Why Grocery Startups are Failing and Going Bankrupt in India in 2023?
Since the start of the pandemic, many startups in different industries popped up and picked up the pace of growth and many of them even grew to Billion dollar startups. Many of them were from the financial, Ed-tech, and B2B sectors. But not many of them stayed for very long.
We are going to talk about one of the sectors that were trending during the pandemic and many startups were formed in that wave, some made profits but many of them failed at the same time but now the pandemic effect is gone these startups are hardly making any profit and shrinking in heavy loses every moment.
What are Grocery Startups?
These are the startups that promise to deliver any Grocery items within 10-20 min. maximum. First, this seems crazy but if you remember carefully this is not something new. Before this, there were many startups that were delivering medicines in a short time, and also there was a pizza-delivering startup that was delivering pizza in 30 minutes.
They deliver normal grocery items and also fruit and fresh vegetables along with basic medicines.
How do these startups work?
Working with these startups is very simple, you order the product on their app or website, they receive your order, pack it and give it to the delivery guy, everything happens so fast.
These startups have many stores in the same city in order to deliver the products in minimum time like they have a store every 2-3 KMs. These are also called cloud storehouses, the concept is similar to cloud kitchens.
Why are they failing now?
There is a very simple reason for this, in the pandemic cities, were under lockdown and strict orders not to come out from homes in order to prevent the spread of the disease. So these startups were very helpful back then because they delivered every grocery and basic item to our homes.
As soon as the pandemic was gone and people are starting to come out of their homes and now, So now they don’t see any need to buy the basic items online and pay the extra delivery fees, They can just go to the shop and buy it themself.
Another reason for this is, these startups are successful in foreign countries because people have to travel long distances to buy basic grocery items, and they buy them for entire weeks and some for months so if they miss something they don’t bother to cover the whole distance for themself ordering it online is more efficient and economical. This is the reason why these startups are successful in foreign countries.
Whereas in Indian there is a grocery shop every next house, and people can buy it anytime so why would they bother to buy it online and pay the extra charges?
These startups are B2C means they can’t make much profit over certain products because they don’t manufacture the product themself, they buy products in bulk from a supplier and sell it on their platform with profit margins, now you understand there is no much margin they can gain from certain products.
These ideas worked during the pandemic time but now it’s very rare that they are going to work in India very soon.
Another reason for failing these startups is because big players like Flipkart, Swiggy, Tata, and Reliance are entering the market, these companies can bear losses for a long period so they can remove the competition from the market by selling at a lower price.
We are going to show you some popular Indian startups and how much are they losing just by being in business.
Some Popular Grocery delivery startups
Blinkit firmly known as Groffers founded in 2013, and recently Zomato a pizza delivery company acquired it. Blinkit reported its financial loss of 1019 Crores in FY22 while these numbers were quite low in FY21, 381 Crores.
Blinkit expenditures were around 1300 Crores while revenue was only 237 Crores.
Most of the money was spent on transportation, contracts, and advertising. One of the reasons they are spending so much money on advertising is that they are making so many losses. To think of whether they will ever recover from these losses is unthinkable.
Read more about the expenditure and losses of Blinkit here.
This is another quick commerce platform based in Mumbai, they are also spending too much on advertising promotions, they almost spend 4 rupees in order to earn 1 rupee.
They suffered a lot on rupees 390 Crores in the first year of operation, but still, they have many chances of success from the other quick delivery startups. Zepto is valued at $900 Million almost $ 1 billion.