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How Grofers Work? Latest Business & Revenue Models Explained

Grofers business model explained
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How Grofers Work? Latest Business & Revenue Models Explained

The advent of E-commerce has prompted a prominent shift in the way businesses work. With a tremendous rise in e-consumerism, industries have started to embrace this disruption, and have been evolving steadily.

Everyone wants a space in the online sphere, towards which the global audience has been moving. Smart applications are also an extension of the same phenomenon. Companies like Uber, Swiggy, Oyo, etc. tackle a specific problem and provide solutions that make it a much more convenient affair for the users. There are a lot of factors that make it an attractive choice for businesses to go for an application to give users a platform for engagement.

Applications like Grofers have become a convenience for a lot of people who want to eat healthily, but don’t have time for browsing the market physically. By bringing the market to them and providing them with a vastness of choices, applications like Grofers have seen a steady rise in popularity.

In this article, we’ll be discussing all the different aspects of a business like Grofers, how it works, and how much it is going to cost you to get a similar application built. So, without further ado, let’s begin!

What exactly are Grofers?

In recent years, home delivery apps have been gaining popularity, and as a result, a lot of entrepreneurs have shifted their focus on delivering such modern solutions to the people.

Grofers comes as an example of the same drive and has become one of the hottest online grocery delivery services in India, along with Amazon India, Big Basket, and other similar services. Since its inception in 2013, Grofers has been successful in engaging its target audience, as well as generating interest and investments from investors. As of 2020, it is one of the most popular Grocery delivery services out of India and had operations in many major cities before the 2020 CoronaVirus Pandemic.

Grofers is the brainchild of Albinder Dhindsa and Saurabh Kumar, who found it in 2013. The company enjoyed interest from plenty of Big investors like  Sequoia Capital, SoftBank, Tiger Global, and more.

Grofers saw an early rise in demand and expanded to many parts of the country quickly.  However, the owners had to maneuver the business model to include the inventory model later on, at which point investors were skeptical about the company’s future. But, this step also proved to be in their favor and helped them build a strong foundation for the company.

During the 2020 pandemic, Grofers has kept its engagement in catering to the demand. There have been challenges, but the company has managed to thwart them, and carry on in the right direction.

So, what is the secret formula behind their success? We’ll be discussing that and more, but before that, let’s address another question that many young entrepreneurs may have.

What’s the need for a service like Grofers?

The rise of e-consumerism has forced businesses to evolve, and it’s not something that’s hidden from the Populus. People have embraced this shift with open arms, especially in suburban and urban areas, where life is busy and tiring. A service that can let people choose from different options, and then get the whole package delivered, is something that saves a lot of time and effort and is extremely convenient. It has to be the biggest proponent of the rise in the popularity of apps like Grofers. The app puts people in contact with most of their favorite sources, and sometimes, accompanied by various discounts and offers.

The sheer number of incentives to use such apps far outweighs the opposing instinct, and if not always, most of the people use such apps at least arbitrarily.

On the flip side, services such as Grofers have been evolving to provide better solutions to the customers. One of the biggest pros of such services has to be customer engagement and prompt addressing of any customer issues by such companies. So far, Grofers has been successful in building customer trust and has also proved to the investors that it is a venture well worth their money.

Before we go into the business & revenue model of the company, let’s trace the company’s footsteps since its inception, and its salient facts and features.

Grofers funding timeline

The Grofers journey has been long. A few of the noteworthy milestones are as follows.  

  • In 2013, the company began its journey as the brainchild of Albinder Dhindsa and Saurabh Kumar, who started the company as a B2B inventory management tool for smaller Kirana retailers, who wanted to keep track of their stock. As small businesses seldom have the technology for tracking such data, Grofers was providing a useful solution. 
  • In December 2014, the company had its seed round and raised $500 K of seed money. 
  • In February 2015, the company had its series A round, and it managed to raise $10 Million in funds. 
  • In April 2015, the company raised $35 Million in series B round.
  •  In November 2015, in the Series, C round, the company managed to raise $120 Million of funds. 
  • In October of 2017, Grofers increased $14.3 in Equity. 
  • In March 2018, the company raised $62 Million in series E. 
  • Series F was conducted next year in May 2019, and the company managed to raise $200 Million in funds. 
  • In July 2019, Grofers managed to add $10 Million to Series funding. 
  • The company added $20.1 Million to its funds in equity in October of 2019. 
  • In November 2019, Grofers increased $45.2 Million in equity. 
  • In March 2020, Grofers raised $5.8 M. 

