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Last Updated : Feb 27, 2017 03:47 PM IST | Source: Moneycontrol.com

Grofers inks deal with Reliance Fresh, relaunches in nine cities

Grofers currently claims to be getting 11000-12000 orders on a daily basis with an average ticket size of Rs 1,000.



Gurgaon-based online grocery startup Grofers which last year suspended operations in nine cities has now relaunched those cities and plans to expand to 70 cities by April, according to a top executive of the company.


The company had let go off a large number of staff last year and was rumoured to be on the brink of a closure. However, the company has bounced back and has expanded to about 25 cities now.


Grofers currently claims to be getting 11000-12000 orders on a daily basis with an average ticket size of Rs 1,000.

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For smaller cities it has partnered with Reliance Fresh for an exclusive deal. Grofers will now generate orders for Reliance Fresh outlets and the delivery will be taken care of by the staff of the outlets.


"We have forged a pan-India partnership with Reliance Fresh. We are with them in 25 cities now out of which eight have exclusive Reliance Fresh partnership. We plan to take that to 70 cities by April. For all our smaller cities, we will be launching exclusively with Reliance Fresh," said Albinder Dhindsa, founder of Grofers in an interaction with Moneycontrol.


Dhindsa said the partnership with Reliance Fresh will help the company in maintaining customer relationship which would have been difficult in case of multiple partners. Grofers earlier did a pilot with Reliance in Pune, Bangalore and Mumbai before going ahead with a pan-India plan.


The Softbank backed startup will be earning a commission for every order it will generate for Reliance Fresh.


Back to TV advertising post demonetisation


Even as the bigger e-commerce players such as Flipkart and Snapdeal have cut down on TV advertising, the grocery startups have ramped it up. Demonetisation helped grocery startups as people found hard to transact in cash notes with local kirana stores who would not accept digital currency. Most grocery startups saw an uptake in demand.


Grofers has now also started a television campaign to re-engage with the lost customers. It plans to invest USD 3 million in the same over a period of six months.  Its bigger rival BigBasket has engaged Bollywood actor Shahrukh Khan as its brand ambassador.


"There was a period when we were changing the model, where we went from very hyperlocal to supply chain. So between July and September, we lost a lot of customers because the customer experience was not good. That only got fixed around December. The idea is to re-engage with the users," said Dhindsa. 


As compared to September last month, Grofers claims that its orders have grown almost 40 percent. The orders had fallen to around 8,000 per day in October. Grofers has raised about USD 165 million from Softbank, Tiger Global and Sequoia Capital so far.

Pivoting for survival in groceries

Started in 2013 by IIT-graduates Albinder Dhindsa and Saurabh Kumar, Grofers was earlier accepting orders from customers on app, collecting items from nearby stores and then delivering them by its own staff to the customers, mostly at a discounted price. The delivery would be done in 90 minutes.


With rationalisation in the hyperlocal logistics sector in India and more and more companies shutting shops owing to excessive cash burn, Grofers revised its model in 2016.


With an aim to reduce cash burn, Grofers is betting big on next day shipments. It has started to pass on the express delivery responsibility to the partner merchants.


Ironically, the company had shut down services in smaller cities citing lack of sufficient orders. It had also laid off about 10 percent of its workforce last year.


According to Dhindsa, the company's presence in smaller cities will give them a larger visibility in terms of brand acceptance.


He claims that almost 30 percent of its app downloads happen from tier 2 cities.


On the other hand, a small city such as Bhubaneshwar would not exceed more than 50-60 orders per day, he reveals.


The move by Grofers comes at a time when Gofers is preparing for a tough battle from Amazon which entered into the grocery space last year and plans to expand it to ten cities shortly.


Besides Amazon, Grofers is already facing competition from bigger rival BigBasket which essentially was working on planned and bulk purchases which consumers order at the beginning of every month.


These can also include weekly purchases which typically revolve around items with shorter shelf life such as milk, fruits and vegetables. However, now Big Basket too has flagged off its express delivery wherein it offers customers deliveries in 90 minutes.


Surviving a high cash burn model


Hyperlocal delivery startups are yet to become successful in India because of their high cost intensive model.

Grofers has skewed its model with partner merchants contributing barely 10 percent of the business. It claims to be getting 90 percent of its business from inventory model.


Grofers saw a tough year during 2016 when it received bad press for withdrawing job offers to students besides slashing its workforce. “It was one of the toughest decisions of my life,” he added.


Grocery and hyperlocal delivery sector overall saw a lot of turbulence with over 72 companies shutting shops in 2016 including Sequoia-funded PepperTap which had raised over USD 50 million.


About USD 125.57 million was invested in the hyperlocal delivery sector in 2016, according to startups data tracker Tracxn.

priyanka.sahay@nw18.com


(Disclosure: Reliance Industries, the parent company of Reliance Fresh, owns Network 18 that publishes Moneycontrol.com)



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First Published on Feb 27, 2017 01:35 pm
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