‘Hyper-locals’ are the new kids on the e-commerce block

Hyper-local seems to be the new buzzword in the fledgling e-commerce industry. Since the beginning of 2015, about half a dozen hyper-local start-ups such as PepperTap, ZopNow, Jiffstore, Grofers, Woolpr and Zopper have raised big money.

These start-ups enable customers to buy anything from grocery 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.

Investor interest 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. Tiger has also invested $5 million in Zopper, a “hyper-local marketplace”. It is looking at raising another $50 million soon. Woolpr, into “hyper-local discovery of products” has raised about $5 million from Helion Venture Partners while ZopNow recently secured $10 million from Dragoneer and Qualcomm.

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

“The model also negates investment in warehouses, high costs 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.

Kirana dominates Zopper’s Marketing Head Vaibhav Garg said that 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. The plan is to tap the top 30 cities by the end of this year.

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.

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 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 hyper-local segment. Amazon started a service called KiranaNow in Bengaluru last month to deliver supplies from mom-and-pop stores to residents.