Why hyperlocal grocery startup Zapmart wants to open offline stores

Online hyperlocal grocery startup Zapmart plans to set up brick-and-mortar stores, as the Mumbai-based company seeks to avoid the risks that sank several ventures in the segment.

Zapmart founder Parvez Siddiqui told TechCircle the physical stores will be part of an omni-channel strategy and help attract consumers who prefer to touch and feel products before buying.

The online grocery delivery segment in India has seen a number of casualties this year as startups battled wafer-thin margins, high logistics and customer acquisition costs, and fierce competition. Gurgaon-based LazyLad, Nagpur's GetNow.at, Delhi's AAGAAR.com and Mumbai-based MovinCart are among the ventures that have shut operations.

Even the bigger, VC-funded players have found it hard to survive. PepperTap--backed by SAIF Partners, Sequoia Capital and Snapdeal--recently shut down while Tiger Global-backed Grofers has restructured its operations, sacked employees and withdrew from several cities. Flipkart and cab-hailing firm Ola also have unsuccessfully tried grocery delivery.

Siddiqui said the physical stores will act as delivery hubs for the online orders and also serve as warehouses to manage inventory better. "We realised that just having a hybrid model is not sustainable as inventory becomes a huge risk when perishable products are stuck in the warehouse," he said.

The bootstrapped venture, operated by GN Retail Services Pvt. Ltd, is looking to open five stores of varying sizes in Mumbai initially. It recently raised Rs 3 crore from two real estate businessmen and plans to invest part of the money to open the stores that will cost about Rs 25 lakh each to set up, said Siddiqui. He didn't disclose the names of the investors.

Founded in 2015, the startup offers about 5,000 products of daily use and has 6,000 to 7,000 customers in Mumbai. Zapmart claims it delivers 500-600 orders a month with an average value of around Rs 650-700. The company is also looking to raise as much as $10 million (Rs 66.5 crore) in its first institutional round of funding.

Zapmart will possibly be the first online grocery venture in the country to open offine stores, as tech startups across segments try out various business models to survive and grow. In June, fashion e-tailer Myntra said it planned to open physical stores across the country. In January, fashion e-tailer Yepme.com launched its first offline store in Delhi. E-commerce giant Amazon has tied up with Storeking for its offline shopping initiative in rural areas and small towns.

"The online model sacrifices profitability in the favour of scale and the offline model sacrifices scalability in the favour of profit," said angel Investor Ajeet Khurana. "The coexistence of both in some kind of a hybrid model could be really tough to pull off. But I would like to be proven wrong here."

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