Delivery (1)

In our #Outlook16 series, we asked hyperlocal delivery companies about their key takeaways in 2015, their plans for 2016 and the challenges that the segment need to address. We spoke to Faasos, TinyOwl, Swiggy, PepperTap and Grofers. Faasos, TinyOwl and Swiggy are food delivery companies while Grofers and PepperTap are hyperlocal delivery companies. Answers have been edited for brevity.

What have been the top developments for the sector in 2015?

Revant Bhate, Faasos

Food tech cannot be synonymous to aggregators but has to also consider other service providers existing in this space. Hence, we would say 2015 made people realise what food technology stands for. 

Harshvardhan Mandad

Harshvardhan Mandad

Harshvardhan Mandad, TinyOwl

One of the top developments for the sector have been ‘wallets’ which is already conquering the app sector. People are preferring variety of payment options under one roof.

Nandan Reddy, Swiggy

– Angels and VCs have been very active and that augurs well for the growth of food-tech industry in particular.
– While starting off from a small base – players have now established themselves across the country with transactions running in hundreds of thousands.
– Since the industry is overcrowded with over 250 players, the year has also witnessed some consolidation and downfall of companies which managed to get initial rounds of funding but failed to create a differentiation in their offering/ service.

What has been the biggest challenge for the sector in 2015?

Revant Bhate, Faasos

There was too much froth in the market. The situation was similar to what happened 5-6 years back when Dominos was growing. A lot of players jumped into market with similar kind of models only to realize much later the difficulties.

Nandan Reddy, Swiggy

– Lack of product differentiation is a key issue faced in the food tech sector. Establishing a sustainable business, balancing growth and profitability has been a challenge for some of the players
– The sector is still very competitive – leading to margin erosion. However, this is bound to change soon.

Navneet Singh, PepperTap

– Proving which model works, and which doesn’t.
– Raising funds for a business, which requires patience.

Albinder Dhindsa, Grofers

The biggest barriers to the ecosystem are currently lack of support for early stage companies, uncertainty in regulation around some sectors which can cause anxiety among founders as well as infrastructure issues, right from safety and security and belief in law of the land, to red tape that often deter companies from either getting started or give up too early.

What have been your key learning in 2015? How will you operate differently in 2016 from 2015?

Revant Bhate, Faasos

We technologically control all the important aspects of a ‘Food on Demand’ business, viz. ordering, distribution and fulfillment (delivery through the company’s own logistics or delivery boys). We have always maintained that a model such as ours is sustainable and have enjoyed investor’s validation time and again.

Nandan Reddy

Nandan Reddy

Nandan Reddy, Swiggy

– It is very important to balance growth with profitability. Swiggy does not believe in heavy discounting.
– Market differentiation and customer loyalty are key to the survival of the business. While the focus has been on growth, we have given only first user discounts and used a referral program to differentiate our offering.

What are the trends that surprised you in 2015?

Harshvardhan Mandad, TinyOwl

The warm welcome to wallets was also something that took the app industry into fast track.

Nandan Reddy, Swiggy

Some of the early-stage start-ups raising high single digit or even double digit million rounds. Definitely shows investor confidence in the food tech sector.

Navneet Singh, PepperTap

The uptake from customers took us by surprise. When we started, we did not expect to be delivering almost 40,000 orders in a single day in 2015 itself.

What trends do you expect to see in 2016? Why?

Nandan Reddy, Swiggy

We expect hyperlocal services to take off on a much bigger scale. 2011-12 was a break-out year in ecommerce goods, 2013-14 for the cab industry. Would expect 2015-16 to be the same in hyperlocal – groceries, food etc. Logistics and payments are critical for ecommerce in general including the food-tech sector and would expect some big innovations in these spaces as well.

Navneet Singh

Navneet Singh

Navneet Singh, PepperTap

Given the tightening of capital markets, I think the players will focus more on building a sustainable business model rather than profitless scaling up.

Albinder Dhindsa, Grofers

We can’t expect 10 players in every space and since grocery in the hyperlocal market is a bigger space, probably 5 will survive but consolidation will happen.

How do you plan to diversify your offerings in 2016?

Revant Bhate, Faasos

In 2016, we are expanding to 3 more categories – World Cuisine, South Indian & Chinese.

