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LocalBanya.com: Shaping Online Grocery Market

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Rashi Choudhary, Co-founder & COO, LocalBanya.com, Mumbai’s first online supermarket, discusses growth plans following funding by an investing company, with Juhi Sharma.

LocalBanya.com has raised Series A funding from Karmvir Avant Group. How does this impact your business?

This cash inflow is a great vote of confidence in LocalBanya’s vision and empowers us with the resources to scale up operations, recruiting and marketing efforts which in turn will fuel growth. With the latest round of funding, LocalBanya.com has raised a cumulative $20 million in cash and kind since starting up in May 2012. In view of the recent Series A funding crunch across industries, this development is great news for e-tailing start-ups.

Karmvir Avant Group has recently made investments in several start-up food companies and IT projects. The deal with LocalBanya comes on the heels of BCCL’s Springboard investment in LocalBanya in July, 2013.The opportunity to Local Baniya.com was introduced to us by Delhi-based Highstreet Corporate Advisors.

How will the funds be used?

The funds will be primarily used for strengthening the company from the core. The priorities are technology development, logistics and operational infrastructure, talent acquisition for each vertical, and further strengthening the customer relationship management back-end. The remaining funds would be used for marketing communication and increasing awareness. We are intending to cap the marketing and promotional expenditure to 20 percent of the funds over this year. We will be adapting the budget every quarter based on performance. The funding will further accelerate the company’s growth and resonates with the brand’s entry into Thane and Navi Mumbai by mid-January and its presence in at least 2 more cities by mid-2014.

What are the current strengths of LocalBanya.com?

We are Mumbai’s first online convenience store since May 2012. We deliver a wide array of categories that include fruits and vegetables, exotic vegetables, groceries, personal care, household supplies, detergents, kitchen ware, breakfast, snacks, etc, besides exclusive products like goat’s milk and special interest products like Frozen waffles, Bake Shop, etc. Our site can offer the best prices due to a well-rounded sourcing process, negligible on-ground setup, and better inventory management processes.

The website processes around 400 deliveries every day with a team of over 100 employees. We are treating new locations as independent set-ups which are responsible for their own performance. Hence, the communication support received by the Thane and Navi Mumbai division is about 10 percent of our monthly revenue, which, we are confident, will grow to around 35 percent of our monthly revenue from the Mumbai region within a few months. Our sales and user base has been rapidly increasing month on month which is leading us to cementing our position as the preferred online grocery brand in Mumbai and start moving to additional metros very soon.

What new trends are you observing of late in the online retail channel?

In just over a year of operation, LocalBanya has seen some interesting trends in the online grocery buying behaviour. According to it, a sizeable (2.1 percent) of transactions are done by NRIs to have groceries delivered home to their kin in Mumbai, and 59 percent of the transactions on the site are done by women. 29 percent of the business is coming from restaurants, corporates, cooperative societies, and other institutions that require groceries in bulk (which the website aims to grow to a sizeable 35% by mid 2014). About 11 percent of deliveries are done between 10 to 12 pm. Senior citizens constitute a sizeable 14 percent of the customer base. Internationally online grocery retail is growing nearly 7 times faster than on-ground formats.

How much does bulk sales contribute to your sales and revenue?

Nearly 27 percent of our customers are bulk buyers. Currently, 85 bulk buyers are registered with us. These include restaurants, organisations and institutions. About 12,000 skus across 24 product categories are advertised on our website. Bulk buyers are important for us from the perspective of revenue and to optimise cost-efficiency of sourcing. The average bill for a B2B customer is around Rs 8,500 per order vis a vis Rs 1,550 for an individual buyer. While the margins are better in the retail segment, the institutional segment accounts for the topline.

How has the perception of online grocery shopping changed over the years?

E-grocery as a concept fills in a big gap. For one, grocery shopping is done as many as 4-5 times a month! Having it delivered to the house, and without having to carry all the bulk or needing to source from different stores, just makes it extremely convenient thus luring to the customers. Imagine the time and money saved by not making those supermarket trips.

Retailers are ready to go online because consumers are ready to buy online. Conventional physical retail does not fulfill all of customer demands and hence they come online for their regular grocery purchase. The key for any online business is the mobile space; with the growth of mobile internet, online retailers will see traction and growth. One of the winning customer value propositions for any online retailer is convenience through last mile delivery.