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Case Study: Grofers Dark Stores India

Case Study Grofers Dark Stores

Dark Stores Meaning

With retailing witnessing a digital transformation, dark stores have caught the imagination of grocery shoppers worldwide. These stores are generally large eCommerce warehouses that cater to an online order fulfillment platform or distribution center, or a ‘click-and-collect’ service, where the customer picks up items they have ordered online. Currently, prevalent in grocery, apparel, footwear, consumer durables, and home goods retail businesses globally, a dark stores business model is D2C(Direct-to-Consumer) in nature. It provides a quick and efficient shopping experience for consumers through a digital ordering process, same-day on-demand delivery, and an in-store location pickup.

Though open to end consumers, a potential buyer can browse through the dark store online and via mobile-friendly applications, providing a virtual, real-time view of the product shelves. He/she can then make a web-based purchase seamlessly through the digital shopping platform, pre-choosing the home delivery or the buyer pickup option according to his convenience. The dark store setup is normally done in or near high demand densely populated areas, dark stores can also be located on the city outskirts. The dark stores concept thus facilitates large, spacious storage and distribution centers where automation-friendly processes like storing, sorting, and managing orders can be carried out unhindered.

Advantages of the Dark Stores Business Model:

• Customer-centric, servicing densely populated areas and neighbourhoods: Dark stores can cater to high order densities in multiple locations at the same time, unlike traditional retail stores.
• Greater product variety and availability: The dark store online order fulfilment system ensures bigger and better inventory visibility and management.
• Reduced operational costs: Real-time live visibility, space and time optimization, and efficient supply chain management reduce operational costs and make the dark stores concept more viable financially.
• Round-the-clock customer service: Whether it is 24*7 order fulfillment, picking accuracy, or consistently maintaining quality standards, the dark store model has the necessary infrastructure to support these services.

Grofers: One of the Pioneers of Dark Stores India

A popular Indian online grocery delivery business, Grofers was founded in December 2013 and is based out of Gurugram, with estimated revenues of around Rs. 177 crores in FY2020, and more than 5,000 employees overall. The name Grofers is essentially an amalgamation of the phrase ‘Grocery Gophers’. Grofers currently operates in 38 cities in India supported by hyperlocal dark stores, including prominent ones like Delhi, Gurugram, Mumbai, Bangalore, Pune, Jaipur, Chennai, Hyderabad, and Kolkata. The company aims to increase this number to 50 cities by March 2021. Its prominent competitors in the online grocery segment include the current market leader Big Basket, Amazon Pantry, Flipkart Supermart, JioMart, Dunzo, and others. After the onset of the Covid-19 pandemic in 2020, Grofers along with Amazon India and Big Basket were among the select few online grocery platforms that continued to operate and thrive in India.

In November 2020, Grofers was in the final stages of negotiation for raising $55 to $60 million from Softbank – its largest investor with a 46% stake in it – and other existing investors. In 2019, Softbank led the $220 million Series F funding round, while in 2018, it led the $53 million Series E round for Grofers. In FY20, Grocer’s revenues grew by a huge 111% YoY to over Rs.176 Cr, from its earlier Rs. 83.62 Cr in FY2019. However, its total expenses (comprising mainly of advertising and promotional costs) also increased in the same period (see diagram below).

Grofers Business Model Explained

Grofers leverages on an online marketplace model which brings merchants and their inventories online for the prospective buyer, who doesn’t have to visit in-person to physical stores. Product categories sold digitally through the Grofers website or the mobile application include Grocery & Staples, Kitchen & Dining, Household Care, Personal Care, Fruits & Vegetables, Beverages, Breakfast & Dairy, Baby Care, Packaged Food, Fresh & Frozen Food, Pet Care, and Home Furnishings. After the order is placed successfully, delivery is made within 90 minutes for orders within a 4 km radius. The Grofers business model is thus online and hyperlocal in nature, characterized by on-demand logistics and faster delivery times, with tie-ups with local stores and merchants, who are charged a commission for all orders that they receive. The commission range for Grofers starts at 8% on orders below Rs. 700 and 12% to 15% for orders below Rs. 1,000.

