Four Reasons Indian Hyperlocal Startups Failed
India’s startup culture dates back to the mid-1980s when, after being exposed to computers and the internet, we were taking baby steps into the world of technology. Today there is a new startup in every nook and cranny, and while it is encouraging to see young entrepreneurs experiencing business and management, you also see many trendy companies fail. . The issues aren’t with e-commerce, but with real-world commerce, and it’s something you can see happening in the much-hyped hyperlocal startup space.
(Also see: Another VC-funded grocery delivery business falls into the hands of the local Sabzi Guys)
Nowadays, online shopping has become a graveyard for failed businesses, leaving customers with worries of all kinds. The primary challenges that businesses – and their customers – face include on-time deliveries, secure transactions, misuse of information by businesses, and fraud by customers. The changing landscape has also sounded the death knell for many Kirana store that could not adapt to a changing world.
From home deliveries to discounts to the convenience of meeting all your different needs from a single app, hyperlocal businesses had a lot to offer and venture capitalists invested heavily. So what was wrong?
PepperTap, LocalBanya, Flipkart’s Near all rose and fell quickly, and even Grofers closed in many major cities. Here are the facts that nailed the coffin.
1) The Gold Rush
2014 was touted as a watershed moment for Indian startups, and billions poured in from global investors. With over a billion people, the huge market potential has attracted them in large numbers. Brick-and-mortar operations have faced fierce competition, and once-traditional and mainstream businesses have been pushed into spending and valuations.
While Hyperlocal businesses turned out to be a boon for local stores by giving them an additional sales opportunity, at the same time it was a game spoiler with all the discounts and offers. This was supported by the companies themselves, all for marketing and customer growth reasons, but it was clearly not sustainable in the long term.
2) Too big, too soon
Businesses in this space were growing at unrealistic rates. PepperTap grew to have operations in 17 cities in just a year and a half. Navneet Singh, CEO of PepperTap, shares, “In the race to pepper the whole country with PepperTap, we had brought too many stores online far too quickly.”
Rome wasn’t built in a day, startups need to understand that rapid expansion without a solid foundation and strategy isn’t worth fighting for.
3) Investor pressure
Behind the scenes of many startups, investors directly compare the nascent Indian market to Silicon Valley. At the same time, companies are under tremendous pressure to show user acquisition, which gives way to offers and discounts. The details of delivery management, fraud and lost orders also create pressure.
4) Discounts galore
Simply handing out heavy discounts does not guarantee loyal or repeat customers. From e-commerce and grocery delivery services, to discounts, coupon codes, deals, weekend sales, festival deals and flash sales, these marketing gadgets are guaranteed to get lots of clicks, visits website and product checks.
But for a business to run profitably, 365 days of discount sales is impossible. Every weekend, the newspaper runs huge advertisements for flash sales, promotions and deals. As hyperlocal apps are busy building smart sales and discount systems, they should have been thinking about ways to optimize costs and find a way to calculate the ROI of these ads.
By offering enormous growth prospects to local merchants, the hyperlocal has ushered in a new era. Immediate gratification and reduced prices will satisfy consumers, but not for long. Instead, drive the exceptional experience, learn the motivating factors. Businesses in this space need to integrate the convenience factor into your retail and make it an experience, and they need to do it now.
Tejinder Pal Singh Oberoi is the Executive Director of Cygnet Infotech, an Ahmedabad-based IT company that developed m1Order, a local mobile commerce platform.
Disclaimer: The opinions expressed in this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of Gadgets 360 and Gadgets 360 assumes no responsibility in this regard.