It’s Grofers vs BigBasket in the grocery delive...

It’s Grofers vs BigBasket in the grocery delivery app war

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Albinder Dhindsa knew it was Grofers’ last chance. So, when the hyperlocal grocery startup raised $120 million last year in November, instead of expanding operations, Dhindsa and co-founder Saurabh Kumar decided to shut shop in 10 cities.

A change in strategy, considering that in less than two years since its inception in December 2013, Grofers had expanded to 16 cities.

Media reports signalled this as the beginning of the end for Grofers, a technology platform where retailers host their inventory, and buyers use the Grofers app to buy fruits, vegetables and grocery.

The perceptions were not un-founded. Since 2012, more than 50 e-grocers had mushroomed in India, but by December 2015, few were left standing. Even the big boys of e-commerce dared not venture too far into the space. Flipkart started Nearbuy, but closed it in five months; Paytm’s ZIP never took off; OlaCabs burnt its fingers trying to get its drivers to deliver grocery.

But, Dhindsa and Kumar though otherwise. “We faced management issues to run so many cities… My manager in Chandigarh didn’t get time for one-and-half month to go to Ludhiana, which was also under him,” says Dhindsa.

They turned their focus on serving fewer cities better. So, even after shutting down in 10 cities, Grofers remained one of the top three grocery selling platforms in India. BigBasket and Snapdeal-backed PepperTap were the other two.

All three wanted the consumer to get rid of queues and parking hassles, and bring the basket to your doorstep. The opportunity was huge — online made up for just 0.1% of $320-billion domestic grocery market.

Death of PepperTap
Internet grocery is not an easy business – it needs deep pockets, large assortment, competitive prices and inventory management. PepperTap failed on most of these parameters. On April 22, 2016, Navneet Singh, co-founder of the 17-month-old startup, said in a blog post that the company will shut its grocery delivery operations.

The move to lure buyers with more and more discounts was bleeding the company’s balance sheet — PepperTap was losing money, sometimes as high as 70%, on every order. There were no signs of profitability, and the startup had become capital light. It had also failed to manage the inventory well, and it was difficult for customers to find everything they needed while placing an order. “Who will give $100 million? The investment climate has changed from what it was a year back,” Singh told HT a day after he wrote the blog.

Once PepperTap shut down, only two large players were left in the race — Grofers and BigBasket. Both companies are modelled differently but sell the same products — fruits, vegetables and things of daily need. Grofers is a marketplace (except for fruits and vegetables), and BigBasket has its own inventory and operates as a mega wholesaler.
Marketplaces essentially act as platforms connecting sellers and buyers, whereas in inventory-based models, companies own the inventories they sell.

Though the jury is still out on who will emerge as the winner, BigBasket, it seems, has won the first round. According to a report by Morgan Stanley in February: “BigBasket generated a gross margin of 19.5%.” The company also raised $150 million from Pakistan-born Arif Naqvi Abraaj Group.

A bigger basket
BigBasket decided early that it will become a wholesaler to a bunch of retailers — one or two in every locality. There are 1,000 such retailers on its platform.

The order is placed on BigBasket, and based on the location of the order, it is forwarded to the nearest retail partner, who does the delivery. BigBasket just supplies to these retailers.

“We have tied-up with farmers for fresh fruits and vegetables. We also have partnerships with over 800 companies,” says Vipul Parekh, co-founder, BigBasket. It has tied up with over 1,000 farmers. Grofers, incidentally, has tie-ups with 100.
Unlike BigBasket, which supplies to retailers, Grofers relies on retailers’ inventories. “We are bringing the local market to your phone, but there is lack of inventory,” says Dhindsa.

So he decided to remove retailers who were not performing well. In two years, Grofers almost halved the number of retailers on its platform — from 18,000 to 9,800.

Grofers is tying up with brands (140 of them) to ensure availability of products. It also runs special schemes with brand — Nestle was running an offer on curd, Patanjali had another one for ghee, along with Kwality Walls and Fortune. Working with brands also helps Grofers earn marketing money as it offers banner ads for promotions. The company has even started building cold chains to carry perishable items.

A higher average order size is critical for any internet grocer, as net margins are low in the business. A vast assortment is needed to make money. BigBasket deals in 20,000 stock-keeping units (SKU), or unique products. That has led to a higher fill rate of 99%, which means when a customer orders, she gets 99 out of the 100 things ordered.

For Grofers, the number is 94-95%. “We are working to reach that level,” says Dhindsa.

Meanwhile, Parekh has set himself a target of a billion-dollar company by 2018. “For that We have raise money to increase our retailer base by 10 times,” he says.

Source:http://www.hindustantimes.com/business/it-s-gro...

7 Comments  |  
7 Dimers
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Deal Subedar
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Feel sorry and sad for peppertap. They allowed coupon code and cod, which was very nice. Feel like we shouldn’t have looted them that much.

BTW @DealSeeker i thought u will like to read about your bigbasket https://cdn1.desidime.com/assets/textile-editor/icon_biggrin.gif

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Deal Cadet
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I hope grofers win this match.

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Deal Subedar
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no bigbasket in Jaipur https://cdn3.desidime.com/assets/textile-editor/icon_sad.gif

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Deal Captain
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I think…bigbasket have better chance of survival as it has its own inventory compare to grofers with no inventory.

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Critic
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I have been a regular Bigbasket customer since January 2012 (launch) in Bangalore (3-5 orders per month). I have also placed 15-20 orders from Grofers. Grofers cannot compete with BB in terms of consistency of quality, product range, product availability and ease of return.

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Deal Lieutenant
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@enapster wrote:

I have been a regular Bigbasket customer since January 2012 (launch) in Bangalore (3-5 orders per month). I have also placed 15-20 orders from Grofers. Grofers cannot compete with BB in terms of consistency of quality, product range, product availability and ease of return.


Delivery guarantee too. Grofers won’t even mention in the order history page if it doesn’t deliver some of the ordered items,forget about an apology, while BB credits 50% extra without asking.

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Deal Cadet
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Experience of our family :
We had been ordering fruits and vegetables from both. Quality-wise, Gofers’ supplies had been better than Bigbasket.

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