How Grofers Got Hit By The Train!
Grofers India Pvt. Ltd. is a mobile online platform that connects millions of households in India with retailers, local stores, and even greengrocers. A company that aims to be a one-stop shopping destination for all the daily necessities of consumers. Users can place an order of their requirements through the mobile app and receive the items at their doorstep. There is a wide array of groceries, fruits, vegetables, bakery items, cosmetics, flowers, electronics and much more. The stores need to get themselves enlisted on Grofers so that they are accessible to the customers through their mobile app.
The idea was brilliant and appealed to many. Even the likes of Tiger Global and Softbank pumped in millions of dollars! Grofers was a startup star and touted to be the next big thing in the Indian startup ecosystem. However, this Gurgaon-based startup that once grew at a scorching rate saw a series of disasters, and soon things began to go downhill. Today, after shutting down operations in 9 cities and struggling for survival, Grofers has become a case study on what not to do as a startup.
The e-commerce is witnessing a “coming to reality” phase. Unicorns like Flipkart are being questioned, and Snapdeal is struggling to get the next round of investment. However, it is the hyperlocal grocery businesses that have suffered the most. With a very thin profit margin, high logistics cost, exponential customer acquisition cost and immense competition, this business is becoming more difficult by the day. Grofers suffered from all of these and some really stupid decisions.
What just happened?
The model of acquiring customers at any cost and growth, by all means, put Grofers on a path to self-destruction. Below are some of the “secrets” to Grofers failure:
Inaccurate audience analysis
In its gambit to grow, the company did not objectively analyze the viability of the business in small towns. While someone in Delhi or Mumbai would be relieved to have a doorstep delivery of mangoes and ‘daal’, thanks to crazy urban traffic, a customer in Bhopal or Kochi would rather walk to the friendly neighborhood store and buy what he needs when he needs. In addition, there is credit extended by these small stores which online businesses don’t offer.
They hired more people than they needed, only to fire them later and incur bad publicity, damaging the brand image and harming any potential business. Same went for other resources, especially the huge advertising budget.
Grofers made the fatal error – they did not know their customer. While typically a tech savvy person would easily use an app to place an order, daily grocery is often ordered by homemakers and the elderly, who would rather pick up a phone and call. A majority of them don’t know how to use an app. And yes, English is a deterrent. This is the fatal flaw that is at the center of this failure.
However, Grofers is not the only one hit by a train. GetNow.at, a Nagpur-based hyperlocal marketplace for groceries, electronics, etc. closed its operations, after laying off 8 employees. One of the stars of the business, Peppertap, which raised funding from SAIF Partners, Sequoia Capital, and Snapdeal, shut down its operations due to unsustainable financial bleeding. In February 2016, Flipkart decided to shut down its grocery delivery section, just five months after the commencement of the service in Bangalore. Soon after, cab firm Ola withdrew its hyperlocal grocery delivery app named Ola Store.
It might take some time for the online grocery businesses to get their model right, However, it looks as if many would be hit by the proverbial train before that happens.
If you have any idea that can help Grofers to grow back in this service industry, then write in the comment box below.
Subscribe with us to get your dose of interesting news, research & opinions in the startup segment. Fill the form below:
[email-subscribers namefield=”YES” desc=”” group=”Public”]