Gurugram-based grocery delivery start-up, Grofers is planning to expand its presence and to consolidate its position further in existing markets.
Co-founder and CEO, Grofers, Albinder Dhindsa told Indiaretailing Bureau in an exclusive interview at India Food Forum 2017, “Earlier, we had shut down operations in 9 cities but we have restarted services in five of them in 2016. Currently, we are in 22 cities. And now, we are on track to open in another 32 cities in next one year. So, there will be regular roll-outs happening every quarter.”
He further added, “We are also increasing our assortment and opening more centres across the country.”
At present, Grofers sells 4,000 unique SKUs on its platform in every city, but the mixture may vary and overall, the grocery delivery start-up has 14,000 SKUs.
Weaving a Success Story
There was a time when despite starting with a bang many food-tech startups failed to reach the desired heights and were forced to take the harsh decisions of either shutting up their shops or merging with the big fish in the market.
However, the scenario is changing now. The start-ups have started realising their weak points and have started working on them making a strong hold on the market.
Dhindsa revealed, “Food-tech startups were incurring very heavy losses because there was a lot of competition in the market which was driven by external funding. In that scenario, most of the companies were spending a lot of capital to survive. But over the past year and a half there has been a lot of rationality in amount of external funding coming into the market. So as a result, the competition has gone down and that has allowed a lot of companies to be a lot more sensible about their business models. Now they have started looking five years down the line and started overseeing the business that they want to build and as they have started doing that the losses have started coming down and they are not forced to take the rational decision just for the sake of growth.”
Grofers was also no different. The grocery delivery platform was clocking losses of Rs 24 lakh per day in July while the business was reporting revenues of Rs 16 lakh a day. So in an effort to bring down losses, Grofers changed its business model.
Sharing how Grofers regained its market position Dhindsa revealed, “We have cut our burn by almost 70 per cent by moving to inventory-led model, by not doing things which are not scalable and by not investing in marketing at a very large scale which is something we were forced to do two years ago.”
He further explained, “We do not lose money on every order any more. The reason behind this is that we are not as hyperlocal anymore, about 90 per cent of our orders are scheduled orders which are delivered within 24 hours to the customer and one of the biggest drivers of profitability for us at our order level is the increase in average order size. So, when we were delivering from local store, our average order size was around Rs 600 whereas now it has increased to Rs 1,200 per order.”
Currently, Grofers is delivering 17,000 orders per day.
Scaling Up Efficiency
To scale up the efficiency further, Grofers also started betting big on next-day delivery instead of express delivery as express delivery is a highly capital intensive exercise.
Explaining it further Dhindsa said, “Next-day delivery is the most lucrative as the cost of delivery is lowest but what the customer wants is much faster delivery. While most of our business is next day delivery but we have introduced express delivery again through partner merchants in order to see how can we make it more viable.”
Grofers also introduced its own private label brands – Best Value and Premium Value to ensure regular supplies and better margins.
“These are white label brands for staples – one is for the value conscious customer whereas the other offers premium products which includes organic and gourmet products. These brands contribute 20 per cent to the overall business whereas the highest margin category for Grofers is fresh fruits and vegetables which contribute about 30 per cent of the business.”
No Plans To Merge
According to a renowned media house, Grofers was exploring an opportunity to merge with BigBasket to consolidate its position further in a cash-guzzling consumer Internet economy.
However, Dhindsa brushed off the speculations saying that the brand has no plans to merge with any player.
“We are not merging with BigBasket. We have no plans to merge with any other player as we have enough capital to sustain on our own and very soon we will also be hitting the break-even,” he added.
Grofers, which gets 10 per cent of its overall orders from its website, is eyeing to hit the operational break-even by July 2017.