Going micro for macro growth: How Zomato, Grofers, others can be profitable faster with this key step

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Updated: Feb 23, 2020 1:00 PM

Zomato, Swiggy, Grofers, Practo, OYO, Ola etc. are some of the leading vertical players while companies including Amazon and Flipkart are the top horizontal marketplaces in India.

Vertical startups offer products and services of a particular type, unlike horizontal players.

Hyperlocal vertical marketplaces into categories such as foodtech, online groceries, healthtech etc., which serves customers in limited serviceable areas, need to focus on micro-market segmentation of cities to acquire and retain customers, and hit profitability, said a report by consulting firm RedSeer. While categories such as e-grocery get over 85 per cent of GMV from top 8 cities, others including foodtech and healthtech get 65-75 per cent of their business from these eight cities despite being present in more than 500 cities. The top eight metro cities include Delhi NCR, Mumbai, Chennai, Kolkata, Bengaluru, Pune, Hyderabad, and Ahmedabad.

Focusing on micro-markets and right geographies gain significance as companies in these categories are having relatively increased focus on profitability and unit economics from past few months. Among the key profitability levers in the consumer internet market, these companies are pulling, according to RedSeer, are subscription programmes to help customer stick to them and monetise, a customer loyalty programme that offers more benefits, and B2B tie-ups to expand customer base. Introducing private labels with high margin potential, cross-selling of services, and ad-based revenue through targeted ads for consumers are other levers. Vertical startups offer products and services of a particular type instead of horizontal players that offer multiple services and products under a common marketplace.

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Top 10 serviceable areas (micro-markets), for instance, in Bengaluru had around 60 per cent city’s market share in foodtech. Hence, it is important for startups in vertical categories “to identify the high opportunity micro-markets for the business and understand the demographic and psychographic profile of consumers,” the report said. Some of the leading vertical startups in India are Zomato, Swiggy, Grofers, Practo, OYO, Ola etc. while companies including Amazon and Flipkart are the leading horizontal marketplaces.

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