Now, buying grocery is just a tap away

Your monthly grocery shopping has been made easy by these online grocers that promise free delivery and fresh products. With more players foraying int

While everything- from booking movie tickets, hiring a self-drive car to ordering food at your doorstep- can be done at the tap of an app, why not groceries? Your elderly parents would no longer need to visit any retail outlets or local shops to buy groceries, and no longer would you need to spend weekends at the departmental stores. Thanks to affordable smartphones and increasing internet penetration with 4G speed, there is a huge scope for online grocery players to serve and survive in the online grocery space.

The retail market in India is expected to hit $725 billion (about Rs 43 lakh crore) by 2017. Retail consultancy Technopak estimates the online grocery business to grow at a rate of 25-30 per cent y-o-y basis in major cities of India.

Many players forayed into the online grocery market, but only a few like BigBasket and ZopNow are able to survive. The new kids on the block like Grofers and PepperTap, among others, are keen to augment their expansion across the country, by tapping young and new talent. They also aim to raise fresh funds to employ many people to deliver products from the stores to customers.

Bigbasket sees big opportunities

The founders of Bigbasket initially started with a brick and mortar grocery chain named Fab Mart and then Fab Mall in 1999, and in the early 2000s. “In 2004, we had around 140 to 150 branches, and by 2006, the number went up to 204 in the South alone. It was then acquired by Aditya Birla group, and is now known as ‘More’,” says BigBasket co-founder Hari Menon.

In December 2011, Fab Mart founders launched Bigbasket in Bengaluru.“By 2012, we owned our own warehouses in seven cities. Thus we have our own inventory, and do not have to depend on other supermarkets for products. We have suppliers right from the big companies to farmers,” he says. BigBasket currently has its own brand called ‘Fresho’, comprising of meat, coffee, bread, cut veggies, and pani-puri. “They account for about 34-35 per cent of business value. Apart from fruits, veggies, staples, and meat, we also deliver FMCG products,” he informs, adding our margin is about 22-23 per cent.

BigBasket has four models of delivery — full service model, one hour express delivery, Speciality stores and Reaching the tier-2 cities — to meet various needs of customers. “This full service model is being operated in eight cities, and we are planning to launch it in Ahmedabad and Kolkata. This is in layman’s language — monthly shopping. One hour express delivery is currently being operated in Gurgaon. It is for those who need only a few products on urgent basis and we term it as ‘top-ups and emergency requirements.’ Apart from this, people also shop perishable products on a weekly basis like veggies and fruits. These are also delivered in an hour. Our aim is to enable this express delivery system in all the eight cities by the end of the year,” explains Menon.

Talking about Speciality stores, he says, they are generally called as pet stores,  i.e, customers’ favourite store, which they visit to purchase a specific product. “We are aiming to launch this in all the eight cities. Our last model is ‘Reaching the tier-2 cities’. Our aim is to reach 20 tier-2 cities by the end of the year. The products will be transported from the main warehouse of tier-1 to the warehouse of tier-2 over-night. Currently, we have a warehouse in Mysore,” he informs. BigBasket has about seven lakh customers, and it gets around 26,000 orders every day. “We expect a turnover of around Rs 1,200 crore this year, and last year the turnover was about Rs 210 crore,” he said.

Four-wheelers to deliver groceries

Another player ZopNow began its operations in 2012 at Bengaluru, and now it has presence in Hyderabad, Pune, Mumbai, and Delhi. ZopNow co-founder Mukesh Singh says the consumer value proposition has not changed ever since they started.  “When we launched ZopNow, we used to have our own warehouse, where we used to stock our stuff. We purchased milk, wheat, rice, shampoos and everything from HUL or PNG. Only in the mid of last year, we started experimenting with the offline thing and earlier this year, we had shut down our warehouse. Over the last seven to eight months, we have been running without managing the inventory as such,” said Singh. It has tied up with Hypercity, which comes under the umbrella of Shopper’s Stop, and More.

ZopNow delivers groceries from 7 am to 10 pm. “In the grocery space, we almost carry 3,000 products, from rice, vegetable to milk, butter, mushroom and broccoli. ” ZopNow uses both the two-wheelers and four-wheelers to deliver groceries at one’s doorstep. Four-wheelers are used for almost 95 per cent of orders that it takes. “Consider the weight factor. It is highly inhuman to use a two-wheeler to deliver groceries that weigh a lot. We prefer four-wheelers because they go right near the entrance of your house, and the delivery guy takes the 15kg pack, puts it in a trolley, and easily delivers it,” Singh says. During the rainy season, the volume of online grocery shopping goes up. “When we started, we used to charge a delivery fee of Rs 30 for a shipment bill of Rs 500. Now that the volumes have gone up, and our backend optimisation has kicked in, we have started actually free delivery. You can ever order a milk packet that costs Rs 22, and we will deliver it for free,” he adds.

Time does matter

PepperTap, an on-demand hyperlocal grocery delivery service, which started in December 2014, delivers groceries in two hours. “We have partnered with 220 odd  local stores. If the customer doesn’t like groceries, we take them back without even raising any question,” says PepperTap co-founder and CEO Navneet Singh, adding PepperTap’s margins are anywhere between 8-15 per cent. “The company is on track to end this financial year with gross merchandise value (GMV) run rate of over $200 million,” he says.
“Once a customer orders online, we go and pick up the items from the nearest merchant within four km radius and deliver them,” says Hyperlocal grocer Grofers co-founder and CEO Albinder Dhindsa.

Grofers is a lifestyle application company which deals with products such as grocery, fruits, vegetables, flower, bakery items, cosmetics and electronics. Grofers commenced its operations in 2013, and has its presence in 26 cities. It has tied up with over 7,000 merchants pan-India and has an assortment of over one lakh products.  With a manpower of over 6,000, Grofers delivery time is 90 minutes. “We charge a very small commission from our merchants. Margins vary from category and it is between three per cent and 25 per cent,” he says.

Challenges thrive

There are ample challenges in the online grocery space. PepperTap CEO Navneet says, “There are challenges as we participate with the unorganised sectors. Getting them to understand is one of the biggest challenges,” he says. BigBasket cofounder Hari Menon says, “As expansion is our main focus, getting people at the right time is the biggest challenge. Currently, we have manpower of about 50,000, and we expect to increase it by another 7,500 to 8,000 by the year-end.”

Investors show keen interest

Cashing in on the burgeoning demand for online grocery market, investors are lining up to invest in these firms. On October 13, 2015, BigBasket raised $25 million (Rs 164.8 cr) in its Series C-II funding. The investor was International Finance corporation. With this, its total funding stand at $120.8 mn.

Grofers has so far raised $45.5 million, including the latest Series B funding — $35 million (Rs 231 cr) — it raised in April 2015. PepperTap on September 29, this year, raised $36 million (Rs 237 cr) in Series B. Investors were Beenos Partners, JAFC Asia, ru-Net, SAIF Partners, Sequoia Capital India and Snapdeal. So far, it has raised $48 million. Zop Now has received $10 million (Rs 66 cr ) in Series B in April this year, from various investors. With this, its total funding stand at $10 million.