Hyperlocal-cum-e-grocers Grofers had a topsy-turvy 2016 during which the Softbank-backed company laid of 10% of its staff and trimmed its operations. However, the company’s financials have taken a turn for the better. While the company is currently clocking a loss of Rs 12 crore per month, revenues are in the region of Rs 11.7 crore per month. In July last year, the company was losing Rs 7.2 crore every month on revenues of Rs 4.8 crore. Grofers India, has reported a loss of Rs 225 crore on the back of revenue of Rs 14.3 crore in FY16. While the e-grocery firm has seen a slight increase in the daily number of orders at about 15,000 compared to the 13,000-14,000 orders last year, as per the firm, it is the 45% jump in daily order value which has been a key factor driving the improvement in the finances.
The average order value currently stands at Rs 1,450 compared to Rs 1,000 that it earned in December last year. The average order value in July last year stood at Rs 750. “Currently we generate 40% of our sales through our private labels which we sell under the brand – Best Value. The sale of private labels has picked up and since they command relatively better margins, our overall margins have improved, Albinder Singh Dhindsa, CEO and co-founder, Grofers said. Dhindsa observed that over the years, consumers have acquired a habit of buying groceries online. “We have increased our capacity by increasing the assortment of goods. For example categories such as general merchandise, which the platform did not offer earlier, have been added,” he added.
Moreover, with 85% of the orders being repeated, the company claims to have been able to bring down the cost of customer acquisition. Moreover, the over-hauling of its delivery mechanism by replacing two-wheelers with mini-trucks and replacing same-day delivery with next delivery has allowed it to lower its losses. Earlier in an interview to FE, Dhindsa said that the change in delivery model had lead to reducing monthly loss by 30%. Currently the company in total has 24 warehouses across the country with three large warehouses of 60,000 sq feet in Delhi, Bengaluru and Gurgaon, and the rest smaller size warehouses of 20,000 sq feet are in Delhi, Kolkata, Jaipur, Chennai and Hyderabad. Sourcing is another area where the start-up had tweaked the model to better its margins, Dhindsa explains.
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The company is now sourcing directly from companies such as Patanjali instead of its distributor Pittie Group, thus earning a higher margin. “Also, we have on-boarded local brands which is sold at a lower price, thereby earning a higher commission,” he observed. For Dhindsa and his team this year, the focus will not be on expanding its service to other cities, rather turning the business more efficient. “The aim is to get more brands at a better price, so that we can get better margins, which will also allow us to provide products at affordable rates to consumers, without taking a hit on our revenue,” he said.
Grofers last raised fresh funds in November 2015. At the time it received $120 million in fresh funds largely from Japan’s SoftBank. Other investors including Russian entrepreneur and venture capitalist Yuri Milner, Tiger Global and Sequoia Capital also participated in the round. Grofers India is a new entity formed in June 2015, and with the earlier company called Locodel Solutions transferring its entire business to the former, the financial of FY 16 cannot be compared to that of FY15.