zomato focusing on hyper-local is
further validation that this is a very large opportunity.“ Several brick-and-mortar retailers
like Aditya Birla, Spencer's, and Trent have been expanding in the space, but their collective
losses crossed Rs 13,000 crore in fiscal year 2014, according to credit rating agency Crisil.
Reliance Fresh has launched online grocery delivery in Mumbai.

7. Contd..
BigBasket, which also sells its own brand of staples online, has been able to maintain profit
margins above 20% and is on course towards profitability, said Menon. Newcomers in pure
logistics plays, where margins are thinner at between 2% and 4%, have to play to their
strengths and scale up quickly.And experts say, unlike with online marketplaces that can
afford to compete with each other with deep discounting, the online grocery battle will
have to be fought also with product quality and range, packaging, delivery times and
customer service.
Consolidation has already started in the segment. Grofers bought Gurgaon-based
competitor Mygreenbox earlier this month. Offline gourmet retailer Godrej's Nature Basket
recently acquired Ekstop.com as part of its online strategy, and has tied up with
ecommerce giants Snapdeal and Amazon to bring its offerings online. “When national or
regional players with a technological edge enter a smaller city, they can buy out local
players and get a ready customer base,“ said Seema Gupta, assistant professor of
marketing at IIM-Bangalore, who also cofounded industry newcomer YouMart.At the end
of the day, all players agree that the larger war being fought is on customer loyalty. For
now, all hands are on deck to figure out exactly how to keep the customer in the bag.

8. For details and bookings contact:-
Parveen Kumar Chadha… THINK TANK
(Founder and C.E.O of Saxbee Consultants & Other-Mother
marketingandcommunicationconsultants.com)
Email :-saxbeeconsultants@gmail.com
Mobile No. +91-9818308353
Address:-First Floor G-20(A), Kirti Nagar, New Delhi India Postal Code-110015