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1. 

   asha chaudhry February 29, 2016, 6:52 am

   i really like this q of yours ashish – and i know it has a genuine involvement from your side. we’ve all watched you grow from one cake onwards 🙂 i think a’bad is the perfect place for your kind of services and i can visualise you expanding very soon!!

   i’m pining rituraj and sunil suri to respond to this and add their pov.

2. 

   Ashish Parik February 29, 2016, 7:08 am

   Hi Ashatai,

   I know i am not good in writing but it is the only place where i try to write whatever comes in mind… Its first. After writing it here i tried to collect views from other colleagues on twitter too. 

   Thanks a lot for all your wishes… Yes, Ahmedabad is just perfect and I am always over loaded with requests. 

   Thanks for considering this post… regards, Ashish

3. 

   Sunil Suri February 29, 2016, 9:25 am

   Hi Ashish,

   I think hyperlocal is the future, but with a caveat “People with deep pockets and patience to be the last man standing, will survive.”.
   

   Firstly I’d like to complement you for having done a commendable job in ascertaining the true facts and putting those so very well.

   Now what good these companies did in order to create a strong customer base: 

   1. Biggies which you’ve mentioned are running their businesses and captured many customers or if I may say so, many customers have gravitated towards them because of their “discounting models”. Schemes like Flat 15% off on first purchase and so on and so forth have really attracted the customers base towards them.

   2. Same day delivery and 2 hrs delivery model have attracted many customers, this model is based on instant gratification. 

   3. They take orders either through web or through installed app. So young people who are mostly on mobile have really got attracted towards them as it seems an easy option.

   4. They have been able to build jazzy offices in order to attract talent. 

   And how they faltered and fallen from the top with their above steps:

   1. Discounting model is the root of all evils, this will help them get gutted sooner than later. If they really want to compete with small players they have to induce operational efficiency, understand unit economics to the core.

   2. Now 2 hr delivery is a complete farce in certain areas, I’m from Delhi and I know if somebody has to deliver items from one part of Delhi to another it can take more than 2 hrs, so 2 hrs delivery is not possible. What if they get 20 orders to be delivered at same time? They cannot justify the unit economics. I’ve an interesting stats to prove that:

   Suppose there is an order for grocery, fruits and vegetables for an amount of Rs 1000. We assume there is a single person who is doing the entire stuff from sorting to packing and final delivery. We assume 90% fill ratio, which is the best ratio.

   Now this individual will take 30 – 45 minutes to sort and pack items and making it ready to get it delivered. Now he has to move from one part of Delhi to another which can roughly takes around 1 hr on an average during peak hrs. So he reaches there within 2 hrs. Now customer at times takes 10- 15 min to check the ordered items. The below table will be handy to understand the process.

   S. No	Operations	Time in Min
   	Delivery of order(which includes fruits, vegetables and grocery) worth Rs 1000/-
   1	From order to Sorting and packing	30-45 min
   2	Delivery	45 min
   3	Time spend with the customer	10-15 min
   4	Back to warehouse from the point of delivery	45 min
   	Total	3 hrs

   We assume margin of 20% on the entire order, so for Rs 200 he has taken 3 hrs(1 hr again from customer location to warehouse). If he does 3 such deliveries he spends 9 hrs and company gets Rs 600, out of which 400 is the minimum salary for the day which comes to be around Rs 12,000(minimum) and rest will be expenses on Conveyance, telephone and misc expenses which includes certain regulatory compliance as well.

   How can they ever think of earning?

   3. They don’t have any personal touch with the customer which other small start ups would like to do. Personal touch can be possible through phones, whatsapp etc.They have not been able to make out that decision making while buying groceries, fruits and vegetables lies with the elders and these elders seldom use smart phones apps.
   The biggies have sadly missed out on these.  

   My eight months journey with FALPHOOL.COM so far has been not that easy, but yes but I’ve never lost money on the orders successfully delivered. We have pivoted several times along the way, from delivering the orders same day to delivering next day, Starting from delivering only fruits and vegetables, we are now delivering grocery, plants and medicines as well.

   It was a gradual transition though was purely based on the demand from the customers.

   My entire business is based on delivering NEXT DAY at the best possible price.We deliver Around 40 orders daily and around 3000 customers, we want to keep on working and pivoting. Suppose customers books an order of potato with us at Rs 10, there is a possibility that he gets final orders delivered at Rs 9.70 per kg. We have proprietary algorithm which changes rates based on the order qty.