Now, let’s go through some of the interesting Grofers facts. 

  • Grofers is the creation of Saurabh Kumar and Albinder Dhindsa. It was founded in 2013 and has considerable standing in the Indian delivery scene today. 
  • The Board of Grofers includes Saurabh Kumar (Founder), Albinder Dhindsa (Co-founder, CEO), Jacob Singh (CTO), Advait Parnaik (Managing Director), Yeshu Bansal (VP Operations), and Manoj Kumar Rathi (SUP, CFO), among others. 
  • The company has headquarters in Gurugram, Haryana. 
  • To date, the company has raised about 591. 5 Million in funds. 
  • As of June 2020, the company has 3, 280 individuals in its employment. 
  • The market valuation of the company is about $567 Million. 
  • At the end of 2019, the company’s total revenue was $34 Million. 
  • Grofers inventors list includes Sequoia Capital, SoftBank Capital, SoftBank Vision Fund, Grofers International, Abu Dhabi Capital Group, BCCL, Tiger Global Management, Yuri Milner, KTB Ventures, Tiger Global, and Sequoia Capital India.
  • In 2018, Grofers started a subscription-based service, Smart Bachat Club, and has got more than half a million subscribers to date. 
  • Grofers top competitors include Swiggy, BigBasket, goPuff, ezCater, and so on. 
  • At the moment company is operational in cities like Gurgaon (HQ), Agra, Ahmedabad, Bengaluru, Chandigarh, Chennai, Delhi, India, Hyderabad, Indore, Jaipur, Kanpur, Kolkata, Lucknow, Ludhiana, Mumbai, Nagpur, Noida, Pune, Surat, and Vadodara. 

 Now, let’s have a look at the business model and the revenue of the company. 

Grofers business model (old)

The business model for Grofers

Grofers is an on-demand delivery service and has transformed its model over the years. However, the main components that make up its revenue model remain more or less the same. 

From the time of its inception to late 2016, the company remained a hyperlocal delivery startup. With this model, the business managed to bring profit to the three arms of the business. 

The local stores

The company made ties with local Kirana stores, and pharmacies, for deliveries. The company was going to be a bridge between these local stores that didn’t have marketing and delivery support and helped them reach the highly lucrative e-sphere of consumers. 

With its logistics and transportation services, it became a useful resource for the local businesses and enjoyed a lot of initial success with the model. 

Users

The main focus was delivering to the people, who for some reason, did not have the time, or energy, for browsing the market and wanted swift deliveries to their doorsteps. This demographic included working people, students, and the likes. 

Grofers seemed to be fulfilling the need for effortless delivery quite nicely.  

The Delivers Staff

Grofers has its own delivery staff, who deliver for orders to the doorsteps of the users. Grofers has generous salary offerings, as well as other job benefits such as goodies for freshers, open-door policy, free evening snacks, and so on. 

How did it work?

In the initial days of Grofers, when the company operated as a hyper-local delivery service, it tied up with various local businesses who wanted to reach the online customer base. At this time, the company was majorly a logistics company. 

The orders would come through the app, which would then be handled by the city team. The team would then send the delivery order to the delivery personnel, who would then go to the local store, pick up the item, and would deliver it to the customer’s door. 

The reason it didn’t work out!

It wasn’t long before Grofers was not doing well and was in a poor place financially. It had taken many losses in many of the cities in which it had business. Now it seemed that the model that had been working before wasn’t all that. 

The principal reasons behind this were as follows. 

  • First and foremost, the local stores with which the company had ties were unreliable, and usually. That meant incomplete orders, which was a crucial reason behind the company’s dwindling popularity amongst users. It also leads to investors pulling back on their interest in the company. 
  • The company already had competition from companies like Big Basket that was making progress with its inventory led model. It meant people were moving on from Grofers to a more convenient model. 
  • Since only the delivery part was in Grofers’ control, and quality control was not as much, customers were often disappointed, and Grofers would end up taking the bad rep. It was something out of Grofers’ control, and they had to make do with the quality standards of the local store owners.

