Online grocery provider Grofers recently said that the company will be centering its focus on its private-label offerings. The Gurgaon-based startup will in the meantime stop the sale of fresh products in certain cities including Bengaluru. Japan based SoftBank had recently invested $62 million in the company for a 35-40% stake. Grofers has been trying to enhance their business model for past few years.
The CEO of Grofers, Albinder Dhindsa said that 2% of the company’s overall revenues come from fresh products. He added that they might return with sale of fresh products after a few months but for now the company wants to focus on its growing private label business. After receiving the fresh investment reports said that Grofers will shut its operations in many cities to change its business model. Currently the company will be establishing its base in Delhi (NCR) by enhancing technology and supply chain. The company also claims to make profits in the city on pre-order basis.
Albinder Dhindsa explained the company’s strategy “Private labels can help improve margins, but it’s not the only way to reach profitability. It comes from having good cost control and discipline.” Big Basket leads the online-grocery delivery sector with 35% market share by running its own private label ‘Fresho’ which alone provides 18% of the company’s overall revenues. Grofers follows the sector at position two with 31.5% market share. The company has been adding items to its non-fresh private label for the last seven months. The company adds around 30-40 products every month. Amazon follows Grofers at 31.2% in the sector.
Many big online players like PayTM, Flipkart and Amazon have been trying to introduce fresh products on their delivery platforms. In an online grocery report by Praxis Global Alliance, fresh food has the lowest margins with 7% market share. The share can reportedly go as high as 30% if products are sourced directly from the farmers and sold under the firm’s private label.