PepperTap has finally called it quits as far as grocery delivery is concerned. The team will now be working on the sister company of PepperTap – NuvoEx which is an e-commerce focused logistics company. This is the not the first time that a grocery delivery startup has called it a day. LocalBanya and Town Rush have earlier met with the same fate. In fact, the major e-commerce players in Flipkart and PayTM too tried their hand in grocery delivery but had to shut shop sooner than they would have initially thought.
While there exists BigBasket which is a major player when it comes to grocery delivery, there has to be a definite reason for why so many startups have failed in this particular domain.
Navneet Singh, the founder and CEO of PepperTap wrote an exhaustive blog post about what went wrong with PepperTap. Here are some of the key takeaways:
PepperTap cites 3 major reasons that lead to its failure.
The reasons included were:
- Integration Problem with local stores – PepperTap was not able to list the stock available with the local stores as effectively as it should have. The smaller local stores didn’t make use of digital inventory which led to either out of stock items being made available or the app not taking in the price fluctuation of many products in stock.
- Massive Cash Burn through discounts – This is something that many hyper-funded startups of today are guilty of. While some of them are able to raise more money to compensate, it still isn’t the most effective strategy to be deployed. With PepperTap increasing its footprints in multiple cities, this cash burn reached a level where it was too much to handle.
- Need for buffer capacity to fulfil 2 hours delivery promise – PepperTap says that the 2 hours delivery promise is something that differentiated it from its competitors in the grocery delivery space. To be able to deliver on the promise it required a lot of buffer from inventory to delivery men and that was getting increasingly difficult to do for all the cities.
It was the compounded effect of these 3 reasons that led PepperTap to shut down operations in a few cities to begin with. The problems were compounded when the investment scene slowed down but the cash burn was too much and hence it became almost impossible for PepperTap to continue its operations without any future investment.
Grocery Delivery does appear to be a domain which has been hard to get hold of by most startups. It will be interesting to see if someone comes up with an action plan that is viable for the domain.