We were fortunate to be one of the beneficiaries of lockdown: Grofers

Softbank-backed Grofers on Tuesday said the lockdown period has given its business a boost towards sustainability and helped it move closer to hitting profits by the end of next year.

The online grocery platform, which has advanced its plan to launch an initial public offer by the end of 2021, said it continues to focus on enhancing customer experience and strengthening its capabilities in the segment where it competes against players like Amazon, Flipkart, Alibaba-backed Bigbasket and billionaire Mukesh Ambani's upstart JioMart.

"...we were fortunate to be one of the beneficiaries of the lockdown. That allowed us to stop worrying about marketing in general, we are getting more customers today than we can serve," Grofers co-founder and CEO Albinder Dhindsa said at an event organised by Shardul Amarchand Mangaldas.

He explained that the company could have added hefty numbers of orders and customers served by taking in all the orders that came in during the lockdown period that started on March 25.

However, the company restricted the quantity of items that could be ordered to ensure that people did not hoard items.

"The fact is that we can best serve our customers in the long run if we are sustainable...We don't really feel like we need to fund raise anymore, even if we do, it will not be a significant amount given how this (lockdown) has given a boost to our sustainability," Dhindsa said.

Asked about competition from deep-pocketed rivals, Dhindsa said the company is working on building a long-term business.

"We are in a market that is massive..we don't control the macroeconomic environment, we don't control the local dynamics of the market but we do control the quality of our execution. So, if the quality of our execution is on par, we are constantly innovating, we are looking for ways to make our supply chain costs lower so we can pass the savings to customers, there is no reason why we will be denied a place on the table," he said.

India's USD 950 billion retail market is predicted to grow to USD 1.3 trillion by FY26. Of this, e-commerce business is estimated at around USD 78 billion and forecast to cross USD 100 billion by 2025. Grocery is the latest category where e-commerce firms are now slugging it out.

Amazon offers grocery and fresh products delivery under Pantry and Fresh, while Flipkart has thrown its hat in the ring with the launch of 'Flipkart Quick'. This segment also includes Alibaba-based BigBasket and Mukesh Ambani's JioMart, which is experimenting with using WhatsApp to connect consumers with local kirana stores.

The online grocery delivery segment has also gained significant traction amid COVID-19 pandemic. Offline retailers, who have taken a major hit on account of the lockdown, are also keen on partnering with digital platforms to facilitate the delivery of goods.

According to a recent report by Goldman Sachs, India's e-commerce business is expected to grow at a compound annual growth rate (CAGR) of 27 per cent to reach USD 99 billion by 2024, with grocery and fashion/apparel likely to be the key drivers of incremental growth.

The report said Bigbasket and Grofers accounted for more than 80 per cent of the online grocery segment in 2019 but projected that Reliance Industries would capture half of the online grocery sales with the help of its partnership with Facebook.

Talking about profitability, Dhindsa said Grofers is making money on every order.

"...that coupled with no marketing cost has made us overall fairly close to profitability. The way that we expect things to pan out is based on the data we have so far and it seems to indicate that we are able to get better customers on the platform," he added.

Dhindsa said this trend is expected to continue till the end of the year, and from that point on, growth will be slower.

"...but in terms of supply chain, unit economics, we will be sitting at a fairly healthy number...if we are on that path, by the end of the year (2021), we would be a company that would be fairly acceptable to public market investors in terms of scale, profitability and pace of growth," he added.