Why e-grocery firms are walking the path of doom

With funding coming down and valuations being slashed, a number of start-ups in the country are struggling to meet their hiring commitments.
All have been aggressively recruiting top talent – including big-ticket Silicon valley veterans – with the millions of dollars they have raised. Retaining this talent, however, has not been so easy for them.
Read More: The top level churn in e-commerce
One recent startup to join the list of not being able to honour hiring commitments is Grofers. The e-grocery delivery start-up is planning to lay off 10 per cent of its workforce, and it also revoked 67 job offers to fresh graduates citing adverse market conditions.
It’s decision comes soon after Flipkart’s move to defer joining dates of leading engineering and management institutes by six months.
Other internet companies such as Hopscotch, CarDekho, Roadrunnr and Click Labs have also deferred joining dates.
Read More: Top notch startups that deferred joining dates of campus recruits
For e-commerce, 2016 has been a tough year as funding has all but frozen. The hardest hit have been food-tech startups which have witnessed the maximum number of shut downs, scaling down of operations in various cities and even laying off employees.
Zomato and FoodPanda both went in for a round of layoffs, while SpoonJoy, a company which was acquired by Grofers, shut its services in major cities. TinyOwl, another struggling food ordering company was acquired by B2B delivery startup Roadrunnr (now Runnr).
“Most startups that entered the food tech space are kids and novices who don’t understand the business. They understand the technology and even technology to the extent of creating an app, which can be replicated by anybody and everybody. So they fundamentally basically have no understanding of the business,” Founder and CEO Urdoorstep.com, Dinesh Malpani told Indiaretailing in an interview earlier.
Urdoorstep.com is a Bengaluru-based online hypermarket.
“They (grocery startups) gathered insane levels of initial funding, which they started throwing left, right and center without building a business. And that is why these businesses are shutting down now,” he said.
Experts also point out that it is three times as expensive to acquire a customer online vis-a-vis in physical stores.
“All supermarkets, particularly the ones with small formats, have more chances to succeed as on-line businesses,” said Founder, VegFru, Anil Chopra.
“Learning on the job, re-inventing the wheel, burning your fingers are all costly affairs. You burn till money last – than you lay off people, cheat / default on payment to your service providers. With no money in sight – you sign off, shows hands up to your investors and become a ‘has been’,” he further stated.
What Recruitment Heads Think
While employee movement is common to any business, experts believe that the pace at which it’s happening in the e-commerce space indicates challenges related to the organisational structure, expectations from employees, young leadership and lack of robust strategies.
“The current e-commerce scenario depicts a situation wherein the middle management is much more experienced than the top management, which may generate heat on some issues within the organisation,” CEO, Beyond Talent Management Pvt Ltd, Barkat Charania told Indiaretailing in an earlier interview.
“Particularly in e-commerce, it is challenging to get the right person with required skills set at the right time. The industry needs professionals who are process-oriented and also have an entrepreneurial overview, people who are strategists and yet should be willing to get their hands dirty,” he noted.
Read More: Why Silicon Valley imports are quitting Indian unicorns
The worrying across-the-board exits indicate that e-commerce firms should consider restructuring their operations in order to focus on business fundamentals, where discount-driven growth and GMVs as profit metrics will no longer be an option.
This is crucial, especially at a time when venture capitalists have begun asking questions on business metrics and profitability and have started controlling big-ticket investments from the beginning of 2016.
“The problem is that these companies are generally very young, and haven’t had the time to build a culture of retention. The business keeps on changing directions and thus, leadership may not feel the need for a high-powered individual any longer as the business has changed direction,” says Managing Partner at Hunt Partners – India, Sunit Mehra.
What The Future Holds?
As far as online grocers are concerned, Chopra feels there is a need to add a value proposition in the overall online experience, banking on just convenience won’t work.
He said, “I don’t see many online grocers to have the infrastructure that support a supply chain that if not eliminate but at least minimize the known supply chain and customer centric issues. Alternatively, they have to invent a different value proposition hitherto not known within demand aggregation, inventory, delivery and customer satisfaction models.”
As for employee attrition, experts advise entrepreneurs to be mentally prepared for more such exits.
“There are plenty of new start-ups who want to hire people with prior relevant experience from established e-commerce brands in senior management positions. That is a tough ask,” Charania said.
“However, if companies are hiring professionals with entrepreneurial mindsets, they should be mentally prepared for the entrepreneurial temperament of their employees pushing them to seek new experiences,” he concluded.