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Devina \n Joshi, Financial Express\n <\/i><\/p>\n
Devina \n Joshi, Financial Express
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Mumbai, \n 8 September 2015 <\/i><\/p>\n
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Recently, \n there was news of restaurant reservation site EazyDiner expanding \n operations to Mumbai from the National Capital Region, having \n secured Series A funding worth $3 million led by existing investor \n DSG Consumer Partners, and Saamna Capital. <\/p>\n
As per a PwC analyst, investors have pumped more than $150 million \n into companies like Grofers, TinyOwl, Swiggy, LocalOye, Spoonjoy, \n Zimmber and HolaChef, among others. Judging by the patronage showered \n upon them by customers and investors alike, it would appear that \n hyperlocal start-ups are all set to create the next big boom in \n the Indian retail sector. But is it really all that rosy? Probably \n not, as can be amply witnessed by acquisitions taking place in \n the nascent yet already overcrowded market.
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Between November 2014 and February 2015, the Rocket Internet-backed \n Foodpanda acquired rivals TastyKhana and JustEat.in, and is rumoured \n to be in acquisition mode with TinyOwl. Restaurant search app \n Zomato, which recently got into the food ordering space, is also \n reportedly looking to acquire minority stakes in food-ordering \n firms.
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While investors are attracted to hyperlocal start-ups, controlling \n logistics well is key to sustained growth for these businesses \n — all of these will definitely go through a constraint in \n the supply of delivery boys, for example. In India, organising \n fragmented labour is a challenge and, hence, a services-based \n hyperlocal needs to figure out the mechanics of human capital \n even more than a traditional, product-based e-commerce firm.
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For services, another challenge is customer stickiness. If a \n user uses an app to obtain the services of a plumber, for example, \n he may not go through the app to contact the plumber next time \n if his services are found satisfactory. Discounting can induce \n trials, but just like in any other business, prove fatal in the \n long run. Like what led to the end of HomeJoy in the US — \n excessive discounts to dissuade direct contact between servicemen \n and customers.
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Even for product-based start-ups, maintaining data quality is \n a big hurdle as stock and prices may not be updated by retailers \n in real time, making it difficult to track offline sales.
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Since the game is hyperlocal, you need to be physically present \n in the city to bring retailers aboard. For that, you need a city \n team. Other challenges include retailer verification and assessment, \n given that hyperlocals deal with small city retailers.
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Stickiness is needed on both sides, and each locality will \n certainly evolve into having a market leader and a follower, with \n other players falling far behind. “So the critical success \n factor for a hyperlocal is being able to rapidly create a viable \n model in each location it targets, and then—to build overall \n scale and continued attractiveness for investors—quickly \n move on to replicate the model in another location, and then another,” \n says retail consultant Devangshu Dutta of Third Eyesight. As they \n do that, they will become potential acquisition targets for larger \n ecommerce companies, which could use acquisition to not only take \n out potential competition but also to imbibe the learning and \n capabilities needed to deal with microcosms of consumer demand.<\/b><\/p>\n