[Reddit Gaming Hot Post] What Happened To Grofers? (Full Case Study) - The Techno Bits

This is the story of Grofers, the company which fulfilled our needs at home, today it faces some or the other problem every day. Grofers, which started in 2013, was going to get IPO in 2021. But suddenly it merges with Zomato in a $700 million deal. Moreover, while companies like Swiggy and Zepto reach new heights every day, Grofers is on the brink of shutting down. Why did the brand we knew as Grofers, change its name? Did Swiggy and Zepto hit Grofers hard? What went wrong that a company working for so long has to face all this today? What happened to Grofers?

CASE STUDY: WHAT HAPPENED TO GROFERS?

The story began in 2013 when Saurabh Kumar and Albinder Dhindsa noticed everything getting done through phones, be it food delivery or booking a cab. Everything got done with a click on your phone. They got an idea at the time. They thought of how everything is done via phone, then why go out for groceries? This could also be done via phone.

This was the start of Grofers, In very little time with great funding, Grofers started expanding itself at a fast pace. Soon, Grofers completed over 50,000 orders a day and dominated the market. Till 2021, Grofers and Big Basket were the only companies in India’s online grocery delivery services.

Then something changed and the fate of the companies dominating this space changed forever. Many startups similar to Grofers also started in 2013, but from Local Banya to PepperTap, none of the grocery delivery startups were successful.

But why is that so? Well, very few people know that as simple as the online delivery space seems, it is that much more complicated on the inside. It has many aspects that aren’t visible on the surface but become responsible for the failure of startups.

The question is what are these things? It is unit economics, that is per order if the company profits or has a loss. From the surface, we only see what’s shown to us but the unit economics which decides a company’s profitability or failure. Many of us think that Grofers succeeded due to a lack of competition because when Grofers was on top, there was no competition in the market.

But that’s not true. Peppertap, Local Banya, GrocShop, FlashGroc, and Getnowmarket, all were also in the online grocery delivery space. But Grofers alone did something that made it survive. From PepperTap to Local Banya, they had a single vision, to deliver groceries to homes within 1-1.5 hours. It’s an amazing idea but it has a huge disadvantage. It would disrupt the entire company’s cost structure.

Grofers had a genius strategy for this. But to understand this, you’ll have to first understand How the online grocery delivery business works?

So, most startups would work in this way. The customers would order on the app. This would go to the shopkeeper they had tie-ups with. And then a company delivery boy would collect and deliver it.

This model had 3 major problems.

1. No control over quality. Whatever quality the shopkeeper had, only that got delivered to customers.
2. The lack of inventory. Customers could only shop from the shopkeeper’s inventory. If the shopkeeper doesn’t have inventory, the customers would face many problems.
3. High cost but low margins.

Due to this, most grocery delivery startups would get customers by offering discounts, but the customer would leave them due to poor service. But you know what? Out of all the startups, only Grofers changed its entire working model. First of all, Grofers closed its 90 minutes delivery because they understood after looking at the market that no one is in such a hurry that they want their grocery in 90 minutes.

Then, it closed its operations in many cities and focused only on metro cities. They set up their warehouses in metro cities which gave them 3 main superpowers.

1. Super inventory. As Grofers is a technology business, they have data from which they know what products to keep and which products customers don’t usually order. Hence, they can stock up on their best-selling products as all the warehouses are owned by Grofers.
2. Stackable items. Grofers delisted all the perishable items on its list, which means the items that rot quickly, and only kept the items that could be stored for long. This resulted in a low storage cost.
3. Good margins. They got good margins because of 2 reasons. Number 1, as there are no middlemen, all their margins are higher as compared to having middlemen. Number 2, keeping private label products. They got a higher margin on private label products as compared to branded products.

Read the full case study on: thetechnobits.in

Submitted July 13, 2022 at 09:50AM by thetechnobits https://ift.tt/C1RYNoQ