E-grocers struggle to get right model

NEW DELHI: Not too long ago, the online grocery business was the toast of the town. Today, some companies have shut shop, some are struggling, and some have even sold out. From a total of 40 companies, four years back, the number has come down significantly.

The latest casualty in the sector is Ola Cabs. India’s largest taxi aggregator is looking to shut down its online grocery business — Ola Store.

This comes a week after the country’s largest e-commerce company, Flipkart, closed down its e-grocery business.

“It is an experiment and continues to be one,” an Ola Cabs executive said.

“(Nearby) was a pilot project in select areas of Bangalore. The experiment was a test for understanding the hyperlocal business,” Flipkart said. “The project has run its course and the learning from this pilot will now be used for future operations.”

Thin margins have forced a lot of grocery delivery startups to shut shop in India.

Paytm started Zip, and piloted it in Bangalore, but the app was withdrawn almost as soon as it was launched. Amazon Now, too, is present only in Bangalore. Snapdeal has The Daily Needs Store, but it wasn’t marketed like other businesses. Instead it invested in e-grocer PepperTap.

Localbanya temporarily suspended operations last September due to fund crunch. Ekstop and at my doorsteps are some of the other firms that have closed down.

Online grocery needs a different business model — from ordering to delivery, and from stocking to building warehouses. It thrives on the delivery time. Satvacart, which claims to have broken even at the unit level, is present only in Gurgaon. “The grocery business cannot be run like a marketplace and be dependent on the offline grocery stores. It has to be an inventory-led model,” said Rahul Hari, founder and CEO of Satvacart. Also, the number of items in every order is much more than a regular e-commerce delivery, but each product is of lower ticket size. Even Grofers, the most funded of them, has started keeping inventory, after it shut operations in nine cities.

For BigBasket, one of the largest e-grocers in the country, the story is no different. On an average a basket has 25-30 items which need local sourcing, local cold chain and local warehousing in every city. “If you do not have inventory, you are no different from a courier company,” said Vipul Parekh, co-founder of BigBasket. “Operations have to be built city-by-city; you cannot go national in days.”

Groceries constitute 70% of the $600-billion Indian retail market.