Building and running a grocery business has always been a major challenge not just for start-ups but also for traditional players who’ve long been in the game. A major reason is a disparity between what a farmer thinks he should be selling more as compared to what consumers are willing to pay more for. Secondly, by the time produce reaches the consumers it becomes 4X-5X the original price. Also, the amount of wastage involved in storing the inventory is huge - a major logistical challenge.
These are some of the major problems that have been persistent in the grocery business that from small local start-ups to the legacy player like Amazon have been trying to solve. Otipy is one such NCR-based e-grocery brand that has claimed to have solved much of the pain points by primarily targeting the supply chain aspect of the business – thus making it more efficient.
Varun Khurana, Founder, and CEO, Otipy stated, “We started as a business to optimize things in the supply chain of fresh produce. The end goal was to provide consumers with better quality produce, prevent wastage and farmers also get good value. Or, at least provide guidance to the farmers what they can grow to earn the most.”
Amongst all the online players, the company claims to have the biggest e-grocery business in NCR. Beyond the groceries, the company also deals with bakery, dairy, rice, flours, pulses, and snacks. Founded in 2016, the brand has been doing direct-to-consumer (D2C) service only since 2020, while earlier it was into B2B (Business-to-business).
Solving E-grocery Pain-points
Let us understand here what the brand has done in the category that has not only made the grocery business more efficient but was able to provide necessary value to consumers and farmers.
The company’s USP can be explained as: because it is dealing with perishable inventory – it has optimized the time from harvest to the time of consumer delivery. The way Otipy has been able to succeed is through a 'prediction-based system'.
“We will predict how we have to sell tomorrow. Based on that, we order from the harvest and the whole night we do the quality checking and so on. If we compare us with conventional e-commerce, they first bring the inventory to the warehouse, there is a quality check and then they start the booking. Now in our case, the time taken to bring the inventory to the warehouse and the time being taken to order – have been made parallel - that is how we save time," Khurana said.
In the conventional supply chain, there is 35 percent wastage in the grocery business, whereas in Otipy’s case there is mere 3-4 percent wastage - 10 times better. Also, in conventional e-commerce, there is still 15-25 percent wastage. That is there because the more you stock fresh products to scale, the more you are likely to waste them.
“We can bring product farm to consumers in as little as 12 hours. Other companies may take 2 to 3 days. The product remains fresh,” Khurana added.
Risks Involved In 'Prediction-based System'
Any sort of major business decision made based on prediction, estimation, et al has to involve major risks without a doubt. Likely so, in this case, there can be a mismatch between the orders placed and the inventory stocked in the company’s warehouse; thus the business would likely be prone to major supply chain challenges. The brand has set some ways to offset those risks.
Elaborating on the same, Khurana shared, "The way we manage it is there are 2 cases: a) if how much you have predicted, a lesser quantity of goods have been ordered – in which you’ll be sitting on the inventory. Our system the whole day monitors the booking rate of the product and by the evening 80 percent of the booking should have happened but only 70 percent has happened. So that is risky. In that case, we might decrease the price a little bit."
"b) In the second case if how much you have predicted, more quantity of goods have been ordered. So in this particular expected case when the product is being loaded, broad information is taken if there is any parity, and if there is, the information is then updated in the evening. So, beyond a certain limit, the system does not take any order," he further added.
To sum it up, the brand relies heavily on a) Real-time monitoring and b) Technology. And, for the same, the company has built technologies, the whole warehousing and predicting system in-house.
Given the success the brand has had in the NCR region, it is obvious that the brand would like to reproduce the same in other cities. Also, the company has raised 2 rounds of investment (Series A and recently Series B) so far. The company has been allocating most of the funds to people, and then on marketing and a little bit on the infrastructure.
“We'll be launching in multiple categories and multiple cities in India including Bangalore, Hyderabad, Chennai, etc. and we have plans to go international as well,” Khurana concluded.