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Grofers, Swiggy look to outsource deliveries to third-parties to cut costs

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Logistics and delivery are a prime concern for all hyperlocal delivery startups. Most of them have been operating their own fleets of delivery so far. However, in search of profitability and cut costs, they are looking at other options.

According to a report in Livemint, Grofers and Swiggy are in talks with third-party logistic provider Opinio for outsourcing their deliveries. Grofers has already roped in Mumbai-based Grab a Grub Services for the same.

The report cited people familiar with the development who said that Grofers still uses its own personals and delivery fleets for most delivery operations. However, third party share will increase once they access outcomes from these initial experiments.

Grab a Grub Services has confirmed their deal with Grofers for carrying out their deliveries in Mumbai.
Commenting on the same, Nishant Vora, co-founder at Grab a Grub Services said,

A sector-agnostic logistics service that blends peaks of various businesses can only lead to positive efficiencies. A fleet which is solely dedicated to food or groceries or e-commerce will always cost more as compared to Grab’s fleet.

He further added that they are also planning to scale this partnership to other cities as well. Similarly, Swiggy and Grofers are also reportedly talking with Bengaluru-based Opinio for outsourcing their delivery operations.

Outsourcing for sustainability

The food and grocery delivery segment in India has not entirely lived up to its initial hype due to investor interest. Many startups have permanently shut down their shops (Peppertap, Dazo, Spoonjoy)while others have closed down in some cities (Grofers).

Grofers which is the most heavily funded startup in the segment with $165 million in its kitty, is also cutting down its costs in all areas.  Earlier this year, it shut down its operations in 9 cities. Last month, it laid off 10% of its workforce to cut costs. It has also withdrawn as many as 67 job offers to fresh graduates.

Notably, hyperlocal startups have so far relied on their own teams for carrying out delivery operations. This allows them to maintain quality of service and have complete control over delivery operations.  Naturally, this helps them to build a trust among customers by offering them superior experience.

However, unlike inventory-led models like that of BigBasket, hyperlocal startups aggregate local vendors and retailers on their platform. They earn a commission of anywhere around 2-10% of the total order value. This thin margin has particulary limited these startups from developing a sustainable business.

Outsourcing their delivery operations to third party services may help them to cut down their costs of maintaining own delivery fleets and personnals. This also helps them to meet occasional spikes in demands. Most importantly, they would be able to forecast demands in advance before they engage their own specialised delivery teams again.

It is not the first time Grofers has made efforts in this direction. Last year, it had acqui-hired Bengaluru based business-to-business logistics startup Townrush. In the same year, it acquired a smartphone based grocery delivery platform My Green Box to enhance its grocery delivery vertical.

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