Consumption slowdown will be extreme: Albinder Dhindsa3 min read . Updated: 18 May 2020, 12:02 AM IST
73% of the people are now ordering online for the convenience and safety of home delivery and not because prices are cheaper than stores
At a time most companies are facing a collapse in demand, online grocer Grofers is besieged by a flood of new customers. Once the peak of covid-19 passes, the company’s monthly order volumes will have risen by 30-35% from pre-covid levels, Albinder Dhindsa, co-founder and chief executive officer, said in an interview as part of Mint’s Pivot or Perish Series. But a consumption slowdown is under way and will only get worse, he warned, and customers have already started switching to cheaper brands. Edited excerpts:
The lockdown has been in force for nearly two months. How have you pivoted the business in such challenging times?
In the first phase immediately after the lockdown, demand went through the roof, but our supply chain was severely hurt because of forced warehouse closures and labour disruptions. After that, things have started getting back to normal, except for Maharashtra.
Demand continues to be high, but customers are caring about different things than they were before covid-19. For instance, we used to sell a lot of open, unbranded dals. But now, people are buying packaged, branded dals. We are hearing that even offline, people are preferring to buy packaged, hygienic stuff. Pan-India, we are back to 80% of our pre-covid capacity. Before covid, 30% of our business used to come from Mumbai, Pune and Ahmedabad. These three places aren’t operational right now. The rest of the cities, which contributed 70%—that business has grown bigger. On average, we are doing deliveries in 18 hours.
Once the peak of the pandemic passes, how much will order volumes normalize at, compared with pre-covid levels?
There was a time when we were running at double of pre-covid numbers. But obviously that’s not sustainable. If things were to open up today, volumes would be 30-35% higher. But if this kind of lockdown persists for a quarter or two, then order volumes will be double of what they were before covid. The early signs are that the consumption slowdown is going to be extreme. People are buying smaller packs and private labels which are cheaper. Even before covid, because of the weak economy, people were buying cheaper brands. But it seems to be getting worse. So, it will continue. Non-discretionary spending will definitely be badly hit—it’s a question of ‘how much?’
Has there been a permanent shift in customer behaviour towards online grocery?
I think so. We acquired more customers in the last month than in any other month including in months when we have done big sale events. And without spending on marketing. According to our data, 73% of people are now ordering for the convenience and safety of home delivery, and not because prices are cheaper than offline.
Earlier, low prices online used to be the No. 1 reason for buying. Now, it’s the fourth or the fifth reason.
What measures have you taken to protect your operations and delivery staff?
Quite a few. Even before the lockdown started, we were sanitizing our warehouses. We sanitize all the crates in which products are stored every day. Everyone wears masks and gets temperature checks every day. In our warehouses, we are doing testing free of cost. We have signed up with 1MG to do testing of our fleet staff. We introduced sealed packaging that protects our customers and delivery staff. We don’t accept cash, only online payments. There are many other things we have done for our warehouse and delivery staff.
Given the surge in business, is more equity infusion warranted in the business?
We are very close to profitability, we are almost EBITDA neutral. Last month, we didn’t burn a single penny, and that’s the expectation this month also. So, we are not under the gun to raise capital. If the business needs money, only then will we raise another round. And if we want more capital a lot of our existing investors are willing to provide that. The business is growing, we have positive unit economics, we are adding capacity. So, let’s see. Maybe we will look at raising capital again in a quarter or two. But no plans now.