Online grocery firm Grofers, which has remodeled itself by switching to inventory from hyperlocal and launched B2B operations for additional revenue, has now around 8,500 merchants on board for the latter.
Online grocery firm Grofers, which has remodeled itself by switching to inventory from hyperlocal and launched B2B operations for additional revenue, has now around 8,500 merchants on board for the latter. The company plans to have 40,000 merchants under its B2B services by March 2018, Prashant Verma, VP of marketing at Grofers, told FE. “Under the B2B model, we have tied up with selected merchants and become suppliers to them,” Verma added. He said that currently the B2B business is contributing gross merchandise value of R4 crore every month and the target is to achieve monthly GMV run rate of Rs 100 crore by March 2018. The B2B leg of business caters to categories such as staples, FMCG and general merchandise and pushes its private label in staples to obtain offline presence at these stores. “We help them with our retail expertise in terms of stocking, buying pattern in the area, etc,” Verma added.
Currently, the B2B business contributes about 10% to the total business. The B2B services is operational across three cities — Delhi-NCR, Mumbai and Bengaluru and by end of current financial year it will expand to 7 more cities where it has its own warehouses — Chennai, Pune, Hyderabd, Kolkata, Pune, Jaipur and Lucknow. For B2C services, Grofers operates on inventory for its top 12 markets including Delhi-NCR, Mumbai, Bengaluru, and Kolkata. “Margins in hyperlocal were a lot less at around 5-7% and in inventory the margins have gone up to 15-20% as we procure from the framers directly,” Verma said.
Inventory-based sourcing may hike cost of the company but it targets to achieve larger margins on large ticket-size. Currently, the company is doing about 4 lakh order every month with an average ticket size of Rs 1,300 under the inventory model against Rs 750, a year ago under the hyperlocal model.
Meanwhile, Grofers also runs hyperlocal business for 13 smaller markets such as Bhubaneswar, Ludhiana, Bhopal, Kochi, and Nagpur. In hyperlocal, the company is doing about 1,200 order per day at an average order value of Rs 800. It has partnered with Reliance Retail’s Sahakari Bhandar which handles the logistics for delivery and Grofers operates as an aggregator.
Grofers’ commission from the stores is between 5-7%. The company is also in talks with Big Bazaar but the deal has not been finalised yet. “We see ourselves becoming operationally profitable in Delhi-NCR by end of this year or March 2018. At current levels, burn on each order from Gurugram is between 3-4%,” Verma said.
In FY16, the company reported total loss of Rs 225 crore on revenues of Rs 14.3 crore, according to documents filed with registrar of companies.