The company was taking losses in many cities where all of the above factors were at play. It was time for the company to either sink or swim. 

Grofers decided to swim!

Towards the end of 2016  and the beginning of 2017, the company decided to switch to an inventory-based model.  

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    Grofers business model (new)

    The Newer Business Model

    Now, the company wanted to compete with the challenges the market had to throw, and they decided to switch from being a hyperlocal delivery service to an inventory-based delivery model. Along with this, their central focus group became the lower middle class and the middle-class population of the country. The company to be the D-mart for the online consumer base. 

    Here are the main components of Grofers’ new business model.

    1. The Inventory

    Rather than having to deal with the unreliable service from the local retailers, Grofers decided that it would take on the procurement and storage responsibilities as well, to deliver to users at a more consistent rate.

    It meant that the company was going to be procuring the product from various brands, as well as local businesses. Then, that product would go into their inventories for further action.

    The company now has its private label brands, and also features regional brands that have reasonable prices for its new customer base.

    The company has proper QR Code tracking for the products. The company monitors every aspect of the product from the number of items to the expiration date. That’s how the company has managed to bring itself in the ranks of best online delivery operations in India.

    2. Users

    The shift in the business model has also prompted the company to focus on a specific segment of the population, which has turned out to be the middle class and the lower middle class. Grofers has maneuvered itself in a position to be of use for this specific segment and aims to be the online D- mart for its users.

    The new demographic has also seen more involvement from women, which was not the case with the previous model. However, the amount of cash on delivery orders by women is more than that by men, which shows that women are still testing the waters with online delivery services.

    3 Delivery Personnel

    Delivery personnel is still a big part of Grofers’ business model, and they serve a crucial function in the whole process. However, the delivery process for Grofers employees has changed a little as well, with the new business model.

    Grofers Workflow (New)

    How does the Inventory-based Grofers model work?

    With the change in the business model of the Grofers, the working process has slightly shifted as well. Where before the orders came from the local store owners, that is no longer the case.

    First, users issue an order with the website or the app. It then goes to the warehouse, where employees locate, check, pack, and prepare the items for delivery. The delivery executives can pick up the order from the warehouse.

    Once the delivery executive picks up the delivery package, they follow the directions on their smart device and take the order to the consumers.

    That is how the delivery process works in the Inventory based model that Grofers has adopted post-2016.

    How is this new model better than the last?

    The new Inventory based model has been a big help to Grofers.

    In the previous hyper-local design, since Grofers had to be dependent on the local stores for availability, the deliveries were always a little unreliable. That directly showed in customer engagement, which declined a lot with time.

    Grofers had scaled to many cities already.  But, because of the failure of the hyperlocal business model, the company had to fall back from several locations. At this point, the future of Grofers was very unclear, and investors had started pulling back a little with the company. However, Golfers switched to Inventory based models amidst all this turmoil and managed to make it work. Slowly but surely, the company started gaining ground again, and it got itself back in the race for the  Indian online delivery market. Although companies like Big Basket have enjoyed a better response, still, Grofers has proved itself to be the underdog, that just won’t quit. For this reason, it has done well in terms of funding recently. Now Grofers has more control over the overall delivery process and can do much better with quality control. Grofers recent acquisitions and partnerships have also been to boost the new model, and it has shown promising results so far.

    So, all in all, switching from the hyper-local Delivery Startup to Inventory Based model has been a wise choice for Grofers.

    grofers revenue model

    Revenue Model For Grofers

    The company provides a service to its users with its inventory-based model. The process involves its logistics and delivery partners, technology partners, Merchant partners, strategic and alliance partners, and suppliers, and vendors. But, the question here is, how does it generate revenue.

    Well, here’s how! 

