Is online food retail in the pink of health?

Is online food retail in the pink of health?

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The online food retail space, which has gained momentum over the past year with scores of startups taking shots at both grocery delivery and foodservice, is appearing to be struggling for survival already, as funding gets harder to come by.

On October 9, Bengaluru-based startup Dazo decided to shut down its operations less than a year after inception. Despite raising an undisclosed amount of funding in April from Google India chief , ’s country manager , Commonfloor founder Sumit Jain, TaxiForSure founder Aprameya Radhakrishna and former FreeCharge chief executive Alok Goel, the company decided to call it quits due to lack of capital.

“We were scaling up and were looking to get into more cities, but were short on capital. At some point we felt we were lagging behind other players and decided to quit,” Shashaank Singhal, chief executive, Dazo was quoted as saying.

The company had initially started as an internet-only restaurant and eventually pivoted to become an aggregator of selected restaurants.

The online food ordering business in India is estimated to be worth around Rs 5,000-6,000 crore, growing at about 30 per cent month-on-month, according to a report by India Brand Equity Foundation.

However, this segment is transactions-driven and companies pump in big money to acquire customers as against the margins, which are razor-thin. Not surprisingly, not all food-tech companies are doing well.

Just like Dazo, many other players in the food-tech sector are facing problems as they grapple with scaling, cash flows and productivity issues. Last week, Bengaluru-based online restaurant SpoonJoy announced that it was rolling back operations in the city and shutting down its Delhi operations. While the company did not comment on why it did so, some media reports points to cash flow issues.

Similarly, Foodpanda, the restaurant aggregator now owned by Rocket Internet is facing challenges in building its business after its co-founders quit. Talks to sell the company’s Indian arm are apparently being spearheaded by top executives back in Germany.

The latest to join this — currently minuscule — trend is grocery e-tailer .com, which has temporarily suspended operations as the company gears for a technology and services upgradation. However, speculations in the industry indicate that the company may actually be strapped for cash.

“Your banya is upgrading his technology and services. We will be back shortly with more exciting features and a far better delivery experience. We can’t wait for you to experience the new and improved Localbanya,” a message posted on company’s website read.

Watch this space for more on online food startups.

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