India: Flipkart, Snapdeal, Paytm plan hyperlocal push

Flipkart is testing an ordering app called Nearby in Bengaluru to deliver groceries, electronics, clothes and other products. Photo: Ramesh Pathania/Mint

Flipkart, Snapdeal and Paytm, India’s top e-commerce firms, are preparing for entry into so-called hyperlocal delivery and considering investments in such start-ups, potentially heralding a much-awaited consolidation of the nascent but increasingly crowded business.

Hyperlocal start-ups connect customers with supermarkets and restaurants through apps and deliver products on demand, in a few hours or even quicker.

Flipkart is testing a separate ordering app called Nearby in Bengaluru to deliver groceries, electronics, clothes and other products, three people familiar with the matter said.

The company has been working on its hyperlocal push for at least a year and plans to launch it over the next two months, the people said. It plans to offer delivery of products within a few hours of an order being placed, they said, requesting anonymity.

Snapdeal, run by Jasper Infotech Pvt. Ltd, is planning to expand into hyperlocal primarily through acquisitions and financial investments, one of the people cited above said. The company may also launch a separate hyperlocal offering, the person said.

Paytm, operated by One97 Communications Ltd, is planning a hyperlocal offering within its mobile wallet, similar to the way China’s Alibaba Group offers such products and services, the second person said. Alibaba’s payments arm said in July that its Alipay mobile wallet app will allow shoppers to buy products directly.

Paytm is separating its e-commerce and payments businesses by creating a new arm, Paytm Payment Bank Ltd, Mint reported on 21 August.

“We at Paytm believe that the truest commerce platform will build a platform bringing millions of merchants to consumers on the mobile. Offline to online (o2o) is core to our strategy and we have built successful models for high-value large home appliances. And latest is in smartphone category in which we are in the process of starting same-day, four-hour delivery in 100 cities. We also building other o2o categories like bus tickets, cinema tickets and deals,” a Paytm spokesperson said.

Flipkart and Snapdeal declined to comment.

Over the past nine months, investors have pumped in hundreds of crores of rupees into hyperlocal groceries and food start-ups such as Grofers (Locodel Solutions Pvt. Ltd), PepperTap (Nuvo Logistics Pvt. Ltd), TinyOwl (TinyOwl Technology Pvt. Ltd) and Swiggy (Bundl Technologies Pvt. Ltd), betting that some of these nascent companies can become as valuable as Flipkart and Snapdeal, which are valued at $15 billion and $4.5 billion, respectively.

Some hyperlocal start-ups have said that over time they will expand from delivering groceries and food to all kinds of products such as electronics and apparel as well.

This is partly why the large e-commerce companies are entering this business, to counter the competition that hyperlocal start-ups may pose. In all, more than 25 food and grocery delivery start-ups have together raised more than $160 million over the past 10 months or so, according to Tracxn, a start-up tracker.

While hyperlocal start-ups have become popular with investors, there are concerns that grocery and food delivery start-ups will find it tough to ever make profits because of their unproven business models, leading some analysts to forecast a consolidation among these firms.

What may nudge consolidation is the hyperlocal push planned by Flipkart, Snapdeal and Paytm. All three companies are also considering investing in hyperlocal start-ups to complement their own planned offerings, the three people cited above said.

“There is a lot of interest in hyperlocal start-ups. Even though everyone knows it’s an overcrowded space, the market is big and no one wants to miss out. Flipkart and Snapdeal, especially, have reached out to several hyperlocal start-ups to explore potential investments. They want to get in early in case any of these guys become big (in value) or even pose a threat, however small, to their business,” one of the three said.

Some experts say mergers and acquisitions among hyperlocal start-ups are inevitable, regardless of whether the large e-commerce companies enter the business.

“Consolidation will happen irrespective of the fact that large e-commerce companies are entering the space,” said Rutvik Doshi, director at Inventus Capital Partners. “But they might not be a serious threat to the smaller players in the market given it is not their primary business. When companies have a lot of cash, they experiment. There is no need for them to rush into it right now when their primary business is still growing.”

This article was first published on Livemint.com

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.