Grofers growing at 25% every month; can it survive against BigBasket, Amazon, Flipkart?

The jump from on-demand delivery to inventory-based model is working in e-grocer Grofer’s favour. In a struggling online grocery industry, where many start-ups like LocalBanya and PepperTap are shutting shop, the Gurgaon-based etailer Grofers is growing from strength to strength.

Change of strategy helped

The online grocery start-up commenced its business as a hyper-local delivery firm. But the mounting losses compelled them to rethink their strategy. In FY 2015-16, Grofers’ loss amounted to Rs. 225 crore and revenue was only Rs. 14.3 crore.

In February 2017, the company transitioned into an inventory-based model and launched its own private labels. This helped Grofers to increase its sales and earn better margins.

Grofers’ CEO Albinder Dhindsa said,

“Now because now we own our inventory and private labels, we are able to drive pricing more aggressively… since then (February) we have seen a study uptick in sales.”

Outcome of Grofers’ inventory model:

• Monthly sales is currently at Rs. 65 crore and increasing at 20-25%
• Presence in 26 cities and delivers  around 15,000 orders daily, with an average order size of Rs. 1,300
• The grocer expects monthly sales to touch Rs. 80 crore by December 2017

• Improved service level and increased repeat purchases (80%)

“Most of our focus now is towards managing the growth we are seeing and providing value to our customers through our products. We have been growing 20-25% every month. We are doing Rs65 crore gross monthly sales and trying to add another Rs. 8-10 crore every month,” affirmed Dhindsa.

How will it compete with the biggies?

In April this year, there were rumours that Grofers might merge with e-grocery leader Big Basket. But there have been no updates on that front.

What’s changed in the last few months is that online marketplaces Flipkart and Amazon are looking at grocery with great interest. While Flipkart launched its pilot project in July, Amazon declared that it is one of the fastest growing businesses for them.

Besides Amazon, Grofers and Big Basket were looking to get FDI nod for food retailing. In July the Bezos-led company got government’s approval to invest in food retail in India. And the ecommerce biggie is all set to launch its food business during Diwali.

Grofers too got the approval but they have decided to wait until they get complete clarity.

“The reason is that there is still some clarity awaited on the definition of ‘foods’—what items constitute ‘food’… but with FDI (foreign direct investment) allowed in this sector, we hope to see a lot more investment in food supply chain,” Dhindsa stated.

Big Basket is on a business high as well because Paytm and Alibaba might invest a whopping $200 million in the company. Looking at all these developments, would it possible for Grofers to sustain its business in front of Flipkart, Amazon and Big Basket?