Exclusive: Grocery delivery startup GrocShop folds as pain spreads

Mumbai-based online grocery delivery firm GrocShop has shut down, joining the growing list of startups that failed to find a profitable growth model in a segment which until recently was attracting investors in droves but is now feeling the pinch of a slowdown in funding.

GrocShop co-founder Ayush Garg told Techcircle that the startup, operated by GrocTech Solutions Pvt Ltd, was late in entering the grocery delivery business and that its competitors grew faster. "We were also not an expert in the operational business and, therefore, outsourced it. We also failed to raise a follow-on round of funding," said Garg.

The startup was founded in November 2014 by IIT-Bombay alumni Rahul Kumar and Garg. It launched its operations in March 2015 and raised seed funding from IIT-Bombay's alumni network. It offered its services in Mumbai, Bangalore and Pune.

GrocShop was selected for Microsoft's startup programme, BizSpark, which provides new ventures free software, support and visibility for three years. In May 2015, GrocShop was among the 16 startups which were selected for the Google Launchpad programme.

The company pivoted to an asset-light model in July 2015 and laid off 45 people in the process. It also started outsourcing logistics to Roadrunnr and Grab.

"We could only reach a maximum of 150 orders a day in Mumbai, and 20 orders a day in Bangalore and Pune," Garg said.

GrocShop shut operations in Pune and Bangalore by December before closing down the company early this year. The online grocery delivery business has seen multiple casualties over the past few months. Startups have found the going tough in the segment that has high logistics and customer acquisitions costs and wafer-thin margins. A slowdown in funding has made matters worse.

Earlier this month, Techcircle reported that GetNow.at, a Nagpur-based hyperlocal marketplace for groceries, electronics, mobiles, computers, home and office supplies, had closed its operations.

Delhi-based hyperlocal grocery delivery service AAGAAR.com, run by Asankhya Retail Pvt. Ltd, shut down operations recently.

Smaller startups are not the only ones that faced rough weather. PepperTap, which was one of the biggest players in the segment and which raised funding from SAIF Partners, Sequoia Capital and Snapdeal, shut shop a couple of months ago.

E-commerce giant Flipkart closed its grocery delivery app Nearby in February, five months after launching the service in Bangalore. Soon after, cab-hailing firm Ola pulled the plug on its hyperlocal grocery delivery app, Ola Store.

Grofers, one of the most heavily funded grocery delivery startups, has also found the going tough. The company, which has raised a total of $200 million from investors such as Tiger Global and SoftBank, shut operations in nine cities earlier this year. It has also laid off employees and revoked campus job offers as part of a restructuring.

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