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BLOG: Online grocery in India finally takes off

From the CEO's desk

Online grocery in India finally takes off

1st October 2015

Hello Everyone!

Hope you are watching the amazing growth of online grocery in India. If not, then below are few updates -

"The world has changed radically for online grocery startups in India. Three to four years ago the buzz was around grocery sites shutting down. Now, the survivors and new entrants are thriving. The VC backed five online grocery startups in India have collectively raised over $120 million just this year." - reads a 2 days old news article. To understand this better we need to have a look at current figures and targets of well funded startups.

As per various reports - The online grocery startup Bigbasket was clocking approx 4,000 orders/day at this time last year and today they are getting 20,000 orders/day. It took 3 years for them to reach at 4000 orders/day and then just 1 year to reach at 20,000 mark (the run rate of ~Rs 1,000 Cr). They expect $1bn (Rs 6,200 Cr) revenue by the end of FY 2017. Of course they can do it easily with approx $110 Mn funds received so far + $150 Mn fresh funds target for their investment bankers. In terms of valuation 1 year ago it was Rs 1,000 Cr for Bigbasket and in their recent round of funding it was valued at $400 Mn (approx Rs 2,500 Cr).

"Hyperlocal" is the new buzzword in Indian online grocery. The Model (inspired by Instacart - the recent highly valued online grocery startup in the US) in which they procure groceries from local retailers and deliver to households. Hyperlocal startups PepperTap and Grofers have got approx $45 Mn each so far. PepperTap raised $36 Mn a couple of days ago from existing and new investors including Snapdeal, and is about to raise $20 Mn more in next few weeks. After just 9 months of its launch PepperTap claims to have similar number of customers and daily transactions which Bigbasket has after 4 years of operation. The exponentially rising number of smartphone users (apart from the flat 20% off weekend deals!) in India has fueled this growth.

Among different models, inventory-led is the model followed by Bigbasket, which has high setup cost but offers better control over the inventory. Inventory-less model which is followed by all hyperlocal delivery startups and few others including MileStores has less setup cost, but often it is challenging to run on someone else's inventory if there is lack of technology & processes, which is often the result of lack of experience that comes from lack of dedication and patience - in this complex, execution oriented business. While the hyperlocal model of PepperTap and Grofers has some fundamental flaws in it, at present they don't seem to be addressing even the basic operational complexities of online grocery. They might have to change their models drastically in future when they would want to see profits. How customers respond to their changed models in future will be interesting to see.

Though funds are essential to succeed, just getting funded is no guarantee of success. The market and business models are evolving and it is tough for a VC to identify the right model. It is always the situation in hyper-growing markets and that's the process of ultimately discovering the right models - which sustain due to the strong foundation laid during their initial years of operation.

With close observation of the market, daily track of different startups and own operating experiences - MileStores is by the day becoming more confident of disrupting the online grocery market with its strong business model, innovative technologies and processes - which is the result of 3 years of persistent efforts in this segment. The consistent support from our "sourcing partners" has certainly played a great role. With the support of all we have reached at the inflection point and are hopeful to surprise everyone soon with the amazing potential of MileStores!

Thank you!