While the grocery business operates at a gross margin of 10-12%, fashion and lifestyle offer 30-40%
Bengaluru: Online grocery store Zopnow, which sources items from hypermarkets HyperCity and More, instead of maintaining warehouses, is planning to diversify into the high-margin fashion and lifestyle space through similar tie-ups with a number of retailers and brands by December.
Through its tie-up with HyperCity, promoted by K. Raheja Corp., Zopnow has gained access to the inventory of K. Raheja Corp’s other businesses such as Shoppers Stop and bookstore chain Crossword, said Zopnow chief executive Mukesh Singh. The firm is also in talks with other retail houses and brands, Singh said, but declined to disclose names of prospective partners.
Currently, Zopnow delivers groceries to homes in Bengaluru, Mumbai, Pune, Hyderabad and Gurgaon.
While the grocery business operates at a gross margin of 10-12%, fashion and lifestyle offer 30-40%.
Online fashion retail is poised to become a $2.8-billion business by 2016, according to a report by venture capital firm Accel Partners. “We believe many customers will appreciate quick delivery. We are ready in terms of access to inventory and delivery network," said Singh. “We are waiting for the crazy discounts to come down to sanity. We definitely want to diversify. There is no doubt on that as it is the next step forward for the business," he said.
Zopnow had raised $10 million in April from investors led by Dragoneer Investment Group and before that raised $2.5-3 million from Accel Partners, Qualcomm Ventures and Times Internet Ltd.
Unlike online grocers, who typically maintain at least two warehouses, Zopnow stations its employees—pickers, who collect the ordered items, and the delivery personnel—at the stores. It plans to follow a similar model for the latest venture and leverage its own network comprising 250 personnel and more than 150 vehicles to ensure prompt delivery.
Singh said Zopnow will not lose its sight on grocery. It plans to scale up to 15 cities, including Chennai, Kolkata, Ahmedabad and Chandigarh by the year-end through tie-ups with More and HyperCity as well as tie-ups with other supermarket chains.
Indian consumer Internet companies, as well as their global counterparts, have been diversifying their businesses to generate revenue and ensure optimal utilization of their resources. For instance, taxi hailing service Ola recently launched a food delivery service called Ola Café, leveraging its expansive fleet of over 100,000 vehicles. Even Alibaba-backed Paytm, which started out as a payment and recharge platform, launched a mobile marketplace in February 2014.
Industry observers are sceptical about Zopnow’s plans as they believe it will require a good deal of marketing spend to reposition itself as a fashion destination. Besides, acquiring customers, who are already hooked on to the deep discounts offered by fashion portals such as Myntra and Jabong, would be a daunting task.
“They have positioned themselves as a grocery store that can deliver within three hours. An aggressive marketing campaign is needed to change the perception," said Rutvik Doshi, director at Inventus Capital Partners, a venture capital firm.
“I am confident about their back-end infrastructure. Only time will tell whether consumers will bite the bullet or not," he said.
Globally, companies such as Amazon and Uber have had success in venturing into new territories. Amazon developed Kindle, an e-book reader, with immense success, while Uber launched UberFRESH, a food delivery service, in 2014.