Satvacart, the slow-and-steady start-up that survived e-grocery meltdown

Rahul Hari, who runs the enterprise, went one cluster at a time while all rivals expanded blindly to the point that they couldn't sustain their businesses

It is 4:30 am and Rahul Hari is already up. Going through the early-morning order lists and planning the rest of the day is a daily ritual for the founder and CEO of Satvacart, an e-grocery platform that has been operating out of Delhi NCR’s Gurugram for the past five years. 

An IIT-BHU graduate and a former advisor to several Fortune-500 companies on market entry, cost reduction and business transformation as a consultant at EY, Hari is quite a hands-on CEO. Attention to detail is what has helped Hari and his firm survive the worst of the times in the e-grocery segment.

The company claims to be the fastest grocery delivery business in the country, with dispatch slots available every half an hour. “In fact, for a 6:00 a.m.-7:00 a.m. delivery slot, the cut-off time is 5:30 a.m. Our inventory-led business model currently operates out of one micro cluster and we have been able to successfully optimise our business here. Over the past few months, we have been working on optimising the technology and operations to make the business ready to scale up. As a result, the enterprise can now process an order at thrice the speed of the industry leaders, and deliver it at a fifth of the time,” added Hari.

The company has raised an undisclosed amount till date from investors such as Palaash Ventures, CBA Capital, Soham Vencaps and a host of angel investors.

Surviving the bloodbath

Back in 2016, when about 10 online groceries, big and small, were bleeding cash and shutting shop one after another, Satvacart managed to break even at the unit level. 

The biggest failure among those that folded up was hyperlocal grocery delivery start-up PepperTap, which after raising over $50 million, including a $36 million series B round led by e-commerce player Snapdeal, shut down. LocalBanya, which raised $5 million, and GrocShop, met a similar fate.

One of the main reasons Hari believes in expanding gradually and not at break-neck speed is that it helps in establishing the business on a concrete foundation. A mistake many other players with not very deep pockets made, was expanding blindly. According to Hari, a thorough analysis of the successes and failures in the grocery industry worldwide went behind the decisions he took with his business.

“We came across business models such as those of WebVan and HomeGrocer, which reached 26 cities and 30 cities, respectively, within the first year, and then shut down. We also came across business models such as FreshDirect that stayed focused on a single geography for over 10 years and is today the third largest player in the US. For example, Gurugram itself is a $1.7 billion opportunity. If a business is unable to make a dent into this and prove viability, it cannot be viable in the larger $500 billion Indian market. We are here for the long term and hence it makes sense to have rock-solid foundations for the business,” he said.

To cut costs during the meltdown, the entire team of Satvacart operated out of a warehouse. Eventually, the company figured out a B2B marketing model that was able to feed cash into the core grocery business. It helped them run completely independent of investor funds. The company has already run the business in this state for the past several months and has started generating a small positive EBITDA.

Growing one cluster at a time

For its next phase of growth and increasing the order volume, Satvacart has forged partnerships for grocery delivery with the latest entrants such as Swiggy Stores, Dunzo and PayTM Mall. Some other partnerships with other ecommerce platforms are also on the anvil.

The company now believes that the time is ripe for expanding, but is not following the cash bleeding path of the other companies. Satvacart believes in working in micro clusters.  

“We operate in a micro cluster with a radius of five kilometers. This is similar to the way Dominos’ operates to meet its 30-minute delivery promise. During our first optimisation in July 2015, we had done analytics on delivery by bikes and by vans. The analysis indicated that deliveries by bikes are profitable and meet our requirement of giving complete freedom to the customer to get deliveries. A side benefit of this approach is also that it allows us to serve a population equivalent to eight modern retail stores, at a rental cost equal to a tenth of a modern retail store,” he added.

The company is now looking at a pan-NCR presence this year followed by entry into Bengaluru, Mumbai, Pune, Hyderabad, Chennai and Kolkata, taking the business to 100-plus clusters by 2023.