Promising future ahead for Grofers and its Dark Store Model

It is expected that Grofers will continue its revenue growth in FY21 as well, given that online grocery stores witnessed an upsurge with new users during the Covid-19 lockdown in India last year, when delivery of essentials through eCommerce start-ups was allowed. Grofers path to profitability speeded up during this lockdown, as new consumer households were added to its buyer mix. In this context, Saurabh Kumar, the Grofers founder claims that his business has acquired 18 lakh new customers and successfully retained more than 70% of buyers who used his platform in the first month of the pandemic.

In 2021 and beyond, Grofers is eyeing overall profitability, fuelled by its dark stores/online order fulfillment centers, as a major chunk of India’s 150 million online buyers nowadays spend on e-groceries. Grofers has also started preparations for its IPO to be launched in the latter half of 2021. Other plans for the company include the strengthening of its private-label offerings through a reported allocation of $15 million on the category.

Your Retail Coach – Dark Store Consultants India

Headquartered in India, YRC (Your Retail Coach) ranks amongst Asia’a top grocery dark store consultants, also offering other varied customized retail solutions for its prestigious clients. The company has proven expertise in online retail grocery consulting, supermarket consulting, online order fulfilment, supply chain management, franchise business models, and SOPs across all key business functions. Spearheaded by retail experts with years of successful industry experience behind them, YRC has successfully incubated and forged winning partnerships with several prominent retail start-ups to date.

If you are an aspiring dark store entrepreneur/ looking for a successful dark store setup, get in touch with YRC retail consultants to understand about setting up a dark store. YRC retail experts have helped many darks store takes shape, scale, and achieve operational excellence to stay ahead of the curve.

PROCESS AUTOMATION

The idea of having Ecommerce Consultants on-board from the beginning itself points towards reducing the involvement of the promoters in daily operations. Ecommerce Businesses willing to be a brand reaping profits & sustaining the competition must ensure that most of their processes should be automated. The more the manual intervention, the more would be the errors.

In Ecommerce business, you get only 1 chance to impress the customer & if you mess up there, you lose the customer for long.

Process automation in respect to all the activities pertaining to customers from order receiving to order fulfilment is a must for a seamless experience for the customers.

Task Management is another grey area where most deadlines fail as 90% of the tasks are assigned manually & are forgotten, unheard, misunderstood or mistaken.

YRC Team of Ecommerce Management Consultants helps to make maximum of the processes system-driven to ensure minimalistic manual intervention.

VIDEOGRAPHY & PHOTOGRAPHY

No matter how good your product is, the customer would know only if it looks good.

Photography includes the following steps:

  • Cataloguing your products
  • Cataloguing your images
  • Backup your images (A few cloud storage solutions include Dropbox, Google Drive, Bitcasa, Apple’s Cloud Storage etc.)
  • Choose the right camera & lens (You may also outsource the photography to a third party agency)

DIGITAL MARKETING

Digital Marketing includes SEO & SMM. SEO i.e. Search Engine Optimization includes activities like back-linking, meta tags, blog-writing etc. to ensure your website ranks on the 1st page on Google Search.

Next comes SMM i.e. “Social Media Marketing” which as the name suggests including promoting your products on all the social media sites, email marketing, influencer marketing & several other BTL activities.

These activities are going to be recurring & would decide the traffic on the website, the conversions, whether the right target market is tapped, the likes, the views, the orders, the reviews & much more. YRCs Ecommerce Consultants create a budget for digital marketing right from pre-launch to launch & for each month thereafter.

Building digital marketing strategies in coordination with the agency, selecting them to signing them off would be the role of YRC.

This ensures seamless coordination, detailed interactions & desired execution as it is always advisable to work with a single agency than multiple of them.

IT INTEGRATION

Selection of the right software for smooth functioning of back-end operations right from production to webstore display would be suggested and integrated by YRC Team.

YRC’s Team defines SOPs of Product Movement, maps it with the locations & people. They then create a blueprint of all the features required in the software & help in shortlisting & selection.

IT Integration involves connecting your offline inventories with real-time online webstore so when a sale occurs, inventories get deducted real time across offline as well as online platforms.

This helps in accurate inventory management, maintaining the MOQs, re-order levels & achieving the optimum inventory levels.

Some popular software include unicommerce, viniculum for your front-end website management & Genisys for your entire back-end Purchase, Production, Accounting, Invoicing etc. management.

