PepperTap
The Indian grocery delivery app that raised $50 million in two years and grew on discounts
- Founded
- 2014
- Closed
- 2016
- Lifespan
- 2 years
- Total funding
- $50 million
- Country
- India
- City
- Gurgaon
- Sector
- E-commerce
- Founders
- Navneet Singh, Milind Sharma
- Investors
- Sequoia Capital India, SAIF Partners, Snapdeal, Ru-Net, JAFCO, BEENEXT, InnoVen Capital
- At its peak
- In September 2015 it was taking 15,000 to 17,000 orders a day across 17 cities, reaching 40,000 orders on a weekend day.
- Cause of closure
- Business model failed
What did it do?
PepperTap was a Gurgaon-based hyperlocal grocery delivery app. Holding no stock of its own, the company partnered with local shops, picking up orders placed by users in the app from those shops and bringing them to the door within a short time.
Why did it shut down?
The company raised three rounds in quick succession in 2015, $1.2 million in March, $10 million in April and $36 million in September in a round led by Snapdeal, and aimed to reach 75 cities by March 2016. Although it hit 20,000 orders a day in October 2015, growth was fuelled largely by discounts. In February 2016, as the investment climate worsened, it pulled out of six cities to focus on eight. According to founder Navneet Singh, integrating with retail partners' inventory systems was difficult, discounts were unavoidable, and two-hour delivery required a logistics network standing by even at hours when there were no orders. At the end of April 2016 the consumer app was shut, around 150 employees were laid off and the team turned to e-commerce logistics.
The story
PepperTap was founded in Gurgaon in 2014 by Navneet Singh and Milind Sharma. Singh had previously founded Nuvo Ex, which managed supply chains for large e-commerce companies. Rather than open its own warehouse, PepperTap partnered with neighbourhood shops; the user ordered in the app, and the company's team picked up the goods from a nearby shop and delivered them within a short time. In 2015 the company described itself not as an online grocer but as a partner that helped local shops compete with big retailers.
The growth was dizzying. PepperTap raised $1.2 million in March 2015 and $10 million in April. In September 2015 it signed a $36 million round led by Snapdeal, with Sequoia India and SAIF Partners also taking part. That month it was taking 15,000 to 17,000 orders a day across 17 cities, reaching 40,000 orders on a weekend day. The goal was to spread to 75 cities by March 2016.
The picture quickly reversed. As investment appetite in India waned, in February 2016 the company pulled out of six cities to focus on eight. Singh later listed the problems: integrating with retail partners' inventory systems was harder than expected, constant discounts were needed to attract customers, and the promise of two-hour delivery required a logistics network standing by even at hours when there were no orders. According to Singh, the sum of all this was that the cash burned on every order rose rapidly, with no end in sight.
At the end of April 2016 PepperTap shut its consumer app and laid off around 150 employees. The team turned to using the technology it had developed in grocery delivery for e-commerce logistics in smaller cities. The grocery app that had grown on more than $50 million of investment passed into history before it was two years old.
Lessons for founders
- Before growing order numbers with discounts, measure in a single city whether customers stay once the discounts end; at PepperTap, growth depended on discounts.
- An inventory-free marketplace model may look capital-light, but a fast-delivery promise cannot be sustained without accurately tracking the inventory of thousands of small shops.
- Prove profitability per order before planning to spread to 75 cities on a new round; when the investment climate cools, shrinking a large network is expensive.
Sources
- PepperTap Lands $36M To Expand Its Grocery Delivery Service To 75 Cities In India (TechCrunch, 2015-09-29)
- Fearing Current Investment Climate, India's PepperTap Scales Back Its E-Grocer Service (TechCrunch, 2016-02-09)
- After struggling with rising costs, Sequoia-backed PepperTap pivots from grocery deliveries to e-commerce logistics (TechCrunch, 2016-04-25)
- Grocery Startup Peppertap To Shut Down Its Hyperlocal Delivery Operations (Inc42)
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