This is the real reason why Pepper Tap and Nearby shut down

Online grocery startups like Pepper Tap and Nearby have shut down their businesses recently. Alibaba backed Paytm too, silently pulled off its grocery app Paytm Zip from App stores within three months of its launch in 2015.

“The reason for shutting down these e groceries is because Indian customers are still more of a Do-it-for-me rather than Do-it-Yourself. The mindset in India to shop for groceries only online will take some time to convert,” said Pratik Jindal, MD, e-retail of SRS Grocery, one of the first industry players to embrace the hybrid model.

In order to cater to a mixed crowd and demand there is a strong need of both an offline and online presence in this market, he explained.

Besides mindset shift, technical faults in the design itself lead to their downfall.

Localisation factor

With respect to groceries, offline models have always worked because of the localisation factor involved. Consumers went to inventories and supermarket to fetch veggies and fruits.

“The change in mindset is not easy enough. We overwhelmed the customer with too many online strategies just when they started to accept it. Not much time was given to adapt,” said Pratik.

Delivery cost

The delivery cost was always higher in the models designed.

“Delivery costs for e-grocers vary between 8 to 11 % while the offline margins of retailers are 15% to 20%. Since one cannot do away with retailer margins and delivery cost both pure play online groceries have very less margins and it is hard for them to drive profitability let alone break even. Given the low operating margins and the challenges of offering better deals omni-channels is a safer bet when it comes to sustaining our business in this space” he remarked.

Yes, offline model solely won’t survive the digital wave either, for obvious reasons.

“Offline and Online channels are two different entities and will continue to co-exist depending on the mood of the customers. Industry players have now started recognizing the potential of the hybrid model as Big Basket is planning to expand its presence offline in order to stay in the competition,” he concluded.

(Image credits: indiatimes)