Navneet Singh entered the hyperlocal logistics space through PepperTap with a focus on the groceries market and aims take this business to 100 cities in the next three years with 2,00,000 to 3,00,000 transactions a dayNAVNEET SINGH, FOUNDER, PEPPERTAP
Navneet Singh always wanted to own a business and the seed was sown during his college days. But, coming from a non-business background he didn’t know what it would take to build a business and eventually entered the professional world where he held different positions with companies like Delhivery, World Bank (IFC) and ExxonMobil. “I wanted to be in the logistics and e-commerce sector and I joined Delhivery to understand the space and find opportunities that I could target,” says Singh. He had two ideas, one in the B2B space (which is his reverse logistics company) and another in the B2C hyperlocal logistics space. When he left Delhivery he had already raised an initial capital for his business, but, he decided that starting a B2C business with limited capital was not a good idea. And hence, he along with Milind Sharma, established an e-commerce-focused reverse logistics company. “We did not need much of a marketing spend for the reverse logistics business and that’s how I started my journey with NuvoEx. This also proved to be a demonstration of my execution skills,” says Singh.
While 90 per cent of these stores have their own delivery mechanism, given that they are smaller players, they have limited logistics capability.
By April 2014, the company was present in about seven odd cities and had reached a break-even point. That’s when Singh decided to start PepperTap, a company in the hyperlocal logistics space, with seed funding from Sequoia Capital. It is a location-based platform where the goods are procured from supermarkets with whom the company has a tie-up. This allows customers to see a specific catalogue of their area based on their location (within a single zone of 5 kilometer radius).
“The first thing we started building in this business was technology. We have our own application for every point of supply chain,” says Singh. Customers can choose from over 5,000 unique products from a wide array of categories right from food, grocery and staples, fruits and vegetables to household goods. The company goes through various rounds of optimisation in order to keep its mobile application, website and the operations updated and in sync with the customers’ requirement.
Tapping market potential
PepperTap is an on-demand hyperlocal grocery delivery service in India that provides convenience, on-time and on-demand delivery to its patrons. Interestingly, the idea to base PepperTap’s business model on hyperlocal delivery is a result of combination of events. “During my stint in Delhivery, I observed that logistics was happening in a hub and spoke model in India. I wanted to explore this space to make a change here and came up with the hyperlocal point-to-point delivery system,” says Singh. After considering groceries, vegetables, food, electronics, designer apparel, he settled on the groceries business. “Groceries was an easy choice as it was a big category. This apart, this business is already taking place in the hyperlocal model but the only difference here is that customers go to a local store to buy whatever they want,” says Singh. Through PepperTap, Singh wanted to bring in the convenience of getting these products from the local store to the customer while it was already available in the hyperlocal model. Currently, PepperTap offers more than 15,000 SKUs across categories including staples, food and dairy products, household items, fresh fruits and vegetables. Consumers can place their orders through a mobile app and deliveries are made in a span of two hours, making it one of the fastest services of its kind. The app is presently available on Google’s Android and Apple’s iOS platforms.
Another factor that works in favour of PepperTap is that it is an asset light model. “Many challenges can be overcome with this model as service levels and cost structure is different from an inventory led model,” adds Singh.
Gaining network support
The company has a tie-up with relatively organised stores. “We generally tie up with people who have small chains; two or three stores,” says Singh. For example, in Gurgaon, PepperTap works with seven different players right now. In New Delhi, it has a tie-up with 32 odd players and in Pune, it works with 13 stores. When the company wants to enter a city, it maps out the region it wants to cover, the zone that it would like to be in and finds the right store. Subsequently, it creates ties with two or three more stores.
“While 90 per cent of these stores have their own delivery mechanism, given that they are smaller players, they have limited logistics capability,” opines Singh. In reality, these stores have just a couple of delivery boys at their service and the focus is not on delivery but on walk-in customers as that segment is more profitable. “Due to the complexity of setting up the logistics network itself, they service customers in a catchment area that does not span more than half-a-kilometer,” says Singh. Since PepperTap has the logistics capability, it is able to extend the store’s catchment area to three kilometers and hence, it gets access to a much larger customer base. Over a period of time this helps in multiplying the revenues for the store. Singh cites an example. “A store that we tied up with in January is currently seeing 2 to 2.5 times the business they were doing earlier. We are already producing more than 50 per cent of revenue for some of the stores which are on our platform,” he shares.
The company currently operates in Gurgaon, New Delhi, Noida, Pune, Hyderabad, Bengaluru, Chandigarh and Jaipur. “We started expanding about a month and a half ago when we received Series A funding from Saif Partners and Sequoia Capital,” says Singh. This round brought in an investment of US $10 million. Earlier, the company was funded by Sequoia to the tune of US $1.2 million. “The main expense happens on two things namely; expansion and customer acquisition. We also need to be involved in marketing, brand building and increasing our sales,” says Singh.
Talking about challenges, Singh says, “Building a master catalogue is a challenge and knowing exactly where it is present in the store is another challenge as the customer can also walk-in and make a purchase at any point of time. So we need to have deep integration with the store. That is why we work with a limited number of stores,” says Singh while adding that once the catalogue is in place, business operations get a lot easier.
The company entered the Gurgaon market in December 2014 and did almost 2,000 orders a day in just that city. “Seventy per cent of our customers are repeat customers,” recalls Singh. As far as its marketing strategies go, the company started online and followed it up with pamphlet distribution and mall acquisitions. “Once we had coverage in the city we advertised in print and ran a radio campaign in three cities,” says Singh.
With a goal of being the best in its segment, Singh aims to make PepperTap reach 100 cities in the next three years, with more than 2,00,000 to 3,00,000 transactions a day from the current level of 10,000 per day. At present, the company has a presence in seven cities and is in the process of setting up operations in another four to five cities including Mumbai, Chennai, Kolkata, Lucknow and Surat. “By the end of August, we should be present in about 12 cities and will then look at other cities to expand into,” states Singh on a parting note.
Founders: Navneet Singh and Milind Sharma
Funding: Series A funding from Saif Partners and Sequoia Capital to the tune of US $10 million.
Business Profile: PepperTap is an on-demand hyper local grocery delivery service in India that provides convenience, on-time and on-demand delivery to its customers.