Few companies have managed to crack the online grocery challenge—a hyperlocal business. Can Bangalore’s Zopnow break the jinx?
“Don’t forget to get me a 2-kilo pack of Baba Ramdev’s detergent powder,” said the voice on the other end of the phone to Bal Krishn Birla.
Birla, as he is known to most people in Bangalore’s closely-knit startup ecosystem, is a jovial 40-year-old who defies classification by virtue of being an IIT graduate, former CTO at online classifieds company Asklaila, one-time restaurant owner, brainchild behind a 20,000-member-strong global community of old Hindi music aficionados and the source of an unending supply of “PJs” of dubious antecedents.
The person Birla was talking to was a former colleague and friend who he was going to meet. The detergent wasn’t to be picked up at Patanjali Yogpeeth in Haridwar, where Ramdev’s business empire is headquartered, but from a 2,500-sq ft warehouse in Kudlu, Bangalore.
The warehouse belongs to Zopnow.com, a two-year-old Bangalore startup operating in that infernal hell of ecommerce: Groceries.
Birla is co-founder and CEO. “We stock over 100 SKUs [stock-keeping units] of Baba Ramdev’s products and he is one our fastest-selling brands,” he says. From soaps to spices to flour to cosmetics, these products are apparently giving competitors from the likes of Hindustan Unilever, Nestle or ITC a run for their money.
Ironically, and somewhat serendipitously, Zopnow ended up unearthing a huge market for products sold under a yoga guru’s name in what is arguably India’s most modern retail market.
“Because they are not available everywhere, Baba Ramdev’s [products] are what I would call ‘low-distribution’ products. So the store loyalty you can get by satisfying a fan of Baba Ramdev’s Amla Candy, you’ll never get by selling someone Maggi,” says Damodar Mall, the head of customer strategy for Reliance Retail’s value business.
No Country for Slow Men
The grocery space has long held a mythical status among ecommerce entrepreneurs because of its sheer size and repeatability. Every household needs groceries. And very few derive enjoyment from buying them.
It’s a category that is ideal to be “disrupted” by the internet.
Except that doing so is damn near impossible. Very few companies have managed to crack the economics of this low-margin space anywhere in the world. Everyone knows of Webvan, one of the ‘stars’ of the dotcom implosion, by virtue of going belly up after spending and raising over a billion dollars by 2001. Even Amazon, a company possessed of almost boundless ambition and capital, spent nearly five years delivering groceries in just a few Seattle neighbourhoods before expanding into a couple of more US cities earlier this year.
In India, the last three years have seen a mushrooming of grocery ecommerce sites in many metros (see chart). Everyone is blinded by the size of the overall market: $35-40 billion worth of FMCGs across the country, of which modern retail accounts for around 5 percent. “In cities like Mumbai, almost 40 percent of grocery orders already happen over phone, so the customer is ready for non-store offerings, including the internet,” says Mall.
Though none of the players gives out revenue numbers, research indicates that the largest player in the space is BigBasket with an estimated revenue of $4 million, followed by Zopnow, which is around $2 million in revenue, and MyGrahak.
By and large, the majority of players restrict themselves to pre-packaged food and consumer goods, staying clear of easily perishable produce like vegetables, fruits or meats. Those that do deliver fresh vegetables, like BigBasket or Town Essentials, have a much more complex supply chain.
Yet, selling groceries online is quite unlike most other forms of ecommerce. For one, you cannot create economies of scale across the country. Grocery retailing makes sense only at a “hyperlocal” level, because products need to be stored and shipped at as minimal a distance from the customer as possible. Even the assortment of products is specific to local tastes and preferences: What sells in Bangalore may not in Gurgaon or Pune.
“In grocery retail, there is little advantage gained from a national presence because the supply chain and assortment in each city needs to be localised. So each city ends up being largely like an independent business,” says Mall.
The three-hour Delivery
(This story appears in the 23 August, 2013 issue of Forbes India. To visit our Archives, click here.)