    • The company Procures a variety of items such as fresh produce, pet care products, bakery products, meats, flowers, sports products, household products, baby care products, and others from various vendors. These items get stored in the company’s warehouse. This way, Grofers has higher control over the quality of the product, as well as it can manage the efficiency of the overall process. So, when any user places an order, the company uses its infrastructure for the delivery and connects various brands, and local vendors with a considerable customer base. In return, Grofers takes a commission on every order, which can be anywhere from 8% to 15%. 
    • Recently, Grofers has brought out its original labels, and slowly but surely, it’s turning to be an active participant in the market as well. Its private brand, along with affordable regional brands, accounts for approximately up to twenty percent of the total revenue generated. 

     With this, Grofers is slowly turning itself around. It is still taking losses, but it expects to be profitable soon, according to its chief staff. 

     At the moment, having a business app like Grofers is a lucrative option for a couple of reasons.  

    • Having such an app already puts you ahead of the curve. While others compete for a place in the already existing platforms, you can begin your platform, and make it a profitable venture,
    • With the rising popularity of online delivery services, it is the right time to invest in something like this, when we are at the dawn of a revolution. 
    • If you’re a store owner, you can get more exposure for your business with such an app, and you can also generate revenue by offering marketing, as well as exclusive deals to different vendors, along with reaching out to your customer base. 

    So, if you’re thinking about building an app like Grofers, where’s a few things you should keep in mind before you begin. 

    The Business Model 

    First and foremost, you need to figure out what’s your business model is going to be beforehand. You have a lot of options in this regard, and to ascertain which one of these options is the right fit for you, you need to study the market you want to enter. 

    Find out about the customer base you’re going to be focusing on, and adopt a model which is complimentary to your geography, market scene, and the customer base. You can choose from the marketplace, aggregator model, grocery chains, the single store model, and so on. Once you’ve done that, you can move on to other things. 

    Figuring out the App

    Making an app is providing a solution. To what you ask? That’s what you need to figure out. After determining your audience, you need to determine what are some of the problems they are facing, that you can solve with your app. You can look at other similar services in the market, and try to create something unique and useful. 

    Based on this information, you can start formulating an idea of how your app is going to look, finished. You can begin naming the features, essential and advanced, and get an idea of the user interface, admin panel, and grocery store owner panel in case you decide to build a bigger platform. 

    Developing the App

    After you have the basic idea about how your app is going to look like, you can now begin the phase of development. You have many options when it comes to app development. 

    Find a trustworthy app development firm, and you can get a consultation with the experts. When you do that, you can get constructive criticism on your model, and you can make changes accordingly. You can also discuss aspects like User interface, Admin Panel, and, Store Owner Panel, etc. to give all parties a smooth experience. During the consultation, you can also determine what features are relevant to your app and how practical it is to include them in your app design. 

    One more question that you might be wondering about is the cost of app development. Let’s get on that!

    Cost of Development

    The cost of making an app like Grofers depends on a couple of things. Before we talk about what’s the general price for developing an app like this, lets first discuss the factors that affect the cost. 

    • First of all, the design of the app and how it looks can affect the cost of development. UI/UX design, which is the User Interface, and User experience, can vary application to application. 
    • The coding structure of the app also determines what your overall cost is going. 
    • Different features that you want to include in your app also affect the overall cost of developing the app. You don’t want a messy application, so put in the most crucial and unique features. 
    • If you’re going to hire an experienced professional development team, you’re going to have to pay more than you would any new app development company. But, investing in an experienced development team is going to pay in the long run.
    • The platform for which you’re developing an app also determines the cost. For example, if you’re going to go for iOS, the cost can be different, and it will be different for an android. If you want to launch your app for both platforms, you might have to pay extra.

    Generally speaking, building an app like Grofers can cost anywhere from $5000 to $15000. It can vary depending on the factors mentioned above.

    Conclusion

    In today’s E-commerce environment, a business like Grofers has a lot of potentials, which is evident from E- Delivery Services like Grofers, Big Basket, and so on. If you think that you can identify the need for such an app, you can procure yourself a very lucrative opportunity. Of course, you should do your due research first, but if ever there was a time for such an app, it is now!

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    Comment (1)

    1. Corpely.com

      Expanding their business is essentially an online-only strategy for Grofers. Last year, they launched stalls at OYO Rooms hotels on a trial mode. But Albinder agrees that offline channels do not work for their business model.

      August 26, 2020 at 7:24 am
      |Reply

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