PepperTap failure

PepperTap

Large and fast grocery delivery service

Description

PepperTap provided online shopping platform that addressed customers' need to buy groceries from local markets by delivering the goods to their doorsteps. It targets buyers from different groups of cities, divided into three tiers. The service helps in solving the problems of long queues in the market, limited parking spaces and manipulative intermediaries. Grofers, their main competitor, focused only on big cities to reduce management costs. Another strong competitor of theirs is BigBasket which manages its own inventory and operates as a mega wholesaler, while PepperTap obtains their inventory from local suppliers.

Stats

Category
Food and Beverage
Country
India
Started
In 2014
Closed
By 2016
Number of Founders
Two
Name of Founders
Milind Sharma, Navneet Singh
Number of Employees
Between 1001 And 5000
Number of Funding Rounds
4
Total Funding Amount
$51.2M
Number of Investors
7
Precise Cause of Failure
Poor Product
Business Outcome
Shut Down

Cause of Failure

Among the reasons why the company shut down even after receiving big investment money from investors, was the deep-seated perception in customers' minds that online platforms should provide cheaper solutions to their needs. To accommodate such expectations, PepperTap offered discounts and sales which were disproportionate to their account strength. PT also failed to weigh the scalability of their project before its full-blast expansion, which caused problems related to technology. For example, certain segments of their products malfunctioned and could not be accessed by customers on the platform.

PepperTap entered the online grocery business without sufficient preparation. It failed to acknowledge the need for deep pockets, large assortment, competitive prices and inventory management.

While 2015 was a great year for startups, and PepperTap was able to find venture capitalists relatively easily, 2016 brought a different scenario. Startups all over the world faced a slowdown in VC activities, and PepperTap had to bow down to the situation. The costs that the company had to bear were high compared to the profit it made. Since they operated without their own inventory, they needed to pay for outsourcing of inventory management plus technology, operation, etc.

PT founders also pointed out that the fact the Indian market was still unprepared for this type of service factored in as a reason that caused them to suspend their operations. The delivery fee for home delivery was seen as too high, particularly in second and third tiers cities or areas where the presence of delivery boys (kirana), was common and proved to be a tough competition to the online platform strategy.

Grocery shopping is also a favorite leisure activity after work among Indians and is often seen as an activity that brings the family together, making it an additional cultural challenge to Internet grocery businesses in India.

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