WAREHOUSE & LOGISTICS PLANNING

  • How many cities or countries you wish to sell in?
  • Where should your Warehouse be located?
  • Should you have one warehouse in each country or city?
  • Should you be having your own delivery team in your base city?
  • Would the 3rd party vendors be reliable? What happens when they lose or misplace your product during delivery?
  • How should I manage the logistics if my goods are coming from different countries?
  • How should the goods be stored and barcoded?
  • How much space do I require for warehouse?
  • I am sure several such questions must be haunting you while you think of starting your own fashion ecommerce brand.

 

At YRC, our warehousing and logistics experts can help you devise a strategy for all of the above mentioned queries and much more.

We design the layout of the Warehouse considering the inward, goods processing, software entry, barcoding, outward, goods return, scrap storage, goods stacking & much more.

Logistics route plan is devised considering the manufacturer to your warehouse and from there to last mile delivery locations.

UI & UX DESIGNING

This Step involves 03 distinct parts:

Part 1: Choosing the right Platform:

From several platforms available in the market right from Shopify to magento, woocommerce, prestoshop, wordpress etc. you must choose the one that fits best for your business

Part 2: UX Designing:

“UX” denotes User Experience, which if put in simple language is building the functional requirements of the website.

UX Designing includes designing the features required in the website, customer journey map, website features, the browsing features, navigation features, ecommerce order management process flow, checkout cart features, catalogue management, ecommerce payment system, cross selling features & much more.

“As per statistics, 68% of the customers abandon the carts before payment”

An interesting UX ensures the customer sticks on to the website for a longer time.

Part 3: UI Designing:

UI stands for User Interface, which means designing the look and feel of the website. UI includes using the right colours, elements and the entire aesthetics of the website.

A good User Interface ensures the user completes the task that he has come for. It navigates the user through the journey of the brand in the simplest but most effective way.

The UX designer maps out the bare bones of the user journey; the UI designer then fills it in with visual and interactive elements.

If User experience is the bare bone, user interface wraps it up with an attractive cape.

At YRC, our team if experts can help you develop the entire User Journey to ensure it is engaging!

SAMPLING & PRODUCTION

This step follows the “Designing” Phase, whether you have an in-house design team, freelance designers or an outsourced design company. It is one of the most exciting phases, as here you see your designs turning into products & your ideas turning into reality.

In most start-up cases, production is outsourced i.e. brands tie-up with the established manufacturers/ job-workers to get their products manufactured.

Sampling involves multiple 04 Stages, Fit-Sample, Prototype Sample, Pre-Production Sample & the Production Sample.

Prototype Sample is the first sample provided to the buyer. It can be in any fabric/ colour. This sample is just to understand whether the product design looks equally great in reality.

Fit Sample, as the name suggests is prepared to check the fit of the garment i.e. the various sizes, length, width etc.

Pre-production is made by the actual production line. Here the stitching quality and other aspects related to manufacturing are checked. This is the last stage where rejection can be accepted.

Production Sample is made before the production which is the replica of what is going to be finally produced.

Once you are through with all this, you are good to go ahead & get your goods manufactured.

PRODUCT DESIGNING / SOURCING

Product Designing or Sourcing is the heart of the Ecommerce Fashion Brand.

Product Designing / Sourcing can be done in several ways, as follows:

  • In-house Design Team
  • Freelance Designers
  • Outsourced Design Team
  • Ready Product Sourcing (From Manufacturer or Wholesaler)

At YRC, we evaluate your business strategy & business model to arrive at the decision, which of the above ways would be best-fit for your business. In certain cases, product sourcing may be a combination of the above.

These are the people who are going to build your brand! Whether they are the designers or merchandiser, your brand look is going to be in their hands.

If you are designing each garment from the scratch, the sourcing would play crucial role in developing design identity of your brand.

Sourcing includes fabric, trims, lining & all the raw material required to build the garment.

BRANDING

Branding is the “Look of the Brand”, right from logo to tagline, the colours used, the brand story, the brand communications on social media, the packaging & all the other aspects which speak directly or indirectly to the customers. Branding constitutes the look & feel of the brand & hence must be thoughtfully planned to match with the product that we are selling.

Branding must appeal to our target audience. Example : A golden colour logo depicting finesse, art, richness, premium, however beautiful it may be individually cannot go with a brand selling affordable kids wear products. So, your logo must be in-line with your brand positioning, whether you are an expensive brand or a luxury brand or a value for money brand, it must be depicted from your “Branding”.

It is an integral part to attract the target audience.

