Grofers founder says quick-commerce model has path to profitability

Grofers, which four months back pivoted to 10 minutes grocery delivery, is going beyond selling grocery, as the SoftBank and Zomato-backed company repositions itself as a quick-commerce platform to deliver anything a consumer might need in 10 minutes, founder Albinder Dhindsa told ET.

This can include anything like a phone charger, stationeries, over-the-counter medicines and others. “When we moved to the 10-minute space, the thing we realised is that it is about quick commerce and not category specific. The rebranding is also an attempt to position ourselves that we are not just grocery but anything that you will need in 10 minutes,” Dhindsa said. “We are not looking at categories (like groceries) but time-specific use cases,” he said, adding that the platform is delivering heaters in North India currently which is not a typical product to be delivered in 10 minutes.

Grofers on Monday
rebranded itself as Blinkit. According to Dhindsa, the platform is aiming to hit an annual gross merchandise value (GMV) run rate of $1 billion by March 2022 compared with the current GMV run rate of $600 million on its platform with 4 million orders a month, growing at a 2X every month.

Annualised GMV run rate is a projection of upcoming sales based on the sales clocked in a month.

“We are investing very heavily in our technology. Overall, the business model we have is very sustainable because we have had learnings from our past. We are primarily focused on scaling up, building the infrastructure and technology and helping our partners a little bit more,” he said. According to him, the company has enough capital to invest and sustain itself but its fundraising plans will also depend on how the “current cycle” plays out.

Business Model and Competition

Blinkit’s move into quick commerce comes at a time when platforms like Swiggy’s Instamart, Dunzo Daily and Zepto are investing heavily to deliver groceries in 15-30 minutes and investors are also backing these firms, cutting them large cheques. Nine-month-old Mumbai-based Zepto raised $60 million in November at a valuation of around $225 million in its first funding. The startup is currently in talks to raise at least $100 million more. ET reported earlier this month citing

Swiggy plans to invest $700 million in its quick commerce service, Instamart, ET
reported earlier this month, citing the food delivery company’s cofounder, Sriharsha Majety.

When asked about the stiff competition and how the company plans to stand out, Dhindsa said: “We are more focused on solving for customers than solving for competition. Competition takes care of itself.”

ET reported last month that
Zomato is in talks to invest $500 million in Grofers, after having co-led a $120 million funding round in June that made the Gurgaon-based company a unicorn. Dhindsa declined to comment on the potential investment, and said there have been no attempts at integrating

’s app with Blinkit!.

According to Dhindsa, quick commerce is the future of commerce and if Grofers didn’t enter the space, now it would have been outdone by someone else. He said the business in its existing cities is contribution positive and that its partners are also making money.

“I think we have a strong proof of concept at a decent scale. The way we are going about this, we are confident this (business idea) is viable and sustainable. It has a path to profitability and we are able to demonstrate,” he said. “How this evolves depends on a lot of things we don’t control. (For example) How competitive the market gets, there is easy money in the market at this point, our execution capabilities … all these are extremely volatile and interrelated.”

Dark Stores

Blinkit is present in 12 cities but Dhindsa said it will take the model to 100 cities by the end of March 2022. It currently operates 250 dark stores and plans to expand to 550 dark stores by the end of January. Dark stores are small warehouses located in dense areas of a city through which orders can be delivered faster.

Blinkit’s capacity of dark stores varies depending on cities and communities in which they are operating, but broadly each store keeps 3,000-4,000 stock-keeping units. Maintaining a low number of SKUs helps in better inventory and faster delivery.

Dhindsa is not concerned about demand and is confident the customer will pay a premium for the convenience if given the right products. “Each city is different. Every community requires customisation. If you are making that level of customisation, you get product market fit and you will see demand being created,” he said.

The company’s increasing focus on 10-minute delivery takes it back to its roots from where it all started back in 2013. Grofers started off with hyperlocal delivery and despite initial interest from investors, the company had to pivot and change the business model, shut down operations in many cities and move to an inventory-led model similar to BigBasket as the business was not sustainable.

“In 2015, the signal we were getting was that the service we were offering to the customers was not useful for them,” said Dhindsa. “So, we followed that customer’s journey to something else. As we grew, we again saw an opportunity that the customers were looking for the service again.”

Till its latest pivot, around 50% of the company’s GMV used to come from private labels but it is now not a focus area. Dhindsa said the company has scaled that business down.