afaqs!

Food retailers are strengthening back end to drive efficiency of operations

By Ritwik Sharma , Business Standard | In Digital | September 11, 2017
Swiggy has tried to focus on its business model as a differentiator.

With no dearth of competitors, a durable business model and innovation-led products and services are a must for start-ups to thrive in the online space. For instance, India's largest online grocer BigBasket, which is present in 25 cities and has achieved operational break-even in a couple of cities this year, has a strong inventory model allowing for control over quality of products. Also, the company has focused on building scale to improve its unit economics. In the last fiscal year, it became the sixth largest grocery retailer in the country, including offline players.

While BigBasket did not comment on specific steps it has taken in its six-year-old journey that have resulted in greater efficiency of operations, the company maintains that its core model has remained the same since inception.

When it comes to food ordering and delivery platforms, Swiggy has tried to focus on its business model as a differentiator, explains Srivats T S, the company's vice-president, marketing.

"The model caters to the unique demands of the Indian ecosystem across customers - best neighbourhood restaurants, full-stack delivery service including live tracking and no restriction on minimum order quantity, restaurants-assisting in discovery leading to consistent additional sales, reduction in large overheads, business intelligence, and delivery executives - flexible working hours, high efficiencies resulting in industry leading earnings," he says.

Given that speed of delivery is the heart of food ordering platforms, Swiggy has over time taken steps to ensure fast and reliable service. Recently, it undertook an app revamp so as to make it easier and quicker for customers to order the meal of their choice through features like dish customisation, greater personalisation and more intuitive dish selection. Srivats gives the example of an initiative like Swiggy Assured, which accords the tag to restaurants that consistently meet expectations of users.

"On the delivery side, through our innovative technology and delivery fleet, one of the largest in the country, we have improved our speeds further to an industry-best average delivery time of 35 minutes," he adds. Swiggy has also utilised data to make delivery estimates accurate - be it taking into consideration traffic related data and festive occasions, or weather conditions - besides working on reducing interactions between delivery personnel and customers.

Online home rental start-up NestAway, which has been in operation for over two years, has functioned as an end-to-end property management solution provider. Says co-founder Deepak Dhar, "NestAway's key is its business model with an annuity. It worked out for us and we have only evolved from there."

As people have multiple choices, providing them with the right choice is always a challenge. While getting partners on board for services, NestAway gets requests from tenants asking for customisation in terms of services that they did not require. "We have established ourselves in providing solutions based on technology like Smart Lock where tenants can lock/unlock their homes using smartphones. We are also working on a product where tenants can view the property without any manual assistance," points out Dhar.

IoT is one such area where NestAway start-up sees great potential. The smart lock system it has piloted follows a technology that works on Bluetooth. NestAway also plans to introduce NFC (near-field communication)-enabled locking systems that can be unlocked by tapping a registered mobile on the lock. One of the biggest challenges for the start-up, which is associated with a target audience of single men and women, is to ensure suitable options are available for families.

Saurabh Shrivastava, chairman of Indian Angel Network, points out that in the current scenario the focus is shifting from just being able to raise more and more money and worrying about breaking even at a distant date. Because investors are concerned want to know what one's model and path to profit is. In the e-commerce space, everybody has made mistakes or not used money always in the most optimal way through excessive advertising, discounting etc.

Shrivastava adds that the tendency among players is to corner gross merchandise value, etc. so that competitors do not get as much funding and it becomes "the last man standing" and wins, following which it can raise prices. "That's a very high-risk strategy. What happens if somebody else gets more funding? You can't predicate your success on it. Therefore, companies are looking at aligning costs, being more efficient, and keeping a lid on discounting," he adds.

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