Let’s talk all about the grocery industry and why they operate at massive losses:-
Every grocery startup has set up dark stores where they store daily and running items in order to get them delivered in 10mins. Yes, that’s what they claim. Delhivery people pick up the order from the nearest dark store and get it delivered within the assigned time. This is the basic business model they operate on. Now, let’s talk about why they are not that successful in India.
1- This industry is very new (it started around 2015) and Customer acquisition cost is much higher than the basket size of a customer.
Yes, this is very true, startups are burning much more money than they are earning. As per the market, until the basket is more than 1000, companies don’t earn money, as delivery may cost higher than the profit earned. (Burning >> Profits)
2-Offering price higher than the market rate. This will be done because Indian customers are in a habit of applying for discounts.
To bypass the cost of coupons or discounts, the price has to be more. Whereas the Indian market is a very low-margin market.
(margins ⬇ )
3-“Indians Parents ke Roz ke aadat hai ke sham ko aate hoe Ghar ke liye, lekar he aana hai kuch” these are words of Ashneer Grover and this is very true. Indians have a habit of buying groceries offline.
(Big competition from the offline market)
4-Bussiness targets younger ones, because they are the ones who are lazy, are going out and can afford that extra amount for such basic necessities.
5-Their main business comes from metro cities and not tier 1 or tier 2 cities. 🏙
These 5 pointers are leading groceries businesses to die every day and spend investors’ money burning for daily marketing costs.