   There are many such things which we have been doing. Will cover the remaining shortly.

   Falphool.com
   (Delivering Food health and happiness)

4. 

   Manish Giri February 29, 2016, 9:53 am

   I believe logistics is the key to every “selling online” business – be it hyperlocal or pan india. Eventually the logistics cost has to go to the customer – expect a few changes in 2016 in every “selling online” business with logistics becoming the most important aspect.

   Manish
   http://www.carryown.com

5. 

   Viral Thakker February 29, 2016, 10:33 am

   This is to Ashish Parik and Sunil both – how do you guys do the marketing bit. I am still trying to sort out on the marketing reach and communications part. Have been able to accumulate a mailing list of 2000 odd genuine emails (and numbers) through marketing campaigns but conversion has been tough, growing them even tougher.

   We are bringing curated supermarkets online offering customers ready promise of quality groceries and a reputed store trusted by thousands of customer. thus we become only the online partner adding the convenience layer for online customers.

   Regards

   Viral Thakker

   eBZaar.com

6. 

   Viral Thakker February 29, 2016, 10:38 am

   Ashish, I echo your thought process (on how biggies will find it tough to crack it). But without spending anything on ads and promotions, how are you growing? Would be keen to learn this 🙂

   Regards

   Viral

   eBZaar.com | Think Grocery. Think eBZaar

7. 

   Ashish Parik February 29, 2016, 11:15 am

   Thank You Very Much Sunil Sir…

   More inputs are awaited and then i will be back with more queries..

   Regards, Ashish

8. 

   Ashish Parik February 29, 2016, 11:27 am

   Viralbhai,

   I know it is tough for anybody to digest that we haven’t spent a single rupee on promotion and ads.. Trust me I wasn’t having anything to spent. The initial amount for website (old one) was paid through deliveries did by us. Go to google and search “Cake home delivery in Ahmedabad” “Online Cake Shop In Ahmedabad” and you will find cakehunt.com as first organic result. I am not considering paid ad results.. 

   And this is because the content (details and images) is very original. Images are taken by me with my phone and uploaded.. All the details are filled by us inhouse. 

   We got the website revamped in May 2015.. still the same result and lucky we…It is probably the goodwill and hard work of the team.

   The only thing we did was to run a campaign on fb to get likes 😀 

   I wish you all the best… It is going to be successful, I am confident… Regards, Ashish

9. 

   Prashant Waghe February 29, 2016, 11:48 am

   Hyper Local will work in big cities. But in smaller towns, it will unlikely to survive.

   In city like Mumbai, minimum auto fare is 18 Rs. Parking is Rs. 20-30. So , if you want to order something from supermarkets , it will cost you minimum Rs. 30-40 per transaction. Added to it is travel and billing time. So in time starved places like Metros, it makes sense to buy groceries online, even after paying small delivery cost. Added to it large number of office going public , there is huge audience which is receptive to hyperlocal services.

   If you come to smaller town, time is in abundance. Parking is free and travel times are not more than 15-20 minutes and wives are typically not working, so buying groceries is favorite pass=time for them. Plus the number of middle class families being lesser , so potential is much much less. If you see , Grofers closed from all small cities.

   Further, grocery does not have great margins. So , retailer has that much lesser margin to share with operator. However, to give timely delivery , operator has to have huge number of delivery boys with vehicles. So , if he opts to give discounts, hyperlocal operator is bound to fail. Even without discount he will not succeed, in smaller towns. So these guys have (at least grocery) guys have limited potential out of top 10 cities.

   Having worked in Retail for 3 years, I have first hand experience of margins and costs in grocery business. I use Zopnow and Peppertap (before it closed) to order groceries from Hypermarket , which is at walking distance, just to claim stupid discounts they give. Because I know, they are not going to last long.

10. 

    Harsh Gilda February 29, 2016, 5:18 pm

    In my opinion this is not the only reason for failure of hyper locals in tier two and three cities. These cities have very strong network of redi walas who delivers fruits and vegetables on time and at very cheap prices. Some of them bring them from farm.

11. 

    Shahid Akhtar February 29, 2016, 6:54 pm

    Hi Ashish,

    Very well put thought on the hyperlocal business.

    The reasons put below by my friends are absolutely correct.

    Since, I come from a family who’s relatives and family members are into different businesses (small though).

    Hence, I would like to add few points to it.

    1) Margins: We have a grocery store at home since last 16 years. The margins on grocery items are wafer thin. So incase someone is trying to run a Grocery marketplace or an aggregater model. Financially it would very difficult that too after giving home delivery.

