How SoftBank-backed Grofers is taking on India’s online grocery market

At a time when India’s US$600 billion grocery delivery market has become the new battleground for ecommerce giants Amazon and Walmart-owned Flipkart, SoftBank-backed online grocer Grofers may just turn out to be the dark horse as it eyes US$1 billion in revenue by FY 2020.

To achieve this aspirational target, Grofers has deployed a three-pronged strategy by bolstering private labels, expanding branded stores, and cutting costs. It it now aggressively getting into the online-to-offline play as it partners with offline stores to convert them into Grofers-branded outlets.

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“In the first phase, we associated with 100 stores. Currently, we have 300 stores under the program and this will be scaled to 1,000 by year-end, all in Delhi-NCR [National Capital Region] region,” Grofers co-founder Saurabh Kumar told wire service Press Trust of India [PTI] in a recent interview.

Grofers is looking at using its network of neighborhood stores to sell its private-label products, known as G-brands, that are usually priced 30% to 40% cheaper than branded products. Kumar said G-brands contribute 40% to the company’s current revenue, and it plans to increase it to 60% in the coming years. According to media reports, Grofers ended FY 2019 with US$360 million in revenues.

Based on a revenue-sharing model, Grofers takes care of the sourcing of products for the stores it partners with. It also provides these stores other services such as inventory management and technology support. Grofers plans to expand these so-called branded outlets to Mumbai and Bengaluru by year-end, while the long-term plan entails 50,000 offline stores in three years.

“We are aggressively growing our business and aiming to clock US$1 billion in revenue by the end of this financial year, with a significant focus on our in-house brands,” Kumar told PTI.

This is not the first time that this Gurugram-based grocer is trying its hand at the O2O strategy. In 2017, the startup had piloted partnership with Oyo to open small shops near the latter’s properties, but wrapped up the pilot within a couple of months.

In November last year, the company took a shot at it again and started working with mom-and-pop kirana stores in Delhi-NCR to convert them into Grofers-branded outlets. The offline strategy has not only helped the company expand its customer base, but has also given a leg up to its private labels which it launched in 2018.

Under its private label, it currently provides over 1,200 products in categories such as staples, kitchen ingredients, fast-moving consumer goods, and personal hygiene, among others. By end-2020, it plans to quickly expand to have 1,500 products in the private-label fold.

“Our private labels are operated very locally. It’s like a marketplace for merchants and manufacturers,” Albinder Dhindsa, co-founder and CEO of Grofers, told KrAsia. “We partner with wholesalers in each city and put our brand name on their packages. We have worked a lot on reaching better price points while adding new products, and this is our effort to make products available a little cheaper for customers.”

He said the company caters to the buyers who are looking for pocket-friendly goods instead of expensive and branded products.

For instance, the startup has recently launched diapers at 5 rupees (US$0.07) and sanitary pads at 2 rupees (US$0.028). Private-label products account for 50% of the entire inventory by the number of units, he added, while by gross merchandise value (GMV), it’s a little north of 40%.

On a roller-coaster ride

Founded in November 2013 by Albinder Dhindsa and Saurabh Kumar, the company has seen its fair share of pivots as it struggled to gain market share while its competitor, BigBasket, was showing steady growth. To survive, it shut multiple operations and services in 2016, including wrapping up business in nine cities as it realized demand wasn’t growing in these markets.

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