Ola plans grocery delivery biz relaunch in early 2019 ahead of Uber's entry

Facing competition from Uber, Ola looks to recreate Grab and Dixi Chuxing's story

Ola is working furiously behind the scenes to relaunch its grocery vertical by early next year, according to three people with knowledge of the company’s operations. The ride-hailing firm’s new arm would use Foodpanda’s resources, including 125,000 delivery riders, they said, as it looks to gain a sizeable share of India’s $28 billion (Rs 2.06 trillion) online grocery ordering and delivery market. 

Ola did not respond to a detailed questionnaire on this issue.

Sources said the Bhavish Aggarwal-led firm had been working on relaunching the grocery delivery business for almost five months now. The aim is to get into the business before Uber unveils its grocery delivery service in India sometime next year. 

From being Lyft to Grab

For years, Ola has been known outside and within the country as India’s Lyft, which is Uber’s main competitor in the US. According to sources, the company wants to change this perception, as Lyft is a distant second in the American ride-hailing game and, though it has attracted investors, it has not emerged from Uber’s shadow yet. 

Ola wants to be India’s answer to Grab, which is into everything, starting from cab service and logistics to bike taxis and food and grocery delivery.   

Singapore-based Grab is also one firm that was able to elbow out Uber from SE Asia in a merger deal that left the US cab aggregator with a minority stake.

“Grab and Dixi Chuxing are two major companies that managed to merge with Uber and emerge as the dominant partner. Ola for the longest time has been trying to do this as well. This is now a new play, which will help Ola show higher number of transactions, larger gross merchandise value with an average ticket size of Rs 1,500,” said a source close to the firm. Ola, which is looking for a new set of investors as well as at least a billion dollars in fresh funds, hopes that the new pitch would help raise funds. Sources said Aggarwal, along with Pranay Jivrajka, the CEO of Foodpanda, was now full-time concentrating on the grocery business. 

What happened the first time? 

According to sources close to the firm, the company would use Foodpanda executives to deliver groceries during off-peak hours. In 2016, Ola had launched Ola Store and Cafe in a few neighbourhoods in Bengaluru and shut them down almost together. At the time, Ola Vice-President Pallav Singh was tasked with running the two verticals and they failed. 

According to a former executive of Ola, the firm had promised its customers that it would deliver groceries within a few hours. Once the order was placed, Ola deliverymen would scramble to neighbourhood stores, fetch the goods, pack them and deliver. Sometimes, it was one person who delivered the order, other times it was more. 

“This led to resource wastage and made each order expensive to deliver. There were further inefficiencies. Ola had managed to piece together supply of these FMCG goods across stores in the city. These stores offered Ola a special discounted rate. However when supplies got exhausted, Ola was forced to send its delivery personnel to supermarkets to buy at the full price, which made the business unviable,” said the executive.

Re-entering grocery

Sources said Ola was working on getting into a slew of partnerships with major retail chains as well as cash-and-carry biggies across the country. “Last time, not many players were interested as grocery delivery had still not seen much traction. It also saw companies such as Localbanya and PepperTap shut shop. Major retailers then did not show much interest in Ola’s grocery play. This time around with Amazon India buying stakes in retailers such as More, Walmart launching grocery vertical via Flipkart, and Paytm Mall in talks to buy BigBasket, retailers are also looking for such online tie-ups,” said a source.

Its biggest competitor in India, Uber, might launch a few pilot projects for grocery delivery as early as next year. The company has been working on a blueprint for grocery delivery for India for the last three months and is drawing up the finer points, so that it can prepare itself for a pilot in the first half of next year.