ORGANOGRAMS & SOP’s

Organogram is the “HR Blueprint” of the business which is created at the onset, to map out the team required across each function at various stages of the business. At the launch, only key people need to be got on board to ensure the project gets started & at this stage, all of them need to multi-task. Similarly, certain financial as well as operational goals are set for addition of the further team. Example, for the operations team, we hire 1 operations manager during the pre-launch phase & we add 1 more only when the business kicks-off & we reach a volume of selling more than 1000 pcs/ month or a turnover of more than 0.1 million USD.

SOPs are Standard Operating Procedures, a bible to run the entire organization right from Sales, Purchase, HR, Order receiving to Order fulfilment, Inventory Management, Accounts, Warehouse, Logistics, Supply Chain, Production & all the other relevant functions for the business. Business must be organized from its first day of operations; only then the tasks can be delegated.

At YRC, we design the organization structure, the processes, and approximate time taken to execute each process, job profile of every member within the organization, their KRAs, KPIs & the Reporting Structure.

CRITICAL PATHWAY

Critical Pathway Analysis (CPA), is a project management technique which cannot be overlooked while launching an ecommerce fashion brand. Brand launch process is cumbersome with multiple inter-dependent & time-bound tasks involved, which need to be tracked to ensure the project remains on track.

CPA outlines key tasks across the project, their turnaround time (TAT) & the dependencies of tasks upon each other. It identifies the sequence of tasks, their interdependent steps from inception to completion, their criticalities, and their dates of onset, target dates of completion along with the key responsible person for the respective activities. Critical Pathway helps in understanding the unimportant & not urgent tasks which may jeopardize the execution of the project because of an unexpected snag! It also maps out the potential bottlenecks which might be posed because of the dependencies of tasks upon each other & cases where the next task cannot be commenced before the completion of the previous one.

CPA detects the minimum & the maximum time involvement of a particular individual or team to execute the task, thereby arriving at the overall deadlines associated with the project.

At Your Retail Coach, we design the Critical Pathway & review it periodically to ensure the project is on track & the progress is measurable.

BUSINESS STRATEGY & BUSINESS PLAN

Business Strategy includes the vision, mission, goals, business model, business plan & strategy for all the functions within the organization.

Business Strategy is a well-defined plan that outlines who, what, where, why, how & when for the company; for example, who would be the target market, how to attract the target audience, when to launch new products, where to operate from, how to handle competitors, what would be the USP, what would be long term goal of the organization & several other answers to the 5Ws of Strategy.

Business Strategy aligns the organization towards a common goal. Business SWOT helps company to identify & overcome their weaknesses & focus to sharpen the strengths. Business strategy forecasts future risks and helps business in building skillsets to overcome the potential threats.

YRC’s Business Plan focuses on creating a “Blueprint” of the business, thereby deriving the feasibility of the concept & gauge whether the opportunity is lucrative to invest time, energy & effort. Business Plan creates cash flow understanding i.e. building inflow & outflow cash projections from Week zero to week 60 i.e. 05 year projection. Business Plan calculates the capital investment, operating costs, one-time costs, recurring costs & all the other numbers relevant to obtain the breakeven sales, return on investment, return on capital, internal rate of return & several other ratios. Business Plan is also one of the important requirements if you are targeting the “Investor Route”. Fund raising becomes extremely transparent & channelized. With business plan panned out clearly, the business will know until what point must it be stretched & where to stop, which reduces the probability of unplanned investments.

MARKET RESEARCH

Starting the concept of Ecommerce Fashion brand with Market Research ensures we get detailed understanding of the industry & this research report also acts as a social confirmation for your concept. Market Research helps in understanding the target locations, their population, potential online buyers for your product, competitors for each category, and top selling products of the competitors, competitors’ price range, offers & their responses & much more. Market Research helps in thorough understanding of your brand position as compared to our competitors. It helps in identifying gaps in the market, in your category along with the scope of the said product in the desired market. This will help in validation of your concept & prevents you from making the same mistakes as your fellow brands, eventually saving your time, energy & efforts. This phase is also a make or a break phase, as the market research study may at-times come up with some eye-popping numbers & statistics which might compel you to re-think on your product or category that you are planning to sell or alter your entire concept itself!! Market Research Reports analyse the competitors’ webstore for their traffic, conversion & sales. This is extremely valuable information to derive our inventory budgets & projections, which takes us to our next phase.