Hyperlocal continues to face the heat of funding slowdown this year. After shutting down its operations in major cities earlier this year, hyperlocal delivery service Peppertap is finally bringing down curtains on its grocery delivery service in the next one month. The firm will focus on building a logistics business for e-commerce companies, reported the ET.
Its parent company Nuvoex Logistics already runs a reverse logistics business and Peppertap will build forward logistics technology to complete the whole B2B stack.
They are shutting down grocery delivery to focus on the logistics business. The company has substantial cash in the bank to scale that (B2B logistics business),
said a person familiar with the developments.
Nuvoex Logistics is already operational in 30 cities fulfilling almost 10,000-12,000 orders a day. It has some of the popular e-commerce companies as its clients such as Snapdeal, Shopclues, and PayTm.
And Peppertap will further scale that business and help in warding off competition from other logistics companies such as Delhivery, Parcelled, etc.
In a statement given to Yourstory, Peppertap CEO Navneet Singh said,
Shutting down PepperTap is an extremely difficult call for us but it’s the need of hour. Our foray into full stack logistics space is a well-pondered decision and our experience in consumer as well as business-focused logistics will certainly help us to build next generation e-commerce logistics startup.
Peppertap was founded in November 2014, and has since then raised more than $50 million in four funding rounds. As per December last year, the company claimed to be delivering more than 20000 orders a day. In that month only, it had raised $4 million and acquired another hyperlocal grocery marketplace called Jiffstore. That clearly hasn’t worked either.
Increasing competition from its heavily funded rivals Grofers and BigBasket and perhaps a weak unit economics have led the company to completely shut down its operations. It had shut down its operations in Agra and Meerut in September last year, followed by shut down in six major cities including Mumbai, Kolkata, Jaipur, and Chennai.
However, it is not just Peppertap but the entire hyperlocal segment which is struggling to keep up with the high initial funding rounds. According to experts, almost all hyperlocal delivery startups operate on extremely low profit margins and lose money on every delivery, making it very tough to sustain the business without external funding.
Before Peppertap, other startups such as Localbanya and Townrush also had to shut down their business due to their failure to build a sustainable business and inability to raise fresh capital.
Even Grofers, which has raised about $165 million from the likes of Tiger Global, Sequoia, and Softbank, had to shut down its operations in nine cities earlier this year.