Grofers, the upcoming, hot hyperlocal delivery platform which has expanded to 27 cities in the last 12 months have suddenly turned cold. In a major decision, they decided to exit 9 Indian cities.
This is surprising for the fact that they had recently raised Rs 800 crore in their 4th round of funding, which had swelled their valuation to Rs 1900 crore ($300 million).
But it seems that the new business model for expansion was flawed and/or they weren’t prepared for the long slog.
Interestingly, Grofers is blaming the smaller cities for this exit decision.
Albinder Dhindsa, co-founder of Grofers said, “The smaller cities are not ready for hyperlocal business yet, once they are, we will reconsider our strategy..”
The 9 cities where Grofers have ceased their operations are: Bhopal, Bhubaneswar, Coimbatore, Kochi, Ludhiana, Mysuru, Nashik, Rajkot and Visakhapatnam.
These cities had around 20 odd employees, who have been relocated to other cities.
Grofers Losing Patience?
As per available reports, Grofers ran extensive TV campaigns in these cities for the last few months, but unfortunately, the response was dismal. It seems that Grofers were testing out these markets, and considering that they had a benchmark which was never breached, they decided to pull the plug.
But such a decision based on just TV ads results seems far-stretched. After all, there is no way to calculate the ROI of TV ads (besides counting the orders, which is way too optimistic); and even if there had been no response, Grofers could have used patience to nurture these markets, create awareness and then build the brand.
In seems that Grofers ran out of patience this time.
All Is Well With Hyperlocal Niche?
Few weeks back, Grofers had temporarily shut down operations in Gurgaon, owning to ‘logistics’ issues, but was back after a delay of some days. Last year, Grofers reported a loss of Rs 3.9 crore on full years’ revenues.
In Mumbai, LocalBanya has already shut down their operations, but rumors are afloat that they may come back very soon.
And now, Grofers exited 9 Indian emerging cities in a flash.
We had earlier reported that Grofers have shifted their headquarters to Singapore, considering the low tax structure and ease of doing business there.
Grofers is considered to the biggest competitor of Big Basket as of now; but after this news of exiting 9 cities, it seems hyperlocal vertical will need some time to sort out the market realities.
We will keep you updated as more details come in..
Grofers employees especially at the local level simply do not possess the skills and ability to take businesses to the next level . recruitment is a mess leading to onboarding of employees lacking basic commitment.They are surviving only because of the huge funding otherwise they will find it very difficult to survive in the market.
On demand hyper local delivery business model has constraints in terms of cost, time based consumers. So that acceptance in small cities is quite limited. Unless its is mixed with other revenue model, the probability of success is limited.
here is one more article explaining the learning from Grofers Shut down of Operations in Small Cities –
http://www.fuckedupstartups.com/fs-analyser/grofers-shut-down-operations-in-9-cities-lessons-for-small-startups
Even in Mumbai Grofers has scaled down its presence
Will it extend to other players in the same segment ?
I guess Navneet singh is founder of Peppertap Is that am i wrong ? …. Seeing navneet singh as co-founder of grofers in your article.
Yes, Srinivas that is right. We have corrected the same. Thanks for pointing out..
Navneet is not in Grofers , He is in Peppertap(a rival)
We have corrected the same. Thanks for pointing out..