Future’s On-demand

LOCAL SERVERS IN DEMAND Aspirational consumers are demanding immediate delivery of products. And nimble young startups are at their command
If India’s largest internet companies such as Flipkart and Snapdeal were built on the rubbles of decades-old brick-and-mortar stores, it’s now their turn to be threatened ­ by younger on-demand startups that are growing like gangbusters. After being introduced to shopping online by the likes of Flipkart, Indian consumers armed with smartphones are increasingly demanding immediate delivery of products, often within a few hours ­ which younger startups designed to cater to high-frequency orders are better equipped to handle than the pioneering giants.Grofers, a delivery startup focused on groceries, is targeting an ambitious climb to 10 lakh orders in August, encouraged by weekend orders that crossed 15,000 a day in July . “We will go up to 30,000 orders a day by August, definitely crossing 25,000. The challenge for us right now is to resolve operational issues like how to deliver in the rains,“ said Albinder Dhindsa, cofounder and CEO of Grofers, which partners with neighborhood stores for delivery of goods.

Other on-demand startups, too, are chasing ambitious goals in a country where people increasingly have less time for domestic chores and prefer being served. This, say investors, makes the nascent on-demand economy an ideal fix for the Indian psyche and the segment most likely to throw up the next few billion-dollar valuation startups.

“The on-demand category hit an inflection point in India a few months ago and it will always trump scheduled orders because it is more convenient,“ said Niren Shah, managing partner at Norwest Venture Partners, which has invested in food delivery startup Swiggy .

Increasing use of affordable smartphones ­ and their ability to show precise locations ­ has made the ondemand business model more feasible and executable in the past year, say investors. “To build a large and highly valuable hyper-local business you need super-efficient logistics play that is better than what momand-pop stores have,“ said Alok Goel, managing director at SAIF Partners, which has backed on-demand delivery companies like PepperTap, Swiggy and Spoonjoy .

The rapid rise in demand has taken even some founders by surprise. Ondemand grocery delivery firm PepperTap’s orders have surged from about 20 a day in January to 5,000-6,000 a day. It now expects to reach 40,000-50,000 orders a day by the end of this year, to achieve which it will have to increase its current workforce from 900 to 3,000-4,000.

“When we started this year we were thinking that we will be 1,000-people strong by end of the year. The kind of growth we are seeing is much faster than expected,“ said cofounder and CEO Navneet Singh.

Online-first restaurant Faasos, which makes and delivers food, han dles around 4,500 orders a day through its mobile application and a total of 1.5 lakh a month. The company aims to increase this to 3 lakh monthly orders by September and 10 lakh by March, according to Revant Bhate, entrepreneur-in-residence at Faasos.

Flipkart said it handles about 80 lakh shipments a month, an average of more than 2.6 lakh deliveries a day .

The number of venture capital investments in on-demand startups has increased from 22 in all of 2014 to 55 till date this year. The capital deployed has more than doubled to $556 million, according to startup research firm Tracxn.

The proliferation of the on-demand economy is likely to incentivise consumers still reluctant to transact on the internet, and open another chan nel that marketplaces such as Flipkart and Snapdeal will have to address, said experts. “This will make etailers stand on their feet and execute at a faster pace, where they will also look to mimic the real offline shop experience where goods are delivered in 4 hours,“ said Goel, former CEO at mobile recharge and couponing firm Freecharge.

Hyper-local startups such as Zopper are already creating marketplaces in segments like mobile and electronics by tying up with local stores.

Some experts said that while ondemand firms provide convenience, the categories they address will be different in terms of impulse buy and the products on offer will be limited as compared to the range of offerings at companies like Flipkart and Snapdeal. “On-demand might work in certain categories like larger white goods, but pricing power of large etailers and services in terms of returns cannot be matched by local stores they work with,“ said Anand Lunia, founder of venture capital firm India Quotient.

Source: The Economic Times

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Author:

Neeraj; an entrepreneur & a visionary in the field of Railway, Defense & Automobiles, is a graduate in commerce and a Harvard Business School Alumni. He’s an expert in govt. liasoning & contracting and has an exceptional network & connections at both local as well as global level. He’s an expert in Market Strategy & Planning and has served number of overseas companies as an advisor/consultant. He takes a profound interest in upcoming startups & is very receptive towards ground-breaking ideas & innovations. He likes to brainstorm those ideas and if the values & philosophies matches; he is even ready to invest his resources, serve as a mentor or act as an incubator to futuristic businesses.

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