Future's On-demand
LOCAL SERVERS IN DEMAND
Aspirational consumers are demanding immediate delivery of products. And nimble
young startups are at their command
If India's largest internet
companies such as Flipkart and Snapdeal were built on the rubbles of
decades-old brick-and-mortar stores, it's now their turn to be threatened by
younger on-demand startups that are growing like gangbusters.
After being introduced to shopping
online by the likes of Flipkart, Indian consumers armed with smartphones are
increasingly demanding immediate delivery of products, often within a few hours
which younger startups designed to cater to high-frequency orders are better
equipped to handle than the pioneering giants. Grofers, a delivery startup
focuse on groceries, is targeting an ambitious climb to 10 lakh orders in
August, encouraged by weekend orders that crossed 15,000 a day in July . “We
will go up to 30,000 orders a day by August, definitely crossing 25,000. The
challenge for us right now is to resolve operational issues like how to deliver
in the rains,“ said Albinder Dhindsa, cofounder and CEO of Grofers, which
partners with neighborhood stores for delivery of goods. Other on-demand
startups, too are chasing ambitious goals in a country where people
increasingly have less time for domestic chores and prefer being served. This,
say investors, makes the nascent on-demand economy an ideal fix for the Indian
psyche and the segment most likely to throw up the next few bil lion-dollar
valuation startups.
“The on-demand category hit an
inflection point in India a few months ago and it will always trump scheduled
orders because it is more convenient,“ said Niren Shah, managing partner at
Norwest Venture Partners, which has invested in food delivery startup Swiggy .
Increasing use of affordable
smartphones and their ability to show precise locations has made the
ondemand business model more feasible and executable in the past year, say
investors. “To build a large and highly valuable hyper-local business you need
super-efficient logistics play that is better than what momand-pop stores
have,“ said Alok Goel, managing director at SAIF Partners, which has backed
on-demand delivery companies like PepperTap, Swiggy and Spoonjoy .
The rapid rise in demand has taken
even some founders by surprise. Ondemand grocery delivery firm PepperTap's
orders have surged from about 20 a day in January to 5,000-6,000 a day. It now
expects to reach 40,000-50,000 orders a day by the end of this year, to achieve
which it will have to increase its current workforce from 900 to 3,000-4,000.
“When we started this year we were
thinking that we will be 1,000-people strong by end of the year. The kind of
growth we are seeing is much faster than expected,“ said cofounder and CEO
Navneet Singh.
Online-first restaurant Faasos,
which makes and delivers food, han dles around 4,500 orders a day through its
mobile application and a total of 1.5 lakh a month. The company aims to
increase this to 3 lakh monthly orders by September and 10 lakh by March,
according to Revant Bhate, entrepreneur-in-residence at Faasos.
Flipkart said it handles about 80
lakh shipments a month, an average of more than 2.6 lakh deliveries a day .
The number of venture capital
investments in on-demand startups has increased from 22 in all of 2014 to 55
till date this year. The capital deployed has more than doubled to $556
million, according to startup research firm Tracxn.
The proliferation of the on-demand
economy is likely to incentivise consumers still reluctant to transact on the
internet, and open another chan nel that marketplaces such as Flipkart and
Snapdeal will have to address, said experts. “This will make etailers stand on
their feet and execute at a faster pace, where they will also look to mimic the
real offline shop experience where goods are delivered in 4 hours,“ said Goel,
former CEO at mobile recharge and couponing firm Freecharge.
Hyper-local startups such as Zopper
are already creating marketplaces in segments like mobile and electronics by
tying up with local stores.
Some experts said that while
ondemand firms provide convenience, the categories they address will be
different in terms of impulse buy and the products on offer will be limited as
compared to the range of offerings at companies like Flipkart and Snapdeal.
“On-demand might work in certain
categories like larger white goods, but pricing power of large etailers and
services in terms of returns cannot be matched by local stores they work with,“
said Anand Lunia, founder of venture capital firm India Quotient.
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Madhav Chanchani
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ET21JUL15
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