Gurgaon based online grocery delivery company Grofers has shut down its operations in nine cities including Bhopal, Bhubaneswar, Coimbatore, Kochi, Ludhiana, Mysuru, Nashik, Rajkot and Visakhapatnam.
“We have closed operations in the following cities as we did not see these cities grow at the pace we expected. We are investing in areas where we are seeing great uptake,” said Saurabh Kumar, co-founder, Grofers. He added that the company stopped operations in a phased manner that included offering positions to the employees in other cities. “Some of the employees have moved with us while others opted to leave.”
Earlier Grofers had shut operations in a few areas in NCR which it later resumed. Before shutting down operations in these nine cities, the company was operating in 27 cities. Last year in November the company raised $120 million from Japan’s SoftBank Corp, Tiger Global and Sequoia Capital.
“Many of these players haven’t got the business model right,” Pinaki Mishra, Partner & National Leader (Business and Risk Advisory services) at Ernst & Young India told FE. “Unless they change the model, it would be difficult for them to survive in the Indian market. Launching a full fledged business and then saying it did not work only means that your business model is not capable enough to garner revenues. Unlike in metros, retail stores and food outlets in smaller towns and cities are already offering door delivery service at many places. So what is the value addition these players are doing is a question,” he said.
Mukesh Singh, founder of ZopNow that competes with Grofers, said, “Grofers expanded way too fast which might have led to operational challenges for them in those cities.” However, the bigger reason he believes for Grofers rolling down operations in nine cities was that they did not have enough product range to start with. “They shut down in Mysuru too, where we recently launched. It’s true that in really small towns there isn’t much demand,” he said.
Grofers had recently acqui-hired food-tech company SpoonJoy and logistics firm Townrush. Grofers is the latest tech start-up to either limit operations or shut shop. Zomato had laid off 300 employees in the US last year, whereas FoodPanda had let go of 500 employees and TinyOwl had to leave out more than 200 employees.
Last year, research firm CB Insights had mentioned Grofers as one of the 50 future unicorns (a company valued more than a billion dollar valuation) in its report.