The latest news: Two of the former executives of the firm Housing.com, namely Rishabh Gupta and Vaibhav Chhimpa have now taken a bold risk and are venturing into the risky business of online retailing. Both Rishabh and Vaibhav are alumina of IIT. Mr. Gupta has done mechanical engineering from IIT whereas Mr. Chhimpa has done computer science engineering from the same institution. Their startup is called The box and is a subscription-based groceries startup. Chhimpa will oversee product development and marketing while Gupta will handle operations, human resources, administration and finance. Their app is in the testing phase and only a beta version of it has been launched. It is expected to be launched as an app – based service by the end of this November.
Why the risk and Mr. Gupta’s vision: According to Gupta, most grocery startups are struggling because they source from retailers, who are at the bottom of the chain and struggle to make margins. They felt the pinch of a slowdown in funding and couldn’t find sustainable growth models in a segment plagued with wafer-thin margins, high logistics and customer acquisitions costs, and fierce competition. Gupta said The Box will source products from distributors and wholesalers of brands, and do last-mile delivery to customers’ homes. The company will have its own sorting center where the goods will be distributed as per the orders placed. Gupta said the bulk of the planned investment will go toward developing the design of the packaging and on logistics. Initially, the firm will only offer its services in Mumbai and then slowly expand to other areas. “This is a new model, so we want to understand what the customer wants. We will select a few geographies and focus our efforts in these places only”, he said.
Our take: Online retailing is a very risky business indeed and the fact that both Mr. Gupta and Mr. Chhimpa are graduates from IIT does not guarantee success. They have to be careful and design a flawless and fast final mobile app. They must understand their customers’ needs and expand accordingly. Many startups like GrocShop, PepperTap, LazyLad, MovinCart and Aagaar have failed in this sector. The rising costs of logistics are another challenge to tackle. The packaging of products has to be appealing to attract customers. Planned expenditure should be made in advertising the product to make the advertisements effective and profit – making. However these challenges also do not mean that they will fail. a few startups in this segment are still growing and have raised funding as well. The biggest player in the segment is BigBasket, which said in March it raised $150 million (Rs 1,000 crore) from investors including the UAE-based private equity investor Abraaj Group and International Finance Corporation. In August, Pune-based hyper local delivery startup Tokri secured $2.5 million in funding from the Syska LED group. Read more on Startups