One thing certain from grocery delivery business is that it is difficult, risky, and problematic. Many challenger had to shut down their business after a few chokingly unprofitable years. Honestbee is one of the most recent examples. And Grofers has many things Honestbee needs to learn about.
Albinder Dhindsa and Saurabh Kumar founded their company at 2013. They started confidently with a total of $165 million investment within 10 months. Sequoia Capital, Tiger Global Management and Softbank trusted them the money just a few months of its initial launch.
How Grofers turned from a confident startup to a struggling one
The concept of delivering fresh groceries from the stores in two hours seemed like a brilliant idea. But soon, Grofers found out that it wasn’t the best model after all. It then pivoted to a more risky inventory model.
The twist costed the company a $100 million off their valuation in 2018 from the previous $400 million. It took the wrong step in solving the problems of complains from customers. The previous models got the company problems in completing all of the customers’ orders.
It then opened dark stores, replacing the previous traditional stores. Then it opened sub-optimal dark stores. And it put Grofers in an even more difficult situation. The company had to shut operations in some cities, pulling out certain business and even letting go some employees.
The dire situation is very much alike with Honestbee’s current situation. But instead of giving up like Honestbee, Grofers went ahead. With the investment left, it opened a warehouse. Then it focused its stock keeping units on the middle-class customers. That meant getting rid of unnecessarily niche products.
With more warehouses in more cities, Grofers now has 13 cities with its service available. It even finds profit in New Delhi. And it’s gross sales increased by 11 times from January 2017 to January 2019.
Getting new investors is a difficult task for the company. Its previous fail made some investors reluctant to even look at the company’s number. So instead it turn back into the previous investors. And it successfully raised $200 M from Softbank Vision Fund, South Korea’s KTB, Tiger Global and Sequoia Capital.
