PepperTap, on-demand hyperlocal grocery delivery service, has shut down its cash-burning grocery delivery operations and has decided to focus on expanding its logistics business.
According to a report in PTI: Citing issues like high customer acquisition costs and poor app integration with partner stores, CEO, PepperTap, Navneet Singh said, “The company was losing cash on every order and has decided to preserve a large amount of the investor capital than be at the bottom of the abyss.”
“We couldn’t shake off the feeling that we were walking (not racing like some other companies) towards the edge of a cliff hoping that things will get better before we reach the abyss…”
“The unique challenges of this business are not solvable in the short term and certainly not solvable without massive injections of capital. We would have to confront this issue sooner or later,” Singh told PTI.
PepperTap, which is controlled by Nuvo Logistics, has a presence in 32 cities in the country and works with e-commerce players like Patym and Shopclues.
PepperTap grew from $1 million gross merchandise value at the start of 2015-16 to $250 million run rate in December last year, clocking 20,000 transactions a day. The company had shut operations in eight cities earlier in February this year.
PepperTap had raised seed round funding of $1.2 million from Sequoia in November 2014 and Series A of $10 million from SAIF Partners and existing investors. In December, the company had snapped up $36 million in Series B round led by e-commerce behemoth Snapdeal, amongst others.
Last year, it had also acquired Bengaluru-based delivery startup Jiffstore for an undisclosed amount.
The decision to shut operations will result in about 150 job losses.
“We have about 200 people. While about 50 are being absorbed in the logistics business, we will have to let go of the others. We are offering compensation packages with upto three months of salary depending on the seniority and tenure of the employee,” Singh was quoted by PTI as saying.
The company will now focus on expanding the logistics business. “We are already working with many e-commerce firms and have a strong reverse logistics operations. In the next few months, we will focus on strengthening our forward logistics,” Singh said.
According to industry analysts, hyperlocal delivery startups like PepperTap, BigBasket and Grofers have been feeling the heat of a slowdown in investment as they operate on wafer-thin margins and end up losing money on every delivery.
In February 2016, Flipkart shut its grocery service Nearby, less than five months after starting it as an experiment in Bengaluru. In January 2016, Grofers shut down operations in nine cities.
“Being able to deliver a wide range of products, including a perishable range, managing same-day delivery and high fill rates is critical to customer satisfaction. Offline supply chains are not fully developed and hence riding on them does not deliver a great customer experience,” Co-founder, BigBasket, Vipul Parekhwas quoted by The Financial Express as saying.
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