    We also have cloth stores in which margins are relatively higher and their are various factors which helps us make money.(Sellu gyan etc). If you know, Myntra charges 40% commission on garments for listing it on thier platform. How do I know? I’m also a distributor of Siyaram’s in Goa for online sales. Though it includes shipping and packing charges but it’s criminally high commission. Especially, when the semi stiched cloths and suit pieces come with an MRP. So what did we do? After sometime we stopped selling on Myntra.

    2) Delivery Challenge: As rightly said by my friend, Getting things delivered from one corner to another is not a joke. I am the Franchise owner of Ferns n Petals in Goa and we deliver flowers, Cakes and all types of gifts all over Goa.We deliver 20-30 orders a day. We have some margin in this but it is a difficult job and at times becomes not feasible because of distances.

    3) Customers belongs to none: Customers acquired by discounts will never stay with you. The moment you stop giving discounts they will look for some one else. Getting business by distributing other’s money to the customers is like paying people to gather at a congregation of some Neta jis Bhashan, and the moment they disperse they forget the Neta and his speech.

    I also have a startup ServiSingh.com – the service expert. We are into all kinds of Handymen/Household services like Electrician, Plumber, Mason, Carpenter etc and Professional services like Photographer, Event Management, Coach etc. And it’s been 1st quarter of our launch we’ve been doing an average of 20 work orders a day and without giving any discounts. Here people don’t want discounts, they want Good and prompt service. We’ve executed more than 800 work orders with an average feedback rating of 4.5 star.

    And I believe that customers acquired by good service and experience not only remains with you but also spreads good word of mouth publicity.

    Regards

    Shahid Akhtar

    founder

    Servisingh.com – Service Expert

12. 

    Venu Ramakrishnappa March 1, 2016, 3:54 am

    Hello Ashish,

    I would like to share my story in the other part of the world. I am the founder of Greenbasket a marketplace for ethnic groceries in USA. I totally agree with you regarding the hyper local delivery challenges and consumers acquired purely by promotions and cash incentives ‘loyalty is nil’. 

    Few learnings from my side:

    1) We are able to attract decent number of customers who pay for the delivery. They are repeat customers and happy with the service. 

    2) Customers acquired via promotions, cash incentive vanished when the same was not available. 

    3) Stores are willing to share a nominal profit for the online orders and that along with the delivery fee, makes economic viability for a young entrepreneur to make a decent income.

    We started as a hyper local delivery service company and pivoted to being a marketplace for ethnic grocers in USA. We are building a very robust platform to be a global marketplace and our intent is to enable entrepreneur’s like yourself to signup SME stores and provide the hyper local delivery service to the community. I personally believe that licensing the platform for young entrepreneur to build a network of stores is a better model that hiring an army of delivery people and sales people to sign-up stores. Let me know your thoughts!

    Also, I am looking for RoR developers for our new Bangalore development center; if anyone is interested, please reach out to me at vr@gogreenbasket.com

    Additionally, I will be piloting our platform in India in the next quarter. If anyone is interested to have the platform rolled out in their cities, please reach out to me. I am looking for people who can sign-up stores for the marketplace, take responsibility for the hyper local delivery service. 

    Please let me know your thoughts, comments, suggestions.

    Best Regards,

    Venu.

13. 

    asha chaudhry March 1, 2016, 4:17 am

    very neat insights venu!

    pls feel free to post about your new platform and if you’re looking for RoR developers – you can even post in our JOBS section.

14. 

    Ashish Parik March 1, 2016, 4:37 am

    Hi Venu,

    First of all thanks for sharing your genuine and realistic experience… I also have an offer for you, if you are interested. We are getting many inquiries for delivery of cakes in USA… There are many Gujaratis there who are our customers. And there are many here who want to send cakes to USA. This is same for other states of India. 

    Let me know if you are interested for such tie up and if you could connect us with few bakers there. 

    I am based in Ahmedabad and if you think we could be of any use to you do let me know. My whatsapp no is +91 76000 56247..

    Regards, Ashish Parik

15. 

    Venu Ramakrishnappa March 1, 2016, 4:46 am

    Thanks Asha, will do..

16. 

    Venu Ramakrishnappa March 1, 2016, 4:47 am

    Dear Ashish,

    Good idea, let’s connect and explore. My whatsApp number is +1-212-203-3302. Let’s talk tomorrow my time. Best, Venu.

17. 

