In further signs of intense pressure on food delivery startups globally, and specifically India, PepperTap, one of the more heavily backed hyperlocal delivery startups in the country, is shutting down its operations in six major cities of India, including Mumbai. Along with shutting down operations, it is also going to lay-off a whopping 400 delivery men.
This move, continues to highlight the difficulties startups are facing in the hyperlocal delivery segment. More importantly though, this highlights how companies have failed to crack the delivery market, despite massive backing and resulting high burn rates.
Earlier in January this year, Grofers also decided to shut down operations in around 9 cities, including Ludhiana, Bhopal, Kochi, Coimbatore and Visakhapatnam.
These companies, apart from shutting operation to conserve capital and extend their run-up to the funding round, have also stopped offering heavy discounts and are now spending less on marketing efforts, largely due to investor pressure to improve financial metrics.
PepperTap had rolled back operations in smaller towns like Agra and Meerut after a month-long pilot failed to take off. The company will now shut down business in larger cities such as Ahmedabad, Chandigarh, Mumbai, Kolkata, Chennai and Jaipur.
However, the company has confirmed that it will continue to operate in Delhi, Gurgaon, Hyderabad, Pune, Noida, Bangalore, Ghaziabad and Faridabad — few of its strongholds, where it continues to enjoy decent dominance.
Navneet Singh, co-founder and chief executive PepperTap, said,
Even though PepperTap has been able to establish itself as a leading hyperlocal grocery delivery service, given the short to mid-term investment climate outlook, we have decided to focus on depth rather than breadth. 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 in.
Founded in 2013 by Navneet Singh and Milind Sharma, the company has raised more than a staggering $51 million since its launch. It had 50 full-time employees in the cities in which it is shutting down operations, along with 400 delivery personnel on a contractual basis — all of whom will now loose jobs.
The company claims to be delivering more than 7,000-8,000 orders a day. Its parent firm Nuvo Logistics Pvt. Ltd, which also runs a reverse logistics business, posted a profit of Rs. 87 lakh on revenue of Rs. 19.5 crore in 2014-15.
In a renewed, and rather subdues strategy of sorts, most of these startups are trying to focus on consolidating their current businesses, rather than going for a full blown expansion. PepperTap’s biggest rival in the space include Grofers, which had recently raised $120 million in funding, but itself is plagued by issues, similar to Peppertap’s.