Last month, Grofers announced its foray into the FMCG segment by launching seven private label brands. It now plans to expand its private label portfolio to food and non-food products. Grofers’ Albinder Dhindsa speaks to Ankita Rai on the company’s focus on private label, competition in the e-grocery space and its new pilots to boost growth. Edited excerpts: Post the transition to the inventory-led model in 2016, and now with a focus on FMCG, how is Grofers reinventing itself in the face of increasing competition? FMCG has helped us expand and grow. The focus on private labels is the next logical step.
Customers choose us because we are very aggressive in reducing the end cost to the customer. Our small manufacturer programme helps us sell products at cheaper prices. Private label is an extension of that. After 2016, when we established our inventory model and supply chain, we worked with contract manufacturers and regional FMCG brands and gave them shelf space. Later, we got feedback from customers that they were looking for better price points but were not sure of these regional brands. So we decided to launch private labels and invest in quality control ourselves to give customers an assurance that if it has a Grofers label, it is of good quality.
Amazon has been in e-grocery for three years now, but we have been growing. We continue to build business for our customers, not our competition. We don’t track what our competition is doing. So far, there are three things that have worked well for us — one is our loyal customer base. We have more than three lakh subscribers in the ‘Smart Bachat Club’. We will continue to focus on membership. The Club not only gives customers more value but also gives us predictability of demand. Two, we are going to utilise our small manufacturers programme. Three, we will focus on private label and keep reducing prices of products by working with contract manufacturers and removing inefficiencies in the supply chain.
While FMCG is touted to drive the e-grocery boom, ‘fresh’ is emerging as a key category. Why is Grofers exiting this category?
Fresh constitutes less than 2% of our overall business. We offer limited fresh items and mostly stock SKUs which have a longer shelf life. We are not focussed on it currently. Our average delivery time is 40 hours. So in that time frame, people don’t want to order fresh. Our strategy is focussed on providing value to customers on a small scale of SKUs. If we have to reduce prices of key products, then we have to move large volumes more efficiently across the supply chain. We cannot do that if we have a very large number of SKUs. Our customers understand that tradeoff. Grofers reported losses Rs 268.3 crore in FY17. How do you plan to achieve the GMV target of Rs 2,500 crore for FY19? At the current growth rate, we can easily achieve this target. The average basket size for Grofers is Rs 1,350 and around 80% of our customers are repeat customers. If we continue with our current pace of growth, our revenue target for 2020 is Rs 5,000 crore. We see private label contributing Rs 3,000 crore.
Which categories have your private labels?
Earlier we had private labels in staples but now we are launching across categories such as washing powder, ketchup and noodles. We are developing beauty and cosmetics lines based on ayurveda principles. We are looking to launch products in ayurveda and wellness, with a focus on budget ayurveda. A big part of our personal care range will be based on ayurveda. So far we had 750 SKUs in private labels. With more launches around Diwali, we will continue until we have around 2,000 SKUs in private labels.
What are the key implementations on the supply chain front and pilots you are running to support the aggressive expansion plans?
Instead of relying on the traditional supply chain of distributors, we manage our entire inventory and supply chain. While most large retailers stock inventory of around 40 days, we stock 10-11 days of inventory across most cities. The inventory turnaround is three times faster than traditional retailers like DMart. Our philosophy is more around floor rather than storage. We work with our partners to make sure we hold the least possible days of inventory in our system. E-grocery was traditionally looked upon as a service for elite customers but we have changed that. Recently, we ran a pilot in private labels for general merchandise such as towels and plastic bottles to enable people to buy in groups. Twelve percent of our orders are now coming from women entrepreneurs who buy in bulk for their friends — a Tupperware kind of model.