    Ashish Parik March 1, 2016, 5:05 am

    Hi Shahid,

    Thank you for sparing your time and sharing hand on experience… Just a query, FNP charges good amount to customers. I am surprised to know that you are not getting much in that… Let’s think on something like cakehunt.com.. Or if you can help us to connect with bakers there.. I am sure you will get more than FNP then 🙂

    Regards, Ashish Parik

     

18. 

    Shahid Akhtar March 1, 2016, 5:26 am

    Hi Ashish,
    We also work for many other Vendors part from FnP. And trust me FnP doesn’t give good commissions. You can call me at 9860006670 and we would love to join hands with you for your Goa deliveries.

19. 

    Rituraj Chaturmohta March 2, 2016, 8:43 am

    Hello Ashish,

    I have a bit of background in hyper local so I would try to answer your question “Can Hyper Local Survive in India” with my opinions built through experience.

    The answer is YES. Not only it will survive, but it will flourish big time in years to come. Let me try to explain, on specific points. 

    1. Scale – In the past 1-1.5 years, it has been clearly shown that Hyper Local can grow, and can grow like crazy. I agree that the volumes are built on the discounts offered but at the same time, it has shown that the market/ability to serve EXISTs.

    2. Model – Having established that the market exists, the focus now is to find and establish a sustainable (read profitable) business model(through tweaks across the supply chain from procurement to delivery) to cater to this customer segment. That is why you see reduction in discounts by established players and scaling down of operations. The shutting down of operations in smaller cities is result of learning that may be tier 2 cities are not ready AS YET to buy groceries online. We won’t know until we try.

    3. Customer Behavior – It will take time and money (loads of it) to change the buying behavior of a population which is 1.25 BN. 2 years back, you would not even think of buying groceries online. Today, if you really need, you would buy grocery online, without discount too.

    4.  Unit Economics – The unit economics don’t work out right now, period. They would never work out until a delivery boy is able to do about 50 deliveries per day, with substantial increase in average ticket sizes (both these parameters need almost doubling from the current levels). 

    5. Competition – There is fierce competition right now in hyper local because none of the funds want to miss out on the opportunity. So availability of money is not an issue, team and model is. In time, consolidation will take place and the discounts would cease to be the driver. Then the real businesses would emerge which are there for the long haul.

    To summarize, the market size is huge and the business models would certainly evolve to serve this market. It would need time and money till then. The jury is still out on how much is required and how would this investment be recouped? 

    Regards

    Rituraj

20. 

    Shailesh Deshpande March 4, 2016, 12:09 pm

    The short answer to your question is – YES but not in the kind of discount-fueled marketplace model popularized by the likes of Grofers, PepperTap etc.

    Problems with this model are:

    1. Poor Unit Economics
    2. Cost of customer acquisition is too high
    3. Cost of customer retention is even higher
    4. Average ticket size is too small (~ 350 Rs.)
    5. Real time inventory updates not available from Retailers, pricing fluctuation = unhappy customers
    6. Consumers in Tier-II and beyond are not ready for app-ordering or there’s not enough value-add for them
    7. Small retailers can not/ will not use technology to update prices
    8. Too many SKU’s to manage in groceries

    These are the top issues I have personally encountered while running a Tier-II focused hyperlocal startup (getnow.at/app) from Nagpur. We managed to scale up to 500+ retailers and 11,000+ customers in 12 months. But we pivoted away from a pure on-demand, marketplace model to a subscription + on-demand, hybrid model.

    The retailer simply does not have enough margin to share with you so you’ll have to move up the supply chain and go to distributors/wholesellers which means you’ll have to do stock-n-sale which locks up your working capital. 

    So Id say, do it – but be smart about it. The market will always tell you what works and what doesn’t. Don’t blindly copy trends from over-funded startups that you read about in the media. The market is huge and will reward you if you are patient and continue to deliver true value.

    Cheers!
    shailesh@getnow.at

     

21. 

    Alok Rodinhood Kejriwal March 6, 2016, 12:58 pm

    If you look at Hyper Local, its the Kirana Shop gone app.

    Thats the opportunity and that the challenge of scale.

    Sure, people ruined millions of dollars in figuring what a monk would have told you in one breath.

    But thats how ‘capital finds its efficiency’.  By friction

22. 

    asha chaudhry May 2, 2016, 10:58 am

    hey ashish,

    check out these observations made by vaibhav on peppertap. these are very useful!

    https://www.therodinhoods.com/forum/topics/peppertap-good-bye-you-won-t-be-missed

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