GrowthShorts

Share this post
🛒 Why grocery delivery may never work
shorts.growthx.club

🛒 Why grocery delivery may never work

Basically, it boils down to the manufacturer, distributor, retailer, & the last mile logistics play.

Sep 15, 2022
11
3
Share this post
🛒 Why grocery delivery may never work
shorts.growthx.club

Year 2022: BigBasket posted ₹812Cr loss 💵
Year 2016: PepperTap failed in less than 2 years 📉


So what’s the reason for Grocery business failing in India, one after the other ⬇️
Just hoping it's 2030 and India has at least one profitable grocery company 🤲🏻

Let's begin ✈️

Every year new grocery startups raise, build sleek product, hyper-grow & go bust. Whatever the reasons, they never turn a profit.

Is India's Online Grocery Boom About To Fizzle Out?


So what's behind every grocery business's failure? 🤔

This question has haunted everyone who has ever worked on building a grocery business in the last 30 years. The answer lies in the nature of any grocery business.

The four players - manufacturer, the distributor, the retailer, the last mile logistics play the game of bringing profits.


The manufacturer 🏭

They never lose money & turn a good profit. These are the OG brands who are the nouns for grocery items in their loyal customer base - Aashirwaad for Atta, Parle/Britania for biscuits, Fourtune for sunflower oil & the list goes on. Typical margins 15 to 30%.


The distributor 🚚

This player doesn't make huge profits but never makes a loss. If you are a grocery player and you rely on distributors - it's really hard to make any margins on most products. Typical margins 10 to 15%.


The retailer 🏬

They have to setup a store, get right branding, do marketing, solve for increasing time spent per customer in the store & 100s of other things. Typical margins 7 to 15%.

Now this is where it get's interesting ✨
Most grocery startups have typically focused on two things.


First
, eat into the distributor margins and buy in bulk from manufactures. Cutting the middle man. This has worked for few brands to reduce losses but no one, I repeat no one has turned operational profit, yet.


Second, promote a white labeled product
(Dunzo's own rice, Zepto's own oil, DMart's own sugar & so on) to improve the 7% retailer margin to ~30% = {manufacturer + distributor + retailer}


But, it missed an important aspect
. Will you use a different toothpaste than Colgate & the next 2 brands? Will you change your choice of rice / daal. Maybe Sugar could be something you have flexibility of choice. But, that too if the non-branded sugar is cheaper.

Changing a user’s behaviour to switch brands is huge & a retailer (let's say they even cut the distributor) can never compete with traditional brands to influence the end users.


Could this be the Amazon-way of doing this?
For the longest time, Amazon has been accused of knocking any good business out of market by launching their own, just a little cheaper. Reuters spent a bomb of time reading through Amazon’s policy and the company has a legit method of creating knockoffs & selling them.

Unfortunately, while people can buy a cheap pan or bottle, they may not switch so easily when it comes to years of habit in their food consumption.

Our newsletter is LOVED by the top 1% 💙 Subscribe & be an insider on Indian startups and their growth secrets. 🚀


My honest admission 💙

This post was triggered when I visited a local DMart type of store and I saw the shopping cart at the billing counter. I had less than 2 whitelabeled items for every 10 items I bought from OG brands in the cart.


Want to scale your mature stage business?

Building strong business models is a science than art. Learn it with fellow growth leaders in the GrowthX experience. More in the rabbit hole below. See you there.

Scale your mature stage business



3
Share this post
🛒 Why grocery delivery may never work
shorts.growthx.club
3 Comments
Satabdi
Writes Synopsis
Nov 13, 2022

I didn't know they're called whitelabeled products but I tend to buy them over established brands because they're usually cheaper and there isn't a noticeable difference in quality.

Expand full comment
ReplyCollapse
Radha Krishna
Oct 9, 2022

If the nearby kirana procurement and promotions management improves rhen there is no chance for E grocery .

Deep discounting and high decibel promotions drag users to e grocery portals else these nearby stores with home delivery can do a wonderful job and all stake holders remain happy and profitable .

Expand full comment
ReplyCollapse
1 more comment…
TopNewCommunity

No posts

Ready for more?

© 2023 GrowthX
Privacy ∙ Terms ∙ Collection notice
Start WritingGet the app
Substack is the home for great writing