Home / Companies / Start-ups /  Albinder Dhindsa: Grofers focusing on building private label business in 2019

New Delhi: Online grocery startup Grofers, which is set to raise fresh capital from SoftBank Group Corp. and other investors, amid an expensive battle for market share against bigger rivals such as BigBasket and Amazon India, will focus on building out its private label business over the next year, among other things. In an interview, Grofers’ co-founder and CEO Albinder Dhindsa, spoke about the company’s transition from a marketplace to an inventory model, plans to enter new markets, potential acquisitions and the future of the online grocery business. Edited excerpts.

Could you take us through your journey, given that the last 18 months have been pretty good for you after the initial struggles?

2015 was a good year, but 2016 was a struggle for us. In the last two years, our focus has changed and the scale has moved to a very different level from where we started off. We started as a convenience driven platform and as more masses come online that focus has changed from providing affordable products to customers. That’s why we have focussed continuously on the lower middle class and middle class for the last two years and it has helped us out. We will continue to do that.

Given that grocery is the biggest retail business in India, and online is a minuscule part of groceries, what do you think is holding back the real expansion of groceries in India?

Grocery has a different DNA than a horizontal e-commerce business. Grocery will get solved in different ways in different markets. Grocery isn’t going to get figured out as one big chunk but broken up where different players will figure out different parts of the value chain. We try to make products affordable for the mass-market segment but I cannot simultaneously say that we are going to do gourmet because it’s not the same customer that I am targeting. I am much more certain that pan-India, there will be different players for different categories in grocery for every customer segment.

Given that you focus on the lower middle class, people in the small towns find your products attractive. Is there a plan to enter tier-II and tier-III cities?

We haven’t reached there yet. We will reach there but not right now. We will be deeply focussed on figuring out for the urban middle class and lower middle class in Delhi, Mumbai, Bengaluru, Hyderabad, Chennai and Kolkata.

At an overall market level, what has been the growth of groceries in 2017 and 2018? How fast do you see the market growing next year?

We have been growing 3X (in value) year-on-year, for the last two years and will continue to do that. The growth is fairly rapid. At Grofers, our average order size growth is up 30% over last year and the rest of the growth has come from the number of transactions going up.

Any plan to enter new categories over the next year?

We are only going to solve this category (FMCG and packaged products). We are not looking to add any categories where we don’t feel we have a natural advantage.

A lot of disruptive FMCG start-ups have come up in the past few years. Are you looking at any of them as potential acquisition targets?

We are working with a lot of FMCG companies which have come up in premium segments like Epigamia ( flavoured yogurt). But these are not mass consumption categories and we don’t have a lot of overlap with them in our customer segment. However, we are able to partner with them to make Grofers branded products (in the affordable segment) and offer them a larger market access. We don’t feel the need to acquire there. We work with 40 SMEs (small and medium-sized enterprises) and it’s helping us scale nicely.

What will be the strategy to achieve your target of 2,500 crore in revenue next year, which means nearly 4X growth?

First, the focus will be to work with a lot of SMEs to create affordable products. The second will be to expand our partner stores’ footprint from 1500 to 10,000 over the calendar year. This will help us in the distribution part and might contribute a top-line advantage well. The group-buying model is also helping in organic customer acquisition.

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