Empressario...An Entrepreneurial Insight

HYPER LOCAL STARTUPS

October 2015

Vol. XX Iss. 1 IMT Hyderabad

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The new craze in town....

5. Business Tip and Add Ons Page 7

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3. The Latest Fad in the Startup

World

2. The New Kid on the Block

1. Prarambh Speaks

Vol. XX Iss. 1 IMT Hyderabad

4. Short Quiz

CONTENTS

The year 2014 witnessed the rise of Hyper local delivery startups, and more than 110 startups were founded in last two years. An approx amount of $280 million has been invested since then and majority of funding has been done across horizontal and food delivery segments. According to the reports, Delhi tops the list for hyper local startups owing to its higher spending power followed by Bangalore and Mumbai respectively.

A hyper local model has quickly disrupted the traditional brick-and-mortar retail store by replacing it with a Smartphone app. The model is aggressively trying to disrupt the logistics & last mile delivery model, which is the current model adopted by the players in the e-commerce industry. It is also understood that hyper local startups are creating abundant employment opportunities across sectors viz, technology, sales to delivery and logistics.

The most active investor in hyperlocal startups Sequoia is . Its portfolio includes Grofers, PepperTap, TinyOwl, Roadrunnr & 1mg. Even Nexus Venture Partners (TinyOwl, Roadrunnr) and Saif Partners (Swiggy, Spoonjoy, PepperTap) are banking on this wave. None of the hyperlocal startups are profitable, but the investors believe the business could break even as average order size increases. Indian shoppers have greeted the hyper local startups with a lot of enthusiasm and the customer demand still comes in unmanageable large numbers. This is majorly driven by freebies to acquire customers and because of this, several startups managed to raise initial rounds of funding and get additional capital to keep the lights on.

Thus with the efficient service and delivery market penetration these firms are striving for better execution each day and providing convenience and comfort.

Happy Reading!!!Team Prarambh

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Prarambh Speaks

E-commerce, as we know, is old news by now. The new kid on the block, ‘Hyperlocal’, is the new buzzword in retail hallways, going by the recent spate of well-funded launches in this space. There is already a wide range of services on offer, from grocery delivery at your doorstep, to office and personal care services, with latest start-ups such as Foodizm, CalorieCare, PepperTap, Taskbob, Zopper, Groupon India, Bookmein, Qyk, and many more fuelling and spearheading the market segment towards something which is now being assumed to be game-changer after the bygone E-commerce phenomenon.

Services are hyperlocal by their very nature, driven by locality or community. When moving into a new city, for example, people would like to stabilize as quickly as possible and this where such services step in. On-demand services based hyperlocals are truly in vogue standing where we currently are, but how far is the entire business model sustainable in the truest of business essence?

The investors and consumers are sitting up and taking note in an equal pace. This trend can’t really be taken as something very trivial, as, if we choose to put the whole picture in context, the Indian retail industry in itself is worth somewhere around $500-600 billion, of which grocery items account for about 67% of the revenue. However, in case of FMCG and grocery, modern retail format accounts for less than 10% of the total sale. E-commerce or hyperlocals are obviously a tiny part of the pie just yet, leaving the market as one with an immense potential to be tapped in from, as it still happens to be an unchartered territory for this entire business model. Most companies, therefore, are still at a stage where they have to prove their business models and change consumer behavior.

While on-demand grocery-the model that players such as Grofers ride on-has immense potential in this space, other high potential categories include delivery of services(such as supplying peons/delivery boys, specialized laundry services, plumbers or electricians), price comparisons, food ordering apps, etc.

For example, home service start-up Taskbob, founded by Aseem Khare, charges a commission of 20% from its servicemen. Product price comparison start-up,

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The New Kid on the Block

MySmartPrice, works on commissions too, while providing a free six-month on-board period to online sellers, where they can use the platform gaining traction. The revenue model of BookMeIn, another home services company, includes a monthly subscription fee for SaaS-backed system given to service providers to manage their business. Further, it gets revenue on leads/bookings done by customers on the website, along with revenues through ads of service providers. So what’s working in their favour?

The answer is a fertile environment. The Indian market is still dominated by the brick-and-mortar- stores, which oddly, is an opportunity in disguise for hyperlocal players. Unlike non-hyperlocal E-commerce, these start-ups are not really competing with the offline retailers, but are partnering with them instead. Customers also tend to trust hyperlocals more than non-hyperlocal E-commerce websites, as the stores they buy from through online platforms have a physical presence, making it possible to attend to any grievances quickly. Further, the start-up can very well tap into the existing infrastructure, acting as a bridge between existing retailers and the consumer.

Within hyperlocals, services have higher margins of around 20%, as opposed to product based models where the margins are anywhere around 2-10% or even non hyperlocal E-commerce companies which operate on 3-7% margins, depending on the category.

So all in all, the biggest learning will be the capability to scale. A hyperlocal that focuses on a single ‘locality’ will find it difficult to get the scale needed to create an economically viable model. Being able to identify a widespread but local need, and having a model that adapts to each market is crucial, and will be the main MANTRA for this unique business model in the days to come.

