Ola is firming up plans to launch a delivery platform using its fleet of taxis, beginning with groceries — wading into a crowding online front where a number of high-profile newcomers are taking on specialist firms to cater to everyday home necessities.
Ola’s plan mirrors rival Uber’s model in several foreign cities where the US firm has ventured into logistics. India’s congested roads, however, pose a greater challenge to Ola in moonlighting as a delivery service, say experts.
BigBasket recently announced an initiative to partner with 1,800 neighbourhood stores to deliver orders faster. Smaller online grocers Local-Banya, Zopnow, Grofers and PepperTap, too, are focusing on hyperlocal deliveries by partnering with local stores, an asset-light model that Ola is pursuing. Flipkart, Snapdeal and Amazon are also entering the online groceries market.
“Right now we are exploring opportunities to see how we can leverage the cars we have on the road to do deliveries as well, and groceries is one of the top sectors we are working out,” a top Ola executive told ET, declining to be identified.
The company has not been able to find a partner to launch the service with, and is looking at tying up with offline retailers directly for grocery collection and delivery, this person said. Ola may launch a pilot as early as next month.
“Ola wants the retailer to do the packaging and picking of the orders and only focus on the delivery,” said an on-demand grocer familiar with the development, requesting anonymity.
Ola declined to comment for this story.
“It’s bound to happen because the valuation (Ola is) gunning for is larger than the entire taxi market in India,” said Rishi Khiani, CEO and managing director of Ant Farm incubator, which is set to launch its own delivery platform, Scootsy, this month.
“Uber has done the same by diversifying, for example, UberEATS in Barcelona. Similarly, Ola is going for an asset light model where at any point of time they are about logistics and people movements, so it probably opens up a higher valuation,” Khiani said.
Ola, founded in 2011 by IITBombay alumni Bhavish Aggarwal and Ankit Bhati, in October raised Rs 1,300 crore ($210 million) in a funding round led by Japan’s SoftBank Capital. Last month, it acquired core rival TaxiForSure for $200 million. The Bengaluru-based company also announced a food delivery pilot named ‘Ola Cafe’ last month to deliver select food items from partner restaurants.
Five of these restaurants ET spoke with said orders had considerably dropped from an average of 160 a day in the beginning of the launch to 15 a day now. The vendors attributed this to deliveries taking 45 minutes to an hour, instead of the promised 20 minutes.
Industry experts said Ola’s four-wheeler infrastructure, which is traffic-sensitive and incurs parking costs when idle, would prove inefficient for full-fledged logistics play. “In the hyperlocal space, delivery costs and time are much greater for four-wheelers. I am pretty sure they will venture into two-wheelers,” said an online grocer whom Ola had reached out to for partnership possibilities.
“It requires a very different type of DNA for packages than it does for fleet management. They probably have to create a new infrastructure for this, like bikes, messengers, cycles, and third-party networks, because you can’t promise 20-minute delivery otherwise,” said another competitor in on-demand grocery delivery.
Food and groceries made up 69% of India’s $490-billion retail sector in 2013, followed by apparel at 8%, according to the latest data available with India Brand Equity Foundation, a government-established market and trade research firm. BigBasket, started in 2011, has raised more than Rs 300 crore in the past eight months to scale up its online grocery offering across cities, and is currently valued at over Rs 1,400 crore, ET reported in January.
“Companies like Ola can start logistics services to move anything, be it food or medicine, but they are unlikely to have any edge in online grocery,” said Seema Gupta, assistant professor of marketing at IIM-Bangalore.
“Groceries are a specialized business. Neither logistics companies nor horizontal ecommerce companies will be able to compete with pure play and focused online grocery companies, which are rapidly gaining volume and will emerge as leaders as they provide superior consumer experience with their focus.”
