Chandigarh-based Fatafat is a hyper-local delivery start-up that combines the strength of its mobile app platform and the logistics capability of its parent Jugnoo – India’s leading on-demand auto-rickshaw aggregator. After a promising start in March 2015, the service got suspended after about eight months. It has been restarted recently, and Fatafat will now initially focus on fresh fruits and vegetables delivery, with plans to expand into other grocery categories later on.
In a candid interview with Progressive Grocer’s Namita Bhagat, Founder and CEO of Jugnoo, Samar Singla talks about the firm’s revamped business model, fresh strategy for its dream re-run and more.
What was the idea behind the launch of Fatafat, a mobile app-based hyper local delivery service?
Fatafat’s launch is in line with our vision of enabling optimum utilisation of resources through integration of technology. As we intend to create a logistics network for the mass market of India, and are currently using auto-rickshaws to do so, we want to tap this space in every possible way. With this launch, we are moving a step ahead towards realising this objective. Fatafat orders are delivered to customers through auto-rickshaw drivers, who are not ferrying passengers at that time.
The service was first launched in Chandigarh in March 2015 and continued operations for about eight months. Re-launching the service was in the pipeline ever since. We just wanted to be more equipped this time in terms of balancing the demand and supply side. The moment we felt we were ready, we launched ourselves into this space again.
What were the reason(s) for the withdrawal of operations after an eight month-long run?
The demand was huge when Fatafat was launched last year. We were receiving more than 1,000 orders in a day from over two lakh registered users. At that time, we were not ready to handle the deliveries at this scale as our network of auto-rickshaws wasn’t that evolved. Also, the service was spread across a wide range of products at that time and we realised that not everything in hyper-local delivery is profitable.
Hyper-local delivery business is still niche in India. Several known start-ups in this space are struggling. What’s your take on it?
Hyper-local delivery is basically a low-margin business. And the only way to ensure sustainability in this space is to develop an efficient and robust platform through technology that enables you to survive on that margin.
How has the business model been revamped and perfected for its second coming? Are your worried about its market reception and long-term sustainability?
In our initial phase, our product wasn’t evolved to a point that we could make the whole operations automated and efficient and hence we were burning money in a lot of places that we shouldn’t have. But now, we have come up with a much more integrated and efficient product to bridge the gap and streamline the operations. Also, we have decided to focus only on fresh fruits and vegetables (F&V) at the moment. This will make it easier for us to scale as we will have processes in place by the time we decide to expand into other categories.
Market reception is not something to be bothered about, as long as we are confident of our product and delivery quality.
What is the coverage area of your operations? Tell us about your ordering system.
The service is currently available in Chandigarh Tricity, consisting of Chandigarh, Panchkula and Mohali, and will be soon expanded to other cities as well. We are planning to launch Fatafat in Gurugram by next month.
Fatafat app is currently available on Android and iOS. To order products via Fatafat, users simply need to install the Fatafat app on their phones. They can search through various categories of fruits and vegetables available along with their prices and place their order. The order will be delivered to them either on the same day or the next day depending upon the time of placing the order as there are two delivery slots in a day, viz. 10:00 am to 2:00 pm and 4:00 pm to 8:00 pm.
Are there any plans to expand into other product categories also, like dairy or grocery/kirana?
Right now, we want to keep our focus exclusively only on fresh fruits and vegetables. But we do have plans to foray into other categories eventually. We will expand into grocery in the coming three to four months once we know the level of maturity of our platform.
What steps have you taken to optimise your logistics and supply chain capabilities? How do you plan to achieve minimum wastage rate, as you deal in fresh fruits and vegetables?
For logistics, we are utilising our already established network of auto-rickshaws and indulging in cross-promotion of Jugnoo and Fatafat to ensure supply across both platforms. We are using analytics to study user behaviour and trying to figure out common intersection points demography-wise.
We have two complementary channels working at the same time – B2C and B2B. B2B channel is operational throughout the day and the orders if cancelled via B2C can be utilized in B2B. Moreover, the supply chain is built and managed as such that the purchase and sale happens on the same day, thereby ensuring minimum wastage and maximum freshness.
Your company has also acquired SabKuchFresh to strengthen procurement and logistics. How would it help?
SabKuchFresh (SKF) is an online store that brings in fresh quality fruits and vegetables at the doorstep of the customers without making them go out to mandis, spend on petrol/diesel, get stuck in traffic, haggle with vendors, etc. The online store caters to Chandigarh Tricity. The products delivered by SKF are bought directly from the farmers and are hence free from any kind of pesticides or artificial ripening agents.
Jugnoo acquired the business in May 2016 and re-launched Fatafat in Chandigarh. SabKuchFresh is helping us in procurement, sorting, packaging and quality checks of the products. Indian consumers are generally averse to paying additional delivery costs.
What would be the service charge strategy? How many orders per day are you targeting?
Our average basket size is around Rs 400 and we do not charge any delivery cost for orders of or above Rs 300. Delivery charges are applicable for orders costing below that amount to justify margins. We expect to receive around 1,000 orders per day within a month.
What are your expectations as regards achieving break-even and turning profitable?
Fatafat is unit economics profitable from day one. On a city level, we will also be operationally profitable once we start receiving 500-700 orders per day, which we expect to do within a month from now. We will achieve break even in three to four months.
Would you be considering external funding route to scale up? Please share the expansion plans for the coming future?
Fatafat is a cash flow positive project and no separate funds are being raised for it. Though, preparations for Series C round of funding for Jugnoo are already in progress. The profit made from Fatafat will be used for our expansion across other cities in India. We are planning to launch Fatafat in about 30 cities in coming one year.