Amidst crumbling hyperlocal industry, Grofers attempts to turn profitable

Hyperlocal delivery company Grofers is planning to attain profitability at the earliest. In the midst of the volatile online grocery industry, the company is looking at breaking even before it tries to grow the business.

In the words of CEO Albinder Dhindsa,

“Before we go after growth again, we need to figure out what is making money for us, where we can see growth and where we cannot.”

He says that the company is working on improving its tools and general performance to work on profitability,

“We are fixing things like brand monetisation, building tools for our sellers to monitor performance, and improving our delivery utilisation.”

The rocky fortunes of the online grocery industry

The hyperlocal delivery sector has immense potential for growth, according to a TechSci study. However, in the recent past, Ola, PepperTap, LocalBanya, and Flipkart’s Nearby have downed their shutters. Grofers has not had it easy either; the company had to wrap up its last mile delivery in nearly 9 cities early this year. The company also had to let go of nearly 200 hundred employees. It has automated about 93% of its activities to reduce costs, and with the result, has reduced its manpower.

Grofers’ average order size has gone up from Rs. 600 to Rs. 1,000 in the past six months, and it expects roughly 20,000 to 30,000 orders in a day. Dhindsa says,

“Our gross merchandise value (or gross sales) hasn’t dropped although our number of orders has come down, but costs have come down dramatically.”

Dhindsa says the company is aiming to grow at 5% each month.

The hyperlocal grocery industry is lucrative; people will need their monthly groceries. Gadgets and apparel can be termed as luxury compared to provisions. Despite the opportunity, why are companies unable to sustain themselves and drive a good growth? Grofers is probably looking at building a stable enterprise before it thinks of expansion. Perhaps others could take a leaf from their book – establish yourself in small scale before you expand.