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E-grocery hots up with former Reliance Retail exec, investment banker joining the e-commerce bandwagon

14 April, 2015

There could be over a dozen e-grocery startups in India already, while a couple of them have raised large investment rounds. But that hasn’t deterred K Radhakrishnan, former CEO of Reliance Retail’s value retail format, and Gaurav Juneja, former India executive director of French investment bank Bryan, Garnier & Co, to venture into the yet-to-be proven food and grocery e-commerce space.

The duo went live last month with its e-grocery website Grocermax, under its company RG Retail Pvt Ltd, which is currently delivering only in Gurgaon. Grocermax plans to expand to Delhi and the rest of National Capital Region in six months, according to co-founder Juneja, who left his investment banking job late last year to turn an entrepreneur.

The founding duo has worked together in the past too. Radhakrishnan is one of the pioneering executives in food retail in India. After a four-year stint at a company which operated a shrimp culture farm, he moved on to join south India-based supermarket chain FoodWorld in 1998. Earlier a joint venture between RPG and Dairy Farm, part of the Jardine Matheson group, it later became a wholly owned subsidiary of RPG.

He spent eight years at FoodWorld where he worked in both operations and merchandising units, before moving in as CEO of value retail format of Reliance Retail in 2006. 

Three years later Radhakrishnan was roped in by Kishore Biyani as CEO of Future Fresh Foods, which housed the fruits and vegetables business unit of the retail major. Before moving out of the Future Group last year, he also worked as CEO of Biyani’s FairPrice chain of convenience stores.

Radhakrishnan had last year joined hands with Meru Cabs founder Neeraj Gupta to launch an offline fruits and vegetables chain through the franchisee route under Freshkins. However, this was shut down early this year.

Juneja, an IIM Lucknow graduate, on the other hand, worked as a deputy manager in Reliance Retail in 2006-07, which he left to join Lehman Brothers. The Lehman stint, however, was short-lived as the firm crashed during the banking collapse of 2008. Thereafter, he headed the India office of Bryan, Garnier where he also advised European hypermarket chain Auchan in its Indian foray with Landmark Group (the JV broke last year).

The two met for the first time in 2006 while they were working together at Reliance Retail. But it was only when they met again in 2013 that the idea to launch a new venture took shape.

“Radha found meat in the idea. We cooked it up for a while, then finally thought this was the right time to start. That’s how we got into this,” recalled Juneja.

When asked why grocery e-commerce, especially when some of the early players are struggling to scale operations nationally, Juneja said, “E-grocery is the holy grail of e-commerce.” “The high frequency purchase of grocery makes it literally the biggest and the most recurring segment of the e-commerce market,” he said.

From a market size point of view, the sector, obviously, is the biggest. According to consultancy firm Technopak, the food and grocery retail business constituted about $370 billion of the overall $530 billion retail (merchandise) spending during 2014-15.

But it’s not easy building the business with its complex supply chain and the perishable nature of the goods making delivery at doorstep expensive.

Technopak observes that globally e-tailers have struggled to develop a successful business model for food and grocery, which, according to a 2012 research report, constituted a mere 2 per cent of e-commerce in a mature market like the US. In India too, the consultancy believes, e-commerce would be driven by non-food categories.

None of the players in India has established a pan-India presence even after three to four years of operations, indicating the challenges in scaling the business from a geography point of view. 

For instance, Bengaluru-headquartered BigBasket.com, one of the earliest e-grocery firms (founded in 2011), is present only in five cities, mainly in South and Central India (Bengaluru, Chennai, Hyderabad, Pune and Mumbai), indicating it’s not easy to acquire a national footprint. The company, however, is a regional leader, and it attracted a large funding of Rs 200 crore last year from Helion Venture Partners and Zodius Capital.

The business is extremely tough and is all about execution which has increased the mortality rate in e-grocery space. For instance, South African e-commerce and consumer internet firm Naspers pivoted its horizontal e-commerce venture Tradus to make it a hyper local e-grocery marketplace only to later shut it down (there is no formal communication but the site has been down for maintenance for long, and Naspers’ India CEO Ashish Kashyap says he is not involved with the business unit).

Another player, Mumbai-based EkStop was gobbled up by offline gourmet food retailer Godrej Nature’s Basket.

But all this doesn’t dissuade the co-founders of Grocermax, who acknowledge that online grocery retail has a very complicated supply chain as it doesn’t involve that one item being shipped per cart.

“I am selling 25 items per cart and all those items are having three or four temperature zones. I need to maintain that temperature zone throughout the supply chain. So in that sense it is a very complicated basket. You have to aggregate all this into one cart so that it gets to the consumers easily,” said Juneja.

It’s not just execution challenges that Grocermax will have to battle, the company will also face stiff competition from funded rivals and large horizontal e-commerce players which are harbouring grocery e-tail plans.

Last month, Grofers, a Gurgaon based e-grocery company, raised $10 million from Tiger Global and Sequoia Capital. On Monday, Bengaluru-based ZopNow said it raised $10 million from Silicon Valley venture firm Dragoneer Investment Corp and existing investors such as Accel Partners. BigBasket, which raised Rs 200 crore last year and present in five cities, is ahead of all of them and could eye Northern markets soon.

Besides these, some of the large, horizontal e-commerce players have taken some baby steps in getting into grocery e-tailing. Amazon is testing local deliveries with kirana or neighbourhood grocers as partners on its marketplace (starting with Bangalore),

On April 8, The Economic Times reported, quoting sources, that Flipkart will start selling groceries from the middle of this year. Flipkart did not comment. In January, Snapdeal tied up with gourmet food retailer Godrej Nature’s Basket to sell about 400 of its products online.

For now, Grocermax is still reading the market with the small corpus of private funding to back up its plans.

“We have raised one round of funding from friends and family which is sufficient for our current requirements. We will be looking out for a second round after sometime. For now, we want to put our head down and crack Gurgaon,” said Radhakrishnan, declining to share further details on the funding amount or the names of the investors.

The company says it’s too early to gauge the venture from the number of orders but shares that currently it is clocking Rs 1,200 as the average order size.

The site offers 8,000-9,000 SKUs across 10 categories such as staples, packaged food, beverages, fruits and vegetables, dairy products, frozen items and home care.

“Radha’s experience of the offline retail market for a similar blend of products comes as a strong differentiator for Grocermax,” said Juneja.

“It is an offline business which has been brought online. But it needs lots of offline expertise. We bring that to table and which is a barrier to entry for a lot of players,” he said.


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E-grocery hots up with former Reliance Retail exec, investment banker joining the e-commerce bandwagon

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