We aim to be an online hypermarket, are close to raising $2.5M: Sumat Chopra, CEO, EkStop

EkStop, an online store dealing in grocery and daily essentials, wants to become an online hypermarket. The company was doing around 165 orders a day as of May this year, with the average transaction value pegged at Rs 1,200-1,300. Currently operating only in Mumbai, the startup is looking to expand into other cities such as Delhi, Bangalore and Pune.

The Mumbai-based startup was founded by Sumat Chopra (CEO) and Shaurya Mehta in May 2012. It is now close to raising $2.5 million in a Series A funding round. The startup earlier raised angel funding from a group of investors, including Jayesh Parekh (co-founder of Sony Entertainment Television), Deepak Shahdadpuri (head of Beacon India Private Equity Fund), Patrick Turner (he runs the entrepreneurship department at INSEAD), Jungle Ventures, Sanjay Kamlani (co-chief executive of Pangea3), and some senior executives of Google and McKinsey.

In a chat with Techcircle.in, Chorpa talks about the company, its business model and the vision to become an online hypermarket.

Why did you launch an online grocery platform?

My partner and I were earlier working with corporate; we didn't have time to go to the grocery store and purchase household items. Moreover, we realised that there are about 600-800 items that any Indian household needs weekly and not all of them are provided in a single store. This made us realise that there is a need to have an easy access to household items from a one-stop shop.

What is your business model? What is the value proposition offered by EkStop?

Since we deal in household items, we offer delivery in the same day. This means that we have to maintain an inventory of products. We partner with manufactures (we have partnered with about 200 manufacturers) across categories like fruits and vegetables to pulses and other food items. We also offer an in-house Ekstop brand for which we have partnered with unbranded agricultural manufacturers. We have partnerships for delivering FMCG as well as agriculture-based products.

For last-mile delivery, we lease the delivery vans but maintain an in-house delivery staff.

How much does your in-house brand account for in terms of sales?

Currently, it makes up about 30 per cent of total sales.

Today even Kirana stores do home delivery in cities. How do you overcome this challenge?

We overcome this challenge by being localised and delivering products the same day. We also make logistics cost effective by maintaining four-five warehouses for a tier 1 city.

What is the opportunity in Mumbai where you are currently present?

We have two warehouses in Mumbai but will increase that number to four in a couple of months. A city like Mumbai offers a $4 billion opportunity in the space we operate in. So even having one per cent of the market share or penetration of Mumbai will put the company on a very strong footing. We aim to strengthen our operations in Mumbai. Once we do it, it is a matter of replicating the process in other tier 1 and 2 cities.

For us, grocery is only a starting point; once customers start buying grocery from us and trust our service, the ability to cross sell in almost infinite. There is no other e-commerce category that touches the customer from so many offerings like kitchenware, cleaning items and household utilities. We aim to become an online hypermarket.

You mentioned earlier that you want to target the weekly shopper. But does that makes sense considering most of your product offerings are daily consumption items?

We are not targeting the daily spot-buy shopper; we are targeting the weekly or monthly shopper. This is because the economics of doing spot buys no more makes sense. We have a minimum order size of Rs 400. What we realise is that people who keep working through the day don't have time to do their shopping at the end of the day; hence there is a trend of doing shopping on the weekends where customers hit the supermarket and shop in bulk so that week days are hassle free. That's the kind of shoppers we are targeting.

How many households do you carter to in Mumbai?

Currently, our two warehouses allow us to cater to about 10,000 households, 60 per cent of which are active daily. With the addition of two more warehouses, we should be able to increase the market size to two to three times.

What are the ticket sizes and margins prevalent in this business?

The ticket sizes are Rs 1,200 to 1,500 and this basket will only increase as we add more SKUs. The margins are 20-25 per cent. We have recently started offering imported products as well and soon we should see changes in both ticket sizes and margins. We have been doing Rs 65 lakh of GMV monthly and are seeing a 30-60 per cent increase month on month.

What is the cost-saving EkStop can offer in comparison with a Kirana store?

Like any other e-commerce player, we offer discounts because we have to beat Kirana stores and offline supermarkets. We can offer discounts since we are not paying to maintain store-facing staff, and our last-mile delivery is cost effective as we have outsourced and have not purchased vans or cargo carriers. Also, we are able to maintain warehouses in a city like Mumbai by finding vertical storage facilities in low-cost areas of the city. We are also able to strike bulk deals via our direct partnerships with manufacturers; hence, on a gross margin basis, we see 30-40 per cent savings, which we either keep for ourselves or pass on to the customer.

What are your plans for fundraising?

We will need $2-2.5 million in funding to make business operations in Mumbai optimal; we will need the same for other metros as well. We have already been in contact with a few VCs and we should be able to close the round soon. However, I cannot reveal more details.

(Edited by Joby Puthuparampil Johnson)