Showing posts with label Home Delivery. Show all posts
Showing posts with label Home Delivery. Show all posts

08 May, 2021

The E-commerce conundrum in Food Delivery

I was present at the India Retail Forum in 2012 at Mumbai’s Renaissance Hotel. The annual event was a carnival of sorts for Retailers across the country. Images Retail, the magazine publisher’s flagship event attracted thousands of retail enthusiasts every year and the year 2012 was a landmark one. This was when there was a cooling down in the Indian Retail story which scaled peak heights at the time. An estimated 350+ Malls were operational all over India and another 300 were in the making. India was touted to have 1,000 operational Malls by the year 2020 (which didn’t happen, obviously). Each mall would have atleast 250+ vanilla stores, 5-6 Anchor tenants and High Street rents had doubled in less than a decade. 

During an interactive session, Mr. Kishore Biyani, Founder and CEO of the Future Group was asked what went wrong with the group – this was the period the Group saw one of its toughest times in their history ever since they started operations in 1987 with their first ever company Manz Wear Pvt. Ltd. which sold suiting and shirting in Calcutta by the name and style of “Pantaloons” which was a combo-word of Pants and Patloons. Kishore Ji quipped that “they wanted to be everything to everyone” and hence a few things collapsed while a few stood tall and successful. The group’s e-commerce outing FutureBazaar.com was a colossal failure and couldn’t compete with a start-up named “Flipkart” (in 2012-13). So ironic looking back now. Their attempts to go “phygital” just didn’t work. Grocery e-commerce was unheard off and hyperlocal as a strategy didn’t even exist or was scripted. 


From running neighbourhood grocery shops measuring 1,000 sft. to running the Central chain of Malls across India, a hypermarket which redefined grocery and household products shopping in India, food courts and home improvement stores, joint-ventures with F&B chains and even a chain of kiosks by the name “ChaMosa” , which as the name suggests sold Chai, Samosas and may things more, the group was in to every format of retail which was in the book and which wasn’t. But the smart and suave entrepreneur that he is, Kishore ji exited his first love – “Pantaloons” store chain for Rs. 1,600 Crores to Aditya Birla Retail and pared an equal amount of debt driving the company back to success, profits and growth, eventually. 


Same is the case right now with many restaurants who wish to manage door delivery of food to customers. Off late, there has been a growing disquiet between the F&B houses – chains as well as neighbourhood standalone ones with the Food Tech companies such as Zomato, Swiggy among others. And the main bone of contention is that the tech platforms are overcharging the businesses – ranging from 20-45% towards discovery, discounts and delivery of food items to customers. What the restaurants believe is that these companies are mere delivery platforms. What the Food Tech companies are – are much beyond that. 


In India, eating out is “entertainment”. People dress up, wear make-up, connect with family and friends to step out for a meal – whether it is to celebrate a birthday or anniversary, salary weekend or just a casual outing. The premium that bars, pubs and restaurants have been commanding for “dining in” in India is not just for the great food, but also for providing an enjoyable and safe setting for individuals and cohorts of people to spend their time. So, more the premium a location is, the more expensive is the food (a cup of Coffee or Dal-Roti at a local restaurant vs. a  premium restaurant in a Mall, or a Star hotel & so on!). 


Assuming that patrons would keep paying more for the “setting” coupled with decent food, many restaurants across India have been charging a premium which has only been on the rise over the years. Even in a fiercely competitive category like pizzas – where Dominos specialises in take-aways vs. PH offering world-class dining options, prices of pizzas have remained more or less the same though Dominos saves immensely serving pizzas even to in-house guests in corrugated boxes with plastic chairs and tables. The likes of McD or BK have not been able to churn out profits like elsewhere in the world due to this continued focus on the restaurant format, the ambience and expected service standards. For Ex., India is probably the only country where we consumers expect someone to clear the paper packaging on which Burgers and Colas are served. So, the “cost of housekeeping” increases the business cost.


