Why India’s third largest online grocer which raised over $50m is shutting shop

Navneet Singh, co-founder and CEO of PepperTap.

PepperTap, India’s third largest online grocer, is closing its shutters next month, to pivot towards logistics.

The year-old company will retain about 40 of its 200 employees and will let go off the rest.

With Snapdeal’s investment, rumors were doing the rounds that PepperTap might eventually merge with it.

“It was a very difficult decision to make. We already have significant amount of capital left in the bank. But the path to profitability in the grocery business looked very distant, at least two or three years away,” Navneet Singh, PepperTap CEO and co-founder tells Tech In Asia.

Before starting PepperTap in November 2014, Navneet was already running a reverse logistics brand NuvoEx. Reverse logistics involves operations related to returns of goods by customers, including collecting products back from the customers, warehousing, and delivering those to the sellers.

The new business may keep the brand name PepperTap or retain the NuvoEx brand.

“We are still to decide the name of the new logistics business. It will have both forward and reverse logistics play,” Singh adds.

PepperTap raised US$51.2 million in funding from a slew of investors such as Innoven Capital, SnapDeal, Sequoia India, SAIF Partners, Ru-Net, Beenext, JAFCO Asia, and others. The company had secured its series B round of funding of US$40 million in December.

With Snapdeal’s investment, rumors were doing the rounds that PepperTap might eventually merge with the ecommerce marketplace. Those rumors now lay at rest, with the company shutting its grocery business.

Hyperlocal is a tough business

Navneet tells Tech In Asia that grocery delivery is still a negative gross margin business in India.

“It will be at least two or three years when people especially in tier-two and three towns would ever want to pay a convenience fee for home delivery of grocery.”

“It’s not that the market does not exist or has vanished. It’s just that it would be a much better use of existing capital in the bank to invest in the new logistics business,” he added.

Navneet had earlier blogged that there in several of India’s smaller cities, users sometimes have to wait up to 30 days to receive ecommerce orders.

Not the first to shut shop