From PepperTap to LocalBanya: The grocery start-up failures of 2016

Newer players claim to have learned from the mistakes of their predecessors, reports Tech in Asia

Hyperlocal grocery delivery start-up PepperTap has the dubious distinction of being the biggest failure of 2016. The Gurgaon-based start-up had raised over $50 million, including a $36 million series B round led by e-commerce player Snapdeal in September last year. And yet, less than a year later, it shut down.

“We operated on a negative margin per delivery, and in such a scenario, the path to profitability looked very distant – at least two to three years,” PepperTap founder and CEO Navneet Singh told Tech in Asia. It’s not the only one: LocalBanya, which raised $5 million, also floundered and bit the dust. A third significant flop was GrocShop.

Essentially, grocery delivery start-ups have been ‘buying’ customers, who pay no convenience fees to get the groceries delivered to their doorsteps. Also, when a discount is offered to acquire more customers, it’s the local retailers who grab the cheap groceries from these apps.

The bigger players hope to offset the cash burn with scale, but that has run into problems too. The well-funded Grofers forayed into tier-2 cities but had to beat a hasty retreat when the cost of acquiring customers skyrocketed.

Newer players claim to have learned from the mistakes of their predecessors by maintaining a sharper focus. Milkbasket, for example, which raised seed funding days after the closure of PepperTap, started with just one product and confined itself to the tech hub of Gurgaon.

The leading player BigBasket, which is also one of the earliest in this space, has adopted an inventory-based model by sourcing, stocking, and packing its grocery. This is a deeper play than those jumping in to connect suppliers with customers.

This is an excerpt from the article published on Tech In Asia. You can read the full article here.