Grofers would never get into micro-delivery business as it's unviable: Albinder Dhindsa

Milk-tech aka micro-delivery business is having a ball in India. While the segment is going through consolidation as BigBasket and Swiggy are acquiring RainCan and SuprDaily, Saama and Sequoia have just showered $3 million in DailyNinja.

Since the beginning of this year, the segment has been a talk of the town amongst VCs, media, and entrepreneurs as it drew the attention of biggies - Swiggy, BigBasket, and local blue-chip early stage investors such as Sequoia, Kalaari, Blume and Saama Capital.

Besides, Unilever, Beenext, and Lenovo Capital also put their bets on MilkBasket in the segment. Analyst and experts see the micro-delivery platform as an answer to missing ‘loyalty factor’ in overall online grocery space. However, Grofers CEO Albinder Dhindsa doesn’t agree with the sentiment.

“Acquiring customers through milk subscription isn’t challenging but covering logistics charge is extremely difficult,” says Dhindsa. For uninitiated, Grofers had launched ‘Morning Store’ in November 2016 wherein it used to deliver milk, eggs and other daily essentials with a free newspaper in Bengaluru and Gurugram.

Within two-three months of experiment, Grofers had pulled the plug on Morning Store. But, why? Albinder answers, “We didn’t see merit in doing it and realised that the model was unviable. The average transaction size was below Rs 80.”

Grofers was going through a painful pivot in the second half of 2016 and in the process it also explored chances of building micro-delivery vertical. “By February our core business picked-up and by then we were sure that such model isn’t complementing our vision. So, we killed it,” adds Dhindsa.

Also read: Exclusive: Swiggy to acquire micro-delivery startup SuprDaily soon

While there has been a murmur in the ecosystem that BigBasket has gained a lead on Grofers in Delhi, Dhindsa emphasised that it has a wide lead in Delhi (NCR) over Alibaba-backed e-grocer. “We do about 18,000 and 5,000 transactions in NCR and Bengaluru respectively on a daily basis,” says Dhindsa.

Over the past eight months, private labels in food vertical have picked-up with a fast pace for the SoftBank-funded company. “About 30 per cent of our volume in staples and processed food come from our own labels,” outlines Dhindsa.

Currently, Grofers claims to process 40,000 delivers every day.

On asked whether Grofers will follow the trend of evangelising micro-delivery model at some point of time in future, Dhindsa explains, “We would never do that. Instead of swaying away with the popular trend we would continue laying greater emphasis on core business - i.e; monthly stock-up and going after mass market.”

Since building a loyal consumer-base has turned out to be difficult, matching unit economics in a pure-play grocery delivery model is tough. On the contrary, micro-delivery platforms promise to have a loyalty factor through milk and other daily essentials requirement which could be used in cross-selling.

But, will micro-delivery platforms get success in cross-selling other products and services with a basic premise of milk delivery? Only time will tell.