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Debopriya SarkarI.I.S.W.B.M,KOLKATA

Imagine this : You have guests coming over in an hour, you are preparing a nice pasta and you realize ‘Damn! I am missing the macroni!’ or imagine this: It’s the height of summer, its 100 degrees outside and the AC goes off, now we all know nothing can be worse. So what do you do in such cases? 10 years ago you probably would have had to make do with some substitute and make the pasta or waited for the electrician to come at his own leisurely pace while you melted in the smoldering heat. Now this was 10 years ago. Today however it’s a different story. With just the tap of an app you have the world at your feet. Thanks to the hyperlocal start ups and their services.

Now lets begin with the dummy question. What are hyperlocal startups? The hyperlocal startups are basically startups that function to serve the local mundane needs of their consumers through online as well as offline modes. When you are too lazy to get up off your couch and go grocery shopping, when you want food delivered to your home from your favorite restaurant, when you need that plumbing fixed, when you want specialized services like that of a doctor or a dentist and so on; that is when these hyperlocal services come in handy. You just have to have the right app, book the service and lo! Voila ! you get your need serviced. Speaking in terms of economics these services try to bridge the demand supply gap.

To make it more clear lets take a few well known examples :-Groffers :- Founded by Saurabh Kumar & Albinder Dhindsa, Grofers is a hyperlocal delivery platform that allows users to order via their mobile app and get delivery of everything from grocery to pet food within hours.

Tiny Owl :- Started in 2014 by Harshvardhan Mandad, a IIT-B Alumni, TinyOwl is a location-based food ordering startup from Mumbai. From confirming the order to informing the customer about the estimated delivery time, TinyOwl’s app does it all.

LocalOye :- Founded by Aditya Rao and Anupam Tulsiyan, LocalOye is a mobile marketplace for hiring local service professionals, a service that will surely come in handy for anyone new to a city.

Yumist :- YuMist is a new entrant in the food delivery market with an aim to deliver homely

The Latest Fad in the startup world

Vol. XX Iss. 1 IMT Hyderabad |Page 4

meals with a few taps on your Android phones. Momoe :- No! Stop salivating. It doesn’t get you momoes! Momoe claims to be a mobile payments experience that allows payments via a mobile app at restaurants, retail stores, home deliveries and urban markets in Bengaluru.

Its not just us who have realized the importance of these hyperlocal services. The Venture Capitalists have also realized what a great investment these hyperlocal startups make. From a business perspective they are a gold mine. Many of these startups have received series of funding from famous VCs like Sequoia Capital, Tiger Global etc. The startups also have further expansion plans for which they require the funding. So yeah! That’s what hyperlocal services are all about. They basically make your life easier and convenient. You don’t have to worry about little things in life. These hyperlocal services will take care of themfor you. What’s better is that they depend on local community businesses to get their orders completed.( If I am a hyperlocal servicer, say for grocery, I get an order for groceries then I will obviously go to the local vegetable market to fulfill that order). Every coin has two sides. Similarly while these hyperlocal services have their advantages, there also disadvantages. There have been many complaints that the goods delivered by these services are not quality reliable(especially the groceries). Also they make use of a lot plastic for their covering and packaging. Well bye bye environment. As said before these services give us convenience. But frankly speaking they also make us lazy. Instead of going on leisurely grocery shopping and perhaps meet up some pals on the way and have nice chat, we will be in the comfort of our homes, ordering the service and facebooking the same pals while waiting.

So there. That’s the story of the hyperlocal startups. These startups are a consequence of changes in the consumer behavior. Today the world lives online. The needs and preferences

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have changed. The modes of satisfying the demands have also changed. Hence these hyperlocal startups have modeled themselves to satisfy the needs of consumers in manner in which the latter prefer. Moreover the hyperlocal space has a lot of potential. Therefore only those startups that are able to sustain their business model, have an amazing supply chain and network management will be able to survive in this highly competitive field.

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Nidhi Bhandhiwad GIM,Goa

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The Answers will be shared in the next edition

1)Which fast food delivery company’s name was inspired by Burkina Faso, the land of the incorruptible, in African language ?

2).Which Indian company will be the first issuer of Corporate Masala Bond ?

3)Who owns the instant noodles brand Joymee that is available in Indian markets ?

4) Wow is an airline from which country ?

5) Who has been signed by Tata Motors as its first brand ambassador in its 70 years history ?

6)Where is Amazon opening its first brick and mortar bookstore ?

7)Which major bottled water brand has admitted in US that what it sells is bottled tap water?

8)While working with which UK retailer did Gulam Noon acquired the name Curry King ?

9). Under what brand name will Reliance sell its 4G LTE mobile phones ?

10)In the start up world jargon, who or what is a ‘dragon’ ?

Short Quiz

Vol. XX Iss. 1 IMT Hyderabad |Page 8

Business TipIf you want to increase productivity in your company, consider making changes

based on big data. Data analysis reveals surprising insights about what does—and doesn’t—improve worker performance.

Readers’ Corner

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Add Ons

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Vol. XX Iss. 1 | Empressario | October 2015 | Prarambh | IMT Hyderabad

Faculty Mentor

Apurva Sinha, Dhruva Banda, Karishma Sethi, Shivam Wadhwani, Abhishek Telukunta, Aayushi Pathak

Creative Credits

Graphic Design: Prakash Thakur, Ayush Agarwal, Shawnell Godinho

Core Team

Write to us: ecellprarambh@gmail.com, prarambh.ecell@imthyderabad.edu.in

Dr. Sivagnanasundaram

Editorial Team

Apurva Sinha, Dhruva Banda, Karishma Sethi, Prakash Thakur, Ayush Agarwal