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Pepper Tap as a Hyperlocal Grocery Delivery Startup

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PEPPER TAP

Pepper Tap was AN on-demand hyperlocal grocery delivery startup primarily based out of Gurgaon(Gurugram). PepperTap began its journey on Nov 2014, by Navneet Singh and Milind Sharma. PepperTap was started with a vision to revolutionize grocery shopping; No additional queues, No additional parking hassles, No additional negotiation with sabzi-wallahs.They worked on “100% Inventory-less” model, whereby they bought the present inventory in native stores on-line to their app. they’d a good beginning, operational in around thirty one cities and that they were processing on a mean of 20,000 orders per day. They became one amongst the biggest player in India in on-line grocery delivery business within a year of operation. They raised total of $51 million bucks from numerous investors like sequoia Capital, Saif Partners, Snapdeal etc. within fifteen months of their operationTHE FALLIn Sep 2015, the corporate closed their operations in Agra and Meerut after a month of pilot run.

PepperTap entered Tier III cities to check the ground and found its not profitable and had to quickly exit the market before losing a lot of cash.In February 2016, PepperTap halted operations in ten cities as well as metros like Bombay, Chennai and Calcutta and it set off around 400 staff as cost-cutting activity. They were focusing solely on cities like Delhi, Gurgaon, Noida, Hyderabad, Pune, Ghaziabad, Faridabad and Bangalore that accounted seventieth of their revenues.Finally, in Apr 2016, PepperTap forced its plug far from its money burning grocery delivery business.

Resons for the fall Technology of the product

PepperTap was specializing in pumping cash to on-board customers they didn’t pay attention of their technology. the integration of their app with their partner stores wasn’t nice, typically customers were unable to envision the complete choice of {items|of things} from a store and typically even essential items were missing from the catalogue visible to them.Growth without scaleIn AN interview the company’s co-founder Navneet admits, “In the race to pepper the entire country with PepperTap, we had brought too many stores on-line way too quickly”. and that they didn’t set up the quantifiability of the product and operations consequently.

The discountsE-Commerce in India has a got a brand that it has to be cheaper than physical store for the folks to buy. to keep engaging customers to buy from their platform, they were spending plenty of time and energy to plot clever sales and discount schemes. to achieve the loyal client base and outstrip the competition they were unrealistically spending money on discounts, that burnt their bank balance.The business modelPepperTap was performing on “100% Inventory-less” model, which implies the corporate has got to pay the MRP from local stores; bear the price of delivery, technology, operations etc. and still offer the merchandise at discounted value to its customers. There’s no way PepperTap could attain profitability.For e.g.

The startup raised $51million in fifteen months of operations, i.e., roughly $1,00,000 per day. If they need 20,000 orders per day with the loss of Rs. two hundred per order (on discounts and cost of team) it calculates to loss of approx. $60,000 per day.The business of raising $1,00,000 per day with the loss of $60,000 per day clearly doesn’t add up.Difficulty in raising fundsIf 2015 was the year once VC’s opened their purse strings for any plan with even the most remote potential, 2016 was totally different. It started with Flipkart’s valuation being clipped by Morgan Stanley, followed by Zomato’s valuation and investors were suddenly being a lot more discreet with their money. And PepperTap had no different fate, they couldn’t raise a lot of funds to run their show.

Instead of specializing in gaining customers quickly by gifting away discounts, PepperTap could’ve centered on solving smaller challenge 1st and develop a profitable and sustainable business model.Instead of defrayment on selling and promotions, PepperTap could’ve spent on Technology to make their app stronger in terms of user friendliness and giving store users an excellent product.PepperTap launched two hours delivery model in Tier III cities. It seldom takes over ten minutes for shoppers in Tier III cities to travel to a store to buy their things.

Therefore, PepperTap’s two-hour delivery service wasn’t very engaging in these Tier three markets, where customers have way more time at their disposal and are usually not in a hurry. Instead, PepperTap ought to have centered its efforts on perfecting logistics in Tier one cities where customers would have been more aware of PepperTap’s service promise.They could’ve followed their competitor’s business model of building own inventory system and building their own branded product. though it comes with challenge of maintaining the inventory, avoiding waste etc. there may be some way to realize profit.

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