Peppertap Loses Patience As It Shuts Down Hyperlocal Delivery Business; To Focus Only On Reverse Logistics

The bubble of hyperlocal delivery market hasn’t yet burst; but yes, it has certainly shrunk.

Peppertap, one of the most promising and rising players of online groceries & hyperlocal delivery niche, has shut down its operations. They have decided to return back exclusively to reverse logistics business, which was their foundation all this while.

Peppertap’s exit can be one of the most crucial developments to have taken place in this sector, and other VCs and Entrepreneurs would be alarmed, concerned and cautious in their expansion plans.

Nuvo Technologies, the parent company of Peppertap will continue to operate as reverse logistics entity, and attempt to ramp their operations. Right now, they are delivering 10,000 to 12,000 orders per day across 30 cities; and serves ecommerce biggies like Paytm, Snapdeal and Shopclues. As per reports, Nuvo will now offer their expert reverse logistics services to more ecommerce companies.

Earlier this year, when Peppertap shut down their operations across 5 major cities and fired 400 employees, then we had asked whether hyperlocal deliveries of groceries isn’t picking up steam?

What is wrong?

Why Peppertap Failed?

Chetan Vashistth, Co-Founder Mads Technologies in Noida, earlier used to manage ground operations of Peppertap at East Delhi, Ghaziabad, Noida, Gr Noida locations. Few months back, he left the company to start-up.

When we asked him about possible reasons why grocery deliveries ‘work with Peppertap, he shared that the management was not able to control unnecessary expenses, and relied on discounts far too much.

He said, “We created artificial demand by giving brainless discounts (as everyone is doing same in this space). Due to huge discounts (proportionate to number of orders), we had to manage huge staff and we went 4 times of optimized number, in terms of ground staff head-counts.”

As per Chetan, and some other previous employees we talked to, Peppertap normally spent between Rs 400-800 to churn out revenue of Rs 100. Such huge burn was ofcourse, not sustainable, and there had to be a full stop.

As per Chetan, “You can’t doubt the capability of the founders and team at PepperTap. Parent Company NuvoEx is doing awesome in reverse logistics. However, during my tenure with PepperTap, I felt that we mishandled the investment and reacted too much on market sentiments.”

Another unconfirmed report claims that investors have lost around Rs 300 crore in their investment; which has been written off.

Last September, Snapdeal along with Russia’s ru-Net, Japanese equity firm JAFCO and BeeNext Ventures, and existing investors Sequoia India and SAIF Partners had invested $34 million in Peppertap, which showcased then confidence in their business model.

In fact, when Peppertap raised another round of investment in December, when Innoven Capital infused $4 million and acquired Jiffstore, a Bengaluru-based delivery start-up, hopes were raised that Peppertap can became that hyperlocal startup which can give some tough competition to Grofers and Big Basket, which are the strongest players in this niche.

But the wafer-thin margin, dependence on discount and advertisement spends to acquire customers, and huge burn rate on operations took its toll on Peppertap, and they had to buckle.

What is your opinion on the exit of Peppertap? Will online groceries ever work in India?