In an exclusive interaction with Progressive Grocer, Founders of online start-up Grocerybag, Ayush Jain and Tushar Tyagi, speak about their unique business model of combining the best quality and most relevant assortment of wholesale markets with the convenience of online shopping…
When and how was Grocerybag conceived? What is so unique about its concept?
Despite having so many modern retail formats and now e-commerce, a majority of the population still believes in the quality and assortment offered by traditional wholesale markets. This is evident from the lakhs of footfall every day at markets in Delhi like Khari Baoli, INA, etc., where people flock to for their specialised or monthly ration purchases. Consumers are willing to brave inconvenience and high cost just for the sake of good quality. Even in our traditional business, which is about 200 years old, we have been supplying groceries from Khari Baoli to hundreds of customers daily across Delhi-NCR on a chargeable delivery basis.
Through our online outfit Grocerybag, we have been addressing this gap by combining the best quality and most relevant assortment of wholesale markets with the convenience of online shopping.
Grocerybag.in was conceived in July, 2015. What differentiates us is that we are a specialised grocery supplier, and our operations are augmented through a convenient technology platform. This is quite different from a technology company supplying groceries. We know what we sell! We have a strong network of specialised wholesalers rather than general stores, carefully selected by us, who help us in maintaining an on demand inventory. The model allows us to maintain a consistent quality with minimum working capital.
In India, the online grocery market is still evolving. What scope does it offer to you?
Even though the macro trends are very encouraging for the sector – rising middle class, Internet and smart phone penetration, etc., – grocery on the whole has proven to be a challenging space for both organised retailers as well as e-tailers. However, given that the food and grocery market is estimated to become a $1 trillion market by 2020, there will be enough scope to grow provided we stay agile, adaptive and relevant to customers.
Tell us about Grocerybag’s current phase of developments? What are your expansion and growth plans?
We have successfully test marketed our product with a retention ratio as high as 40 per cent. We are continuously upgrading our platform to make it simpler for customers, adding new products and categories and at the same time streamlining our logistics. In the near future, we wish to set up another fulfillment centre in Delhi’s INA market and increase our gourmet offerings. For the long term, we would like to explore the possibility of an auto-hub model (where we set up our fulfillment centres in wholesale markets) in other tier 1 and tier 2 cities as well. Our vision is to be the most trusted edible grocery brand in India.
How are you going to achieve your marketing and promotional goals?
Up until now, we have been maintaining a lean marketing budget for the test phase. Most of it is being spent on the social media, google ad-words and direct mails. In future, we will engage in more offline promotion as well through print and radio.
Technology is integral to modern retail, more so for e-commerce. How are you leveraging technology at Grocerybag?
We believe technology should be enabling rather than intimidating, like in the case of Apple. From day one, we have maintained that the interface needs to be very simple and uncluttered for best user experience. No unnecessary banners, ads, filters. Recently, we developed a special category called suggested products for you on our webpage, which suggests products as per your past buying or browsing behaviour when clicked upon, rather than flashing like an ad and obstructing the user experience. We will soon be out with an app to cater to the needs of our regular users.
Modern F&G retail is gradually moving towards omni-channel. What are your views on this?
Indian customers are buying their groceries from a multitude of channels – daily needs (fruit vegetables, dairy, etc.,) from local stores, monthly ration from supermarkets or traditional markets. There isn’t and can’t be a one-stop destination for grocery shopping. Thus, omni-channel is a natural progression and will ultimately be a reality. Even at Grocerybag, we believe the online portal is just one mode of shopping. In the future, we wish to make it an omni-channel model by tying up with small retail stores, and supplying through a hub-and-spoke model, supported by our comprehensive online product catalog and fed by the mother branches in wholesale markets. Thereby, customers can shop in the way they want – online, offline or a combination of both.
How do you view competition from offline retailers and other online players?
Competition is good. However, it’s a challenging sector with lots of e-tailers and organised stores closing their shops lately. We believe that whatever be the format, you need to fulfill the customers’ needs in the best possible way. Google wasn’t the first search engine nor Facebook the first social networking website. We have thrived in our traditional business and continue to do so because of our strong sense of market and customer understanding. We derive our efficiency from both the unorganised and organised sector and that is quiet unprecedented in our view.
Big e-tailers are also offering grocery. As a start-up, what are your key concerns as they are also eyeing the grocery market?
We have a rich heritage, we understand the customer and the market like nobody else. Lately, this segment has attracted lots of VC funding, which has been unduly utilised for deep discounts and marketing. However, over the long run, such price-driven models will be rendered unsustainable and only those models will be successful that can retain customers profitably.
What are your plans to raise capital for growth and expansion?
We are in talks with couple of VCs and are hopeful of closing on the best one soon.
What is your business model and how do you think it is suitable for scalability?
We have an asset light model – where in like an auto-hub we plan to set up our fulfillment centre close to our vendors (in this case in wholesale markets) – then carefully select both organised and unorganised wholesalers/distributors for different product categories. We procure from them on on-demand basis while maintaining full control over packaging and delivery. This allows us to provide consistent quality while maintaining limited working capital and higher profit margins. This model is highly scalable as it caters to both standard as well as localized food item demands with minimum investment.
How tough or easy was it for you to convince the investors and meet their expectations?
We are still in the process but the response has been very encouraging considering that we have a strong domain background, robust vendor network, and a profit-driven approach.