How would you feel if you get a van full of farm-fresh fruits and vegetables you wanted to buy at your doorstep just at the click of a button?
Well, it pretty much sums up what this Delhi-based delivery startup VegEase is doing -- sending you a van full of vegetables and fruits to choose from.While the model sounds interesting, it is capex-heavy, with the company buying and fabricating the vans. The cost incurred on each van is around Rs 3-3.5 lakh.
Idea behind the model
Arpit Katta, chief financial officer, VegEase, has an explanation. “It is not that you have to take whatever is delivered. Customers can pick and choose …the price is competitive and quality is ensured as per the requirement of the customer.”
“When customers see a cart full of fresh fruits and vegetables, they are tempted to buy more than what they ordered," he told Moneycontrol in an interaction.
In fact, when the van gets parked in a colony or society, passers-by also gather around it to make purchases, apart from the customers who had placed the orders in the first place, he said.
“For us, customer experience is everything, and that is why our focus is on assortment and timely deliveries. We are not here to burn money. So, we are very cautious on that front. Our focus is to invest in the core infrastructure to make it robust and we are aiming to become EBIDTA (Earnings Before Interest, Depreciation, Tax and Amortization) -positive by October," Katta said.
How does VegEase work
VegEase works with farmers as well as distributors for fresh produce and sources the products from across the country. While some items, such as leafy vegetables and fruits, are sourced on a daily basis, others like potatoes and onion are sourced and stored in warehouses for a longer period.
Currently, it has 85 vans, with 70-odd stock-keeping units, and plans to increase the number of trucks to 500 in Delhi NCR alone by May. Foray into other cities by March is also on the cards.
The company has set up a warehouse each in Delhi and Gurugram, spanning over 90,000 sq ft, and is setting up another one in Gurugram.
Owned and operated by Egreen Farms Pvt Ltd, VegEase was founded by Mayank and Rajiv Chaurasia in 2019. It has already invested Rs 10 crore and plans to invest Rs 20 crore before it reaches out to institutional investors for funding.
The journey so far
The company claims to have generated around 200 orders on a daily basis, with an average ticket size of Rs 500 thus far. While the company did not share the money it is making on these orders, it said operational costs involving maintenance and running of vehicles is not more than Rs 1,000 per day and that it is managing to break even on a unit level.
The online grocery market is regarded to be one of the biggest and is expected to grow to $18 billion by 2024.
The company is targeting a revenue of Rs 200 crore by March 2022.‘Too capital-intensive’
However, the VegEase model has raised some doubts. Serial entrepreneur K Ganesh, who has also invested in online grocery firm BigBasket, says:
“This model seems to be very capital-intensive as it requires investment in trucks, with one truck being sent for every order, even if it is small. People have tried sending trucks to apartments at scheduled times and they do decent business but to scale this requires a huge amount of capital. Having a store inside a large apartment complex makes sense, pure online like BigBasket makes sense - this model seems to require too much capital for not enough returns.”
“The basket size is attractive, it is also of high frequency since Indians want fresh fruits and vegetables, and so order multiple times a week. Having said that, the competition is also high as there are so many mom-and-pop grocery shops in every neighbourhood and they have gotten savvy. You can WhatsApp them and they will send you the order in 10-15 minutes,”For Katta, the pain point is not just delivery but also the consistency in quality, which takes a toss when grocery is delivered.