Grofers has announced that it has raised USD 220 million from SoftBank Vision Fund and other investors. The five-year-old company, which has more than 5,000 stores in 13 cities in India, will use the money to expand its supply chain operations.
The commitment by SoftBank and others, including KTB Ventures and existing investors Tiger Global and Sequoia Capital, comes a few weeks after Alibaba-backed BigBasket raised USD 150 million. It faces competition from the grocery verticals of Amazon and Flipkart, and hyperlocal player Dunzo and delivery startup Swiggy, which has entered the grocery delivery space.
Albinder Dhindsa, chief executive of Grofers, told Mint, “We are clear about our target audience. It is going to be middle India that goes after planned purchases and low-priced offerings."
Grofers started out as a hyperlocal grocery delivery player in December 2013. It has moved to the inventory model over the last two-three years and is now focusing on private labels. Almost half of the company’s sales are from private label offerings. Unlike BigBasket, Grofers does not offer fresh produce or same-day deliveries.
Grofers had raised USD 120 million in November 2015 at a valuation of USD 400 million. Since Grofers had changed its business model and rolled back its hyperlocal services, it had to accept a drop in valuation. It raised money from its existing investors in February 2018 at approximately 40% lower valuation than its previous round in 2015.
Sticking to its new business model has worked for the company. The company claims to clock about 60,000 daily orders, with an average order value of Rs 1,450.
Dhindsa said Grofers is profitable in Delhi, where it earns about Rs 100 crore in revenue a month, and will soon be profitable in Kolkata. He expects Grofers to become profitable overall by the end of 2021.
BigBasket leads the online grocery industry with approximately 80,000 daily orders, according to industry estimates. Its subscription service, BB Daily, gets almost 30,000 orders every day.