Big Basket to unleash 2-wheeler deliveries as hyper local model catches grocers' fancy

New Delhi: The convenience of getting groceries delivered to one's doorstep is no longer good enough. Now e-tailers in the online grocery space are going a step further by adopting the hyper local model. This leads to shorter delivery times, brings in more efficiency into the whole bargain and these e-tailers get a bigger share of the customer's wallet.

The hyper local model seems to have caught investors' fancy too, with several such startups getting quick rounds of funding. So two trends are clearly visible now: First, new entrants into online groceries tie up with local kirana or established hypermarkets at the very outset and facilitate deliveries rather than owning a large inventory of staples. Second, the e-tailers already doing full service grocery are now also getting into hyper local models to cover the entire grocery value chain.

Take the case of ZopNow, which started three years back with an inventory lead model but has now transitioned to a hyper local store. It now promises grocery delivery within three hours, free of cost for any order size. Founder Mukesh Singh says the company's operations in four cities are expected to become profitable this fiscal; Bengaluru is already profitable. ZopNow has raised $10 million in funding till now and is looking at raising $40-50 million in the next round. It offers 1300-1400 SKUs (stock keeping units) for customers to choose from.

"For six months last year, we experimented between the warehousing and the hypermarket sourcing models since we wanted to

BigBasket

expand beyond Bengaluru. So half the city was serviced from our warehouses and the other half by tying up with Hypercity. We realised that expansion to other cities will be more economically viable by junking the warehousing model wherein we owned the inventories. Operating warehouses is time consuming and requires more capital. Hyper local model works well for us now," Singh says.

So how is ZopNow different from the bigger online grocery stores which have not gone hyper local till now? These stores keep up to 10 times more SKUs but do not promise such strict time based deliveries. Most importantly, they carry their own inventories and sometimes manage their own delivery metrics too.

Navneet Singh, co-founder of Peppertap (another hyper local grocery platform), says his hyper local model has no warehouses of its own. "We use existing local stores as our fulfillment centres and in the process we help to get them online too". Peppertap gives a two-hour delivery guarantee and aims to bring the delivery time down to just 30 minutes within the next two years. Peppertap was started just six months ago and is already present in four cities with Singh claiming his company services 6000 orders daily. Peppertap has raised $1.2 million from Sequoia Capital last November, then $10 million from SAIF Partners and Sequoia together in February this year. It is obvious from this furious pace of fund raising that investors are also quite keen on the hyper local delivery model.

Shailendra Singh, MD of Sequoia Capital says "Hyperlocal is going to be the next big shift in the e-commerce space and grocery is a hot category that can grab a major chunk of this prevalent market. E-commerce 2.0 is hyper local commerce. On-demand fulfillment is a trend thanks to the proliferation of smart phone technology and escalating use of apps 24*7."

So what have the full service, bigger online grocery guys like Big Basket done to tackle the onslaught of the hyper local soldiers? Hari Menon, co-founder of Big Basket, says his company acquired one of the earliest hyper local grocery companies, Delyver, a month back and will use this acquisition to additionally do time-based deliveries.

The current model of Big Basket is full service - it has upwards of 15000 SKUs, owns its own inventory and delivers using four wheelers across multiple cities with deliveries done by staff.

Under the new vertical, Big Basket will set up 50 'Dark Stores' across six cities. Dark Stores are small stocking points, with just about 1000-1500 SKUs from where deliveries can be done quickly on two wheelers to nearby addresses. Menon says this hyper local model is starting out in Gurgaon in the next two weeks and will be implemented in six cities within a month, in eight cities by September. Under this model, Big Basket will promise deliveries in an hour.

Why does Big Basket want to compliment its full service model with this two wheeler very delivery model? Menon says typically, families buy most groceries in bulk orders by the beginning of the month but for topups, which happen almost every week, a visit to the local store is still required. This topup business is what Big Basket is eyeing by launching faster deliveries using a far smaller product store.

Does this mean consolidation is on its way as far as hyper local grocery platforms are concerned? Will the startups promising time-bound deliveries and sourcing from local stores ultimately merge into the full service ones like Big Basket? This is anybody's guess.