Now that consumers have been used to door delivery of F&B, mostly during the last 12 months and even before the pandemic began, the footfalls at restaurants for dining has dwindled. Sadly, most restaurant chains have not kept up with times and have followed their traditional ways of operating the business with the same kind of dine-in behaviour which today, unfortunately is becoming an expensive affair. With a total lockdown announced across some of the major towns in the country, restaurants are unable to operate the dining facility though the Government has allowed multiple delivery options. 


Now, what the Food-Tech companies have done, obviously is to charge consumers for deliveries and also charge a hefty commission from restaurants to catch-up on their hereditary losses – though am not sure if this model is sustainable. Even when the “Unlock” began around Aug. ‘20, many restaurants failed to convert their business model with a deeper focus on takeaways and deliveries, instead waited with bated breath for customers to keep pouring in. Until the second wave hit us and which has hit us very, very hard that there is no looking back now and consumers becoming weary to venture out, even after the so-called second wave slows down sometime in Jun. ‘21.


The ongoing tussle between the Restaurants and Food-Tech companies (I refuse to call them delivery partners because they are not just that) has reached a tipping point now that many restaurants are pulling off some of these platforms and are instead using pure-play delivery partners such as Dunzo, Shadowfax, Delhivery among others and / or are merely using their staff and waiters to deliver the food items. To opine the least, this is a disaster in the making.  The waiters and staff are not the “delivery person” material as their skill sets are quite different. But now, due to an imminent loss of livelihood, I believe they would double up their roles until they find their fitment elsewhere. 


To believe that each one is cut-out for the other’s business model is a myth. We saw how many so-called “Cloud kitchens” were created by the Food-Tech platforms which have not grown beyond a point. I am no one to judge but I guess, it’s best for the service providers to simply focus on their core skills so we consumers can keep at it without breaking this chain of discovery, ordering and reordering. Whether the players are listening to, is anyone’s guess.

12 June, 2014

Online Grocery Shopping

Big Basket

There has been enough spoken and written about the Flipkart-Myntra deal. Online Commerce is no more a hype at the moment and there is no money to be made – that’s the response most subject matter experts are saying although they don’t want to be quoted since they are in various advisory capacities for many such companies. With a healthy two-digit margin, if offline Retailers are not able to succeed (read: profitable), then how would these companies survive- they ask. Having said that, there is not a single ECommerce company (in India) that has tasted profits yet. While many promoters have made millions of dollars collectively, the companies in question still remain unprofitable. I would presume that a very few of them would even be making unit level margins. Such is the discount structure and focus on Topline that these companies are almost forgetting that the main intention of a business is to create value through profitability and not just a valuation (to subsequent investors). Amongst the online frenzy across categories, the most dreaded and the most challenging category is grocery & daily needs including fruits and vegetables. Bangalore based BigBasket.com already has some headway while WeStaple.com from Noida and a few others who are regional players are taking the lead to establish their positions. Big Basket even has a Mobile app for Android and iOS from Apple. Take a look below at what their customers have to say;

https://www.facebook.com/Bigbasketcom 

http://venkysundaram.wordpress.com/2013/05/29/why-i-stopped-using-bigbasket-com/

https://www.facebook.com/WEstaple

Ganesh Bigbasket

K Ganesh and his wife Meena Ganesh are an entrepreneur and angel investor-duo. BigBasket, which is run on a daily basis by the founders of e-tailer Fabmart, on the other hand, is one of India’s only online grocery stores. Online grocery stores have been seeing big traction around the world, as recurring orders prop up the profitability of the niche e-commerce category. “The Series B funding for BigBasket, which should close in the next three-to-four months, will be around $40- $50 million. We believe it has huge potential, with gross margins of nearly 20 per cent. Every order is profitable for us on BigBasket,” Mr. Ganesh told The Hindu.

