Subscription commerce (aka micro delivery) space has become a tough business in a unique way. Unlike regular online grocery play, subscription commerce has sound unit economics and stickiness or loyalty for a simple reason – it enables people to order daily essentials, including veggies and grocery.
Despite such advantages with the model, startups such as Milkbasket and DailyNinja have been finding it difficult to convince venture capitalists for a sizeable round – $25-30 million or beyond. The apathy of investors has been making them cut down growth plans and focus on profitability.
Unilever Ventures-backed Milkbasket has now shrunk operations in about 250 societies across NCR and Bengaluru. According to three Entrackr sources, the company shut down operations in as many as 170 societies in Bengaluru.
Milkbasket co-founder and CEO Anant Goel has confirmed the downscaling without confirming the exact number of societies it withdrew from. “These societies are where we were not able to maintain our delivery standards and hence, very high refund rates. They represent less than 2% of our customer base. So, we decided to move,” he said.
Currently, Milkbasket operates in over 3,000 societies across the cities mentioned above. However, Goel claims that less than 1% of the overall revenue is impacted post this action. The company claims to do revenue of over Rs 30 crore every month.
So far, Milkbasket has raised about $26 million across several rounds from Kalaari Capital, Unilever, Mayfield, Blume Ventures, Lenovo Capital, many family offices and a clutch of HNIs. Six months ago, it scored an internal round worth $10.5 million led by Unilever.
Sources also indicate that Milkbasket has laid off about 10% of its workforce in a bid to shrink operational costs. But Goel has denied it. “We have not undertaken any such activity. We do regular performance appraisals every month and exits and hires is a routine thing,” he said.
When asked about potential funding in the company, Goel said that Milkbasket is in talks with private equity funds since they have crossed the stage for domestic VCs funding range. “We are nearing profitability as we cut down marketing and other overheads to a large extent. Milkbasket would be a profit-making entity by early next year,” Goel said.
Subscription commerce has turned fiercely competitive with the entry of Swiggy and BigBasket. The Naspers-backed firm had acquired SuprDaily while BigBakset acquihired Pune-based RainCan and Morning Cart in Bengaluru to strengthen their bets in the micro-delivery space.
In terms of scale, SuprDaily is the largest player followed by DailyNinja, Bigbasket’s BB Daily and then Milkbasket.
Presence of deep-pocketed players has been one of the major hurdles in the funding of Milkbasket and DailyNinja. Venture capitalists are shying away from cutting a large cheque for them largely due to the presence of Alibaba, SoftBank, Naspers and DST in the online grocery segment. The Chinese behemoth counts BigBasket in its portfolio while SoftBank has Grofers.
Naspers and DST have backed Swiggy which expanded into grocery through Swiggy Stores.
While Milkbasket claims to turn profitable this year, it certainly requires sizeable funding to propel growth. Going forward, it would be exciting to observe whether the likes of Milkbasket and DailyNinja are able to raise more dollars or eventually consolidate with large players in the grocery space.