Hyperlocal marketplace Zopper raises $20 mn in second round

Hyperlocal mobile marketplace Zopper has raised $20 million in its second round from Tiger Global and Nirvana Ventures Advisors.

Founded by Surjendu Kulia and Neeraj Jain, Zopper helps consumers buy from over five lakh offline neighbourhood stores through their mobile phones. Users can buy from the comfort of their homes/ offices and get the product instantly from trusted stores. It raised over $6.5 million in venture funding in the earlier rounds from Tiger Global and Niravana in June 2014.

According to a company statement, the investment will be utilised for expanding the services to over 30 cities and strengthening its leadership position.

Neeraj Jain, co-founder & CEO, Zopper said, “The concept of hyperlocal is gaining popularity pan-India, hence, we are leaving no stone unturned in meeting the requirements of this emerging market. With the second round of funding, we wish to fortify our presence in the major cities and rope in more retailers to give them higher visibility and provide a satisfying experience to our patrons.”

Hyperlocal marketplace

Besides Zopper, the fledgling e-commerce industry has over a dozen hyperlocal start-ups such as PepperTap, ZopNow, Jiffstore, Grofers, and Woolpr, amongst others, who have also raised private equity investments in the last 18 months. In the last three months Gurgaon-based grocery delivery firm PepperTap has raised $10 million from SAIF Partners and Sequoia Capital, while Delhi-based delivery outfit Grofers has raised $35 million from Tiger Global Management.

Woolpr, which is into “hyperlocal discovery of products”, has raised about $5 million from Helion Venture Partners, while ZopNow recently secured $10 million from Dragoneer and Qualcomm.

These start-ups enable customers to buy anything from groceries and apparel to medical supplies and consumer durables from their neighbourhood stores. Though they compete with large companies such as BigBasket and Flipkart, their USP is delivery within 2-3 hours.

Navneet Singh, a former merchant navy officer and co-founder of PepperTap, feels that e-commerce is moving to hyperlocal models in specific categories because of higher efficiency, better service levels, and lower logistics costs.

“The model also negates investment in warehouses, the high cost of running those warehouses, filling them up, and delivering items to the whole city/ region. The lack of all of these, coupled with better service levels, make this model much better compared to inventory-led models,” says Singh.

Zopper’s Marketing Head Vaibhav Garg said 85 per cent of people still buy from local kirana stores. This has provided opportunities for his company, which has tied up with over 500,000 local retailers across Delhi, Mumbai and Bangalore. PepperTap, which operates in Delhi and the NCR currently, plans to enter 10 more cities this year. To enable quick delivery, these companies have hired delivery boys and positioned them near the retail stores. PepperTap has about 15 delivery boys at each kirana store.

Zopnow and Jiffstore are investing in setting up a network of delivery boys and a platform that allows users to connect with kirana stores.

“Our delivery boys have tablets on which they receive orders in real time,” says Mukesh Singh, Founder, ZopNow, which does 500 daily deliveries with 50 boys.

Revenues

The start-ups earn revenue by charging a commission of 5-15 per cent on the bill amount from the store. The commissions will cover expenses only when volumes grow to a substantial level. For now, the focus is on volumes and not profits.

PepperTap does 150-200 transactions in a day. On weekends and promo days, it gets about 200-250 orders. In contrast, Localbanya does over 1,000 deliveries a day.

“Grocery in India is a huge market and grocery shopping the on mobile is already seeing strong adoption. We believe the hyper-local marketplace approach is the most efficient way to cater to this market and can scale very rapidly,” says Ravi Adusumalli, MD of SAIF Partners.

That the format seems to be succeeding is apparent from the fact that giants Amazon and Flipkart are also looking to tap the hyperlocal segment. Amazon started a service called KiranaNow in Bengaluru last month to deliver supplies from mom-and-pop stores to residents.