Nandan Reddy, Swiggy

We are evaluating a multiple options in terms of service offerings including but not limited to partnering with restaurants for cloud kitchens, enabling deliveries in under 15 minutes, providing value added services to restaurants etc.

Navneet Singh, PepperTap

We plan to diversify our catalog as per the exact demand of products in a particular area. Our association with Zappfresh where we started serving non-vegetarian food is just the start of this diversification.

How do you plan to diversify your revenue streams in 2016?

Nandan Reddy, Swiggy

Swiggy intends to work with the best restaurants in creating delivery-first restaurants or cloud kitchens. The core idea is to help restaurants with generating demand and managing logistics for them while the restaurants themselves can focus on the preparation of food. There are multiple means to achieve higher revenues – investing in these kitchens is one of them. We are keen on launching Swiggy Express in other parts of Bangalore as well as in other cities.

Navneet Singh, PepperTap

We have already started sampling and exclusive product launches on or portal. Going forward we will certainly use this medium as one of the revenue models.

How do you plan to limit the cash burn in 2016?

Revant Bhate

Revant Bhate

Revant Bhate, Faasos

We have not experienced significant cash burn. On the contrary, we expect to be profitable by the end of next year.

Nandan Reddy, Swiggy

We shall continue to charge a small delivery fee for orders below a certain value. We are also focusing on improving our current backend system to ensure an automated flow of events from placing an order to delivery. We are looking at reducing voice calls.

What was the split for transactions and traffic for mobile, mobile web and web in 2015?

Revant Bhate, Faasos

Mobile: 80%
Web: 5%
Others (Twitter, Whatsapp, dine-in etc.): 15%

Nandan Reddy, Swiggy

More than 70-75% of our traffic comes from mobiles. However, web continues to be a great source of customer acquisition for us.

What categories and subcategories are likely to be the key drivers of growth for the sector in 2016? Why?

Revant Bhate, Faasos

Food discovery & personalization of menu are the likely growth drivers for 2016.

Navneet Singh, PepperTap

In my opinion, ecommerce as a whole will keep growing in 2016; bigger products like white goods etc will start seeing a push to hyperlocal rather than on intercity routes.

What trends did you notice in hiring challenges (such as availability of talent, tenure, willingness to move, salaries etc) in 2015? How were they different from 2014? What changes do you expect to see in 2016?

Revant Bhate, Faasos

The biggest advantage for us is that we are in Mumbai. We have steady flow of good candidates whom we have been hiring over a period of time. 

Nandan Reddy, Swiggy

– We have been very fortunate to have been able to attract the best talent across the board in Swiggy – be it the frontline operations or our core technology team.
– People are no longer averse to joining start-ups and having a strong team in place ensures we continue to attract the best.

Albinder Dhindsa, Grofers

We have been getting the people we wanted, we liked and who were (and are) right, to come and join us. Recently, we acqui-hired teams of SpoonJoy and Townrush to bring dynamic learning to the table.

What kind of consolidation (if any) do you expect to see in 2016?

Harshvardhan Mandad, TinyOwl

The coming year will bring along with it some shake-ups and some exciting new things. However, the consolidation phase will happen more than a year or two later if not immediately.

Nandan Reddy, Swiggy

It wouldn’t be very surprising to see greater consolidation in 2016. Companies might try to backward/forward integrate into kitchens/logistics. Food commerce enablers might also see some element of consolidation – especially around payments and personalization.

Navneet Singh, PepperTap

Consolidation in the sector is already on; we’ve seen multiple players either having been acquired or shut down. We expect this to continue in 2016. In the end, there will be 3-4 big players left.

Do you plan to expand your presence in Indian cities in 2016 and why?

Revant Bhate, Faasos

We are currently present in 15 cities and intend to be in 25 cities by end of 2016. We are looking at Kolkata & Chandigarh at the onset.

Albinder Dhindsa

Albinder Dhindsa

Albinder Dhindsa, Grofers

We want to focus on other tier-2 and tier-3 cities. However, the work is still in progress and we are yet to finalise the cities and regions.

Harshvardhan Mandad, TinyOwl

It’s in the planning stage right now. There are many factors which we consider before launching in any city such as eating habits and localities among others.

Image source: Antonio Foncubierta under CC BY SA 2.0