Bigbasket founder Hari Menon, a successful entrepreneur who sold his brick-and-mortar retail chain Fabmall and Trinetra to Aditya Birla Group, is bullish. “It’s a huge, underserved market. Convenience is a major factor in our metros. We are finding that at least 85% of our customers return after the second order.” Menon said that revenue is increasing 20% each month. Bigbasket delivers 4,000 orders daily. In Mumbai, where the average size of an order is Rs1800, it does 800 deliveries each day. The site has served 200,000 customers so far and is expanding to Delhi and its suburbs. Menon said the company did Rs85 crore ($14.3 million) in revenue in 2013-14 and was on course to do Rs200 crore ($33.7 million)  in sales this fiscal year.

While the category is exciting, most customers seem to expect the savings (on real estate) to be passed on to them, which in reality is not. If the Real Estate savings are about 10-12% on Sales, the promotions and marketing costs are much larger than that, especially the first-time acquisition cost of customers. While most players do not offer much of discounts for every item, there are chances of combined savings when you buy more quantities or multiple brands from the same company.

However, the overall sentiment seems to be simple- customers would buy products online only if they value their time more than the time spent in shopping offline at Retail Stores such as Spencers, Foodworld, Nilgiris, Big Bazaar, etc. India has a huge density of Kirana Stores while Organized Retailers in the big cities are already quite popular for more than a decade now. Fruits and Vegetables are still preferred to be bought from the vendors who sell fresh quality items, most of them directly sourced from the Markets. Retail FDI in multi-brand retailing is a contentious issue and even the new Modi-led Government is not actively pursuing this at the moment, for the benefit of the trader community who form a big chunk of vote bank.

Online Grocery, at the moment is restricted only to those who work in odd-times, say BPO Employees and many others who would find it difficult to shop at a nearby store especially those who live in far off suburbs. Having said that, the Kiranas are much more active these days, offering various facilities such as door delivery to credit facilities to their customers. While Online Grocery has a great future, time will be a real reckoner.

17 April, 2014

Digital Retail is still nascent

Croma, which is a part of the TATA Group has been my preferred store for shopping all things electronic over the past few years. They customer service is friendly, well-stocked and well maintained and operated stores. The staff also double up as digital experts, mostly guiding customers on why they need to buy a gadget, rather than what they need to. The apple Assistant at one of the Croma Stores I frequent is more like a good friend and advisor now – I reach out to him regarding queries about the phone, the software, the enhancements and a whole lot. Croma’s main competitors in the organized Retail space include EZone from the Future Group and Reliance Digital, a part of Reliance Retail. Then there are the local biggies, such as Viveks, Shahs, VGp, etc in Chennai and ofcourse the most infamous Ritchie Street off Mount Road which is the hub for electronic products in the city. Croma has fared much better than the others while it faces stiff competition from Reliance which is expanding rapidly off late.

Tata photo

I visited the Croma Store on Mount Road a month back, to enquire about a revolutionary device – a a USB Stick which provided 3G & Wi-Fi services on the go. The device just needs a plug point – AC or DC; which means you can use it as a wi+fi device using the cigarette lighter slot in your car and can provide its service upto 5 gadgets including laptops, tablets, phones, iPods, etc. The device has been around for sometime and the staff say that it is seeing brisk sales every other day that it gets sold out within a few days of stocks coming in to the store. So, the store that I went to didn’t have the stocks and they apologised for the same, and said that I could pay the advance for the device and that they would call once the device reaches the store. Somehow, I wasn’t comfortable with that idea, since I wanted the device then and there.

I set out looking for the Tata DOCOMO Store that exclusively sells these devices and offers other solutions and services of the same nature. Even they didn’t have the stock at the time I went. However, the staff was quick to note down my details and said he would call me the next day as soon as he received the stocks. And he did promptly call me the next day. Within just four hours, the device was working!

Croma

So, why did the guy at Croma not do what the guy at the DoCoMo store did? Since, the sales targets were different to each one of them, simple. For a mass retailer, which attracts hundreds of customers to their stores, the kind of focused service is always on the back seat. For the guy at the exclusive store, his key targets are selling the USB sticks and converting buyers into users and users into big spenders. It’s a known fact that “data usage” is indeed going to be a money spinner in times to come for Telecom companies, with SMS being replaced by the likes of whatsApp and ISD calls being replaced by the likes of Viber, Line, etc.

