As the hyperlocal business models continue to grapple with challenges in the country, yet another player in the space has started facing the heat. This time, the hyperlocal grocery delivery app PepperTap, has decided to shut down operations in ten cities including metros like Mumbai, Chennai and Kolkata. The app will now only operate in 8 cities and suburbs out of 18 it was presently catering to.
This move from the Snapdeal and Sequoia Capital backed company comes in the light of cost cutting due to fund crunch which is being faced by many hyperlocal providers in the recent times.
Company’s Co-Founder and CEO, Navneet Singh has recently confirmed the closure to media. As per Singh, larger chunk of PepperTap’s workers and delivery boys was on a contract basis and have now being let go in cities where the operations have shutdown. The company had around 2,500 employees including permanent staffs.
"Even though PepperTap has been able to establish itself as a leading hyperlocal grocery delivery service over the last one year, given the short- to mid-term investment climate outlook, we have decided to focus on depth rather than breadth,” said Singh.
“We are digging our heels in for the long term. We will focus on building a stellar customer experience by providing additional categories and services that differentiate us from our competition in cities where we continue to operate,” he added.
Though the company has shut operation in many cities but still operates in cities like Delhi, Gurgaon, Noida, Hyderabad and Pune which contributes as much as 70% of its total revenue. PepperTap had plans to expand into 75 cities when it announced its $36-million raise last year led by Snapdeal.
Though the hyperlocal grocery space kicked off on an exciting note and made investors pump millions of dollars into it, but with companies like Grofers and now PepperTap have started struggling hard for survival, viability of the industry is a big question. One of prime factors of this major crunch could be in the backdrop of eCommerce giants like Amazon etc who are stepping into the vertical for hyperlocal grocery delivery.
For the industry, hyperlocal in particular, fulfillment of orders without having an inventory-led model in place has now become one of the biggest challenges for players like PepperTap and Grofers.
The SoftBank-backed grocery delivery firm, Grofers, too ceased operations in nine cities last year saying non-metros and smaller markets did not contribute significantly to revenues. The company secured about $120 million from SoftBank and now operations in 17 cities while other players like BigBasket covers 16 cities.