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Adding to the string of deals in the startup space, auto-rickshaw aggregator Jugnoo snapped up SabKuchFresh on Monday, to enhance its recently launched grocery delivery service ‘Fatafat.’
The delivery services are currently available for customers in Mohali and Panchkula apart from Chandigarh and Jugnoo will soon expand the delivery service to Gurgaon by next month and eventually tap 30 more cities by the end of this year. The launch is a progressive attempt to widen Jugnoo’s customer outreach by tapping consumers beyond its domain.
Why go Hyperlocal now?
The question that arises here is that why is Jugnoo venturing into the grocery delivery space which has seen companies shut shop recently? Talking about the acquisition, Samar Singla, founder and CEO of Jugnoo told Entrepreneur Media that the demand for grocery is already there in the market and hence we are not burning money on customer side.
“Unlike our competitors, we are not even burning money to meet the demand as we are utilizing our already established network of auto-rickshaws for logistics. We are focussing on customers who value quality rather than discounts. Our competitors are shutting down because they were chasing discount hunters. They were trying to buy customers rather than providing service to people who actually need it,” Singla said.
Commenting on Jugnoo’s acquisition, Tarun Dutta, who handles Strategic Relations & Outreach at Jaarvis Accelerator said, “They already have 'Jugnoo Fatafat' delivering fresh vegetables and fruits. 'Sabkuchfresh' was already in the market and their operation was very structured, so 'Jugnoo Fatafat' can benefit from their experience. Jugnoo Auto has a large network and these autos could deliver the vegetables and fruits quickly. So this market will grow, and this acquisition is likely to add value to Jugnoo's existing business.”
“Right now, we are focusing exclusively on fresh fruits and vegetables, which is a high margin segment in the grocery domain. Therefore, it totally makes sense to introduce this service. Also, launching this logistics model, further helps us in optimizing our supply. Ours is a full stack model in terms of supply chain management,” Singla added
Singla said that Fatafat is unit economics profitable since inception. “We expect to receive around 500-700 orders per day within a month, which will make us operationally profitable on a city level. We will achieve breakeven in 3-4 months from now,” he said.
The demise of hyperlocal companies
Failure to retain customers, lack of investor support and high logistics costs have left a lot of players with no option, rather than bowing out of the rat-race in this space. Companies like Localbanya and PepperTap had to shutter operations despite of being backed by ivy-league investors.
However, Tarun of Jaarvis said that the fresh vegetables and fruits delivery market is large. "In Tier 1, 2 and 3 cities many nuclear families do not have time to do shopping on a regular basis. Because fruits and vegetables are commodities which we buy 2 or 3 times per week," he added.
With Jugnoo following the deal-merger strategy adopted by a handful of startups in this space recently, it will be interesting to see if they can channelize growth in this cloudy domain.