Why this investor opened an online grocery store
Kishore Ganji, an electrical engineer who has done his MBA as well, embarked on his entrepreneurial journey when he started an IT service company in the US. He developed it into a $40-million company with 300 employees, based in New Jersey and California.
For the last few years, Kishore has been actively investing in startups. On close observation, he recognised the growing demand for online grocery; and since this is a recession-proof vertical and penetration by competition was comparitively low, it seemed like the obvious choice for Kishore to start up with.
In December 2014, he launched Zip, which calls itself a versatile and innovative online supermarket. The platform is based in Hyderabad and Vishakhapatnam and offers the delivery of a wide range of quality grocery and home-related products.
“We launched the platform with an aim to provide facility to people who have to compromise on quality, money and time to buy groceries to fulfill their daily home needs. The platform eliminates the rigmarole of treading through local supermarkets, bargaining with vendors and dealing with billing and traffic/parking hassles,” says Kishore, 40, CEO and Founder, Zip.
The platform carries 8,500 products and offers deals and discounts on a regular basis. Kishore says the company’s ‘just in time’ delivery model ensures the best quality of products once they reach the customer’s doorstep, which culminates the shopping experience and leaves a lasting impression. Maintaining the quality of products during transit is therefore crucial to retaining customer loyalty.
Business model
The platform, which is so far bootstrapped, offers same-day delivery on orders made before 1 pm. “As we consolidate our orders for delivery, we are able to reduce our deliver expenses. Since we have time to procure products, we are able to offer a wide range, thus increasing the average order value. Because of higher order value, gross margins owing to consolidation, and concentrated deliveries, our business is a sustainable one and a viable one to expand,” says Kishore.
The platform claims to have an average number of 200 orders a day. It says that it has been able to increase the average order size to well above Rs 1,000.
Difficulties and challenges
On initial difficulties, Kishore says that he faced issues while building partnership with retailers and wholesalers as they are not technically advanced to exchange information. They were also not sure if the platform was cannibalising there revenues or protecting it.
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Another bigg challenge was ensuring quality of the product and delivery service. “Since the customer shopping experience ends at customers’ doors, we need to ensure the quality of the product is maintained during transit. Also, delivery persons are critical to customer satisfaction. So zip.in maintains its own logistics team and delivers using trucks which can ensure quality of the product during transit,” says Kishore.
Expansion plan
The platform is planning to expand its operations in two more cities by the end of this year. In terms of products, it says that it will increase its seller stock; and thus expand its product range from 8000 to about 12000 products in the near future.
Market competition
The groceries segment holds a share of 60 per cent of the total market value in the Indian retail market as food is a basic requirement. The food and grocery industry in India is now worth $383 billion and is expected to touch $1 trillion by 2020, according to a study by advisory firm Technopak.
The major players in the market that lead from the front are Big Basket, Zopnow, Grofers, Peppertap, and Jugnoo, among others. The top five online grocery startups in India have raised over $173.5 million, of which $120 million was raised just this year. Big Basket and Grofers have raised $85.8 million and $45.5 million, respectively.
When asked about the competition from the giants, Kishore says that he has adopted a viable business model which will surely help in the sustenance of the company.
Yourstory take
In the past two years, the hyperlocal segment has witnessed the deluge of startups. In this particular segment, online grocery has got a special attention, owing to its recession proof nature probably.
Many have showed concern whether so many platforms, each calling itself a unicorn, can exist in the market. However, we believe that it’s impossible to cater to 1.2 billion people by just a few. There will be some major players in the market, besides, many small players will be existing along.
It will be interesting to see how the market responds in coming future. Will there be one or many unicorns? Only time will tell this.