I would have expected Croma, which is also a Tata Company to work closely with another division of the group (DoCoMo is a Telecom company operated by Tata Teleservics). It is challenging, since they are different companies with different cultures. Also, the supply chain mechanism could be different. The big learning was as consumers, we need to visit the right kind of stores to get our things done. While it is simpler to buy online, it takes much more time to get the sim-card activated which required personal identification at a retail store, and hence only elongates the process.

22 September, 2010

It was a Sunday afternoon and a lazy one at it. And that’s just when someone at home asks for a pack of NAN 3 – a health substitute from Nestle SA that’s given to children. Given that it is a product not available so easily and usually procured from Pharmacies or Drug Stores, no one at home is willing to hit the road and that’s when the friendly Kirana comes to remembrance. One phone call and it would be delivered in a few minutes, suggested one of the members at the household. The next minute, someone was making the call and the friendly voice at the other end was actually prodding for further purchases if the family needed something else. A few other items were included and it was promised the stuff would be delivered shortly. And indeed, it was. In the next 15 minutes, there was a young boy at the door with a bag full of items for well over Rs. 500/-. This can happen, most probably only in India. We as a nation are not yet fully used to shopping in a cycle – although we see major crowds at the large hyper and super markets, consumers miss out buying many things – either they are out of stock or they are out of their shopping list. This is very unlike in the West where there has been an evolution of shopping habits, usually during the beginning of the month, or even on weekends, well in advance for the week ahead. But here, most times we prefer the “just-in-time” way.
 
While the debate and discussion regarding opening up FDI in Retail has prevailed for long, there is little doubt that Organized Retailers could offer such services. “Free Home Delivery” is usually advertised at many Supermarkets like Foodworld, Spencers, Nilgiris and even a few Hypermarkets like Total, Food Bazaar but they all come with riders – that the distance should be within a 3-5 km radius, the total bill value should be above a certain level and that the delivery could take between 2- 6 hours depending on the day of the week and place of delivery. Naturally, since the cost of operating is far higher for Organized Retailers than the neighbourhood kiranas. The big boys need to maintain books of accounts, a mini truck or a van to deliver and a driver to drive (not to forget the maintenance of these vehicles) and many other internal processes. All these are negated with the local kirana. Depending on the level or urgency, the kirana is willing to deliver at the earliest and usually within the locality and most of them operate in one.
Cash & Carry Retailers (are they actually retailers?!?) such as Metro AG have been operating in India since 2001 and most recently Wal-Mart in a JV with the Bharti Group has been operating such stores in Punjab under the trade name “Best Price”. These stores usually sell their wares to the smaller kiranas, hotels, restaurants, etc. who in turn retail to end users and consumers. Since the large Organized Retailers order their goods directly from the brands and suppliers, they are able to pass on higher margins to the kiranas who in fact benefit from this exercise. This has been a strong point supporting FDI in Retail all along since many in the industry believe that it would do well in the long run for the Retailers, the Kiranas and the Consumers.
 
It is quite natural to see more deliveries over the weekends, festivals days and specials events such as Cricket Series and Public holidays as there are more people to consume at home. Not just the kirana stuff, even door-delivery of food and other beverages seems to be on the rise. Last Sunday along with the morning newspapers, there were pamphlets from atleast three restaurants in the area – all small time local operators. An A4 page size pamphlet cluttered with a whopping menu of more than 100 items printed in two colours on the back and front size. But who cares! As long as the food is tasty and delivered on time, nobody bothers. What’s important is not just quick service but the quality of products. Kiranas and small-time eateries take greater care while packing, transporting and delivering as these simple steps are their real “Brand Ambassadors”. If all three were good the first time, chances are they would be called again.
So, no matter how many large Retail formats open up in this country, one reason why Kiranas will remain in business is “convenience” – a fact that most of us live by.

Long Live Kiranas! Long Live Home Deliveries!

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