For dummies: the whys and the whats of hyperlocal e-commerce platforms

Thanks to the new cool startups addressing the demand-supply gap in hyperlocal space, today, we can enjoy a Starbucks coffee at home, have daily groceries delivered in 30 minutes and see a plumber or a physiotherapist in an hour; all from just a touch or two on our smartphones.

The conspicuous rise of internet users, surge of payment options, proliferation of geolocation aware devices and suitable demographics have paved the way for hyperlocal businesses - the latest cynosure of investors.

What is hyperlocal?

In a layman’s terms, a startup in the hyperlocal space is a platform to enable local offline services from anywhere, anytime. It’s simple enough to explain, but executing the model can be an uphill task.

A good use case is cataloguing all local grocery and mom-and-pop stores products in a mobile app and choosing channelised workforce to deliver products in the shortest possible time.

Another popular hyperlocal service includes ordering food from a local fine dining restaurant which otherwise won't deliver at home.

Why hyperlocal makes so much sense?

Let’s face it; there are two types of businesses today: one that is conducted offline and the other which is online.

So far, a change in consumer behavior with the network effect of shared economy has bred the marketplace model in online businesses. Add to it the panacea for consumer location and suddenly the offline businesses worth billions of dollars are activated in the online world.

Hyperlocal platforms solve the problem of matching immediate demand with the nearest available supply in the most optimised manner. In short, if you need your air conditioner fixed, wish to order food from a fine dining restaurant or want to get a haircut within the comforts of your drawing room, just look to the nascent and yet gigantic hyperlocal ecosystem for a solution.

VCs, are you listening?

Actually, they are doing more than just listening. Let’s look at some recent funding activities:

• Grofers - the hyperlocal grocery app is valued at more than USD 100 million after raising around USD 50 million over three rounds in just seven months
• Tinyowl - the food ordering app has raised over USD 30 million funding so far
• Peppertap – the hyperlocal grocery store has raised over USD 11.2 million from two investors
• Zopper - the hyperlocal mobile marketplace has raised over USD 20 million in the last few months
• Urbanclap - the hyperlocal service marketplace has raised over USD 11.6 million in the last few months
• Swiggy - the food delivery startup has raised over USD 18.5 million in the last few months
• Spoonjoy - the food subscription startup has raised USD 1 million to expand its operations
• Localoye has raised over USD 5 million funding. Between October 2013 and March 2015, LocalOye has worked with one lakh customers in Mumbai.

It’s a mad gold rush. Last six months have witnessed over 140 million dollars being raised by this new breed of businesses and over 28 funding deals clinched.

There is a sense of competition amongs VCs as well, who fear losing out and go heavy on investments in the space. They are investing in more than one startup in the same space to divest their investments. Sequoia has invested in at least four grocery and food-delivery companies, including Grofers, TinyOwl and PepperTap. SAIF Partners has invested in three food delivery and hyperlocal companies: Swiggy, PepperTap and SpoonJoy.

What does the future entail?

As per an Assocham-PwC study, about 40 million consumers made an online purchase in 2014 and the number is expected to grow to 65 million by 2015. The Indian e-commerce industry is poised to cross USD 100 billion by 2020. Now, e-commerce giants who have already spent millions online on customer acquisition are acknowledging the hyperlocal opportunity and preparing to partake in the hyperlocal gold rush.

Amazon, Flipkart and Paytm are prepared to up the ante by launching their hyperlocal services. Amazon Kirana is already operational as a pilot in Bengaluru. Paytm has launched Zip mobile app and is testing in Bengaluru. Ola has launched Ola store, an hyperlocal grocery mobile app.

All eyes are now on Flipkart and Snapdeal for their next big hyperlocal move.

Future is going to be exciting for sure with plethora of money and talent flowing in the hyperlocal streets.

Does it mean anything to the brands?

By all means, yes.

If I am an FMCG brand selling offline, hyperlocal and marketplaces are my category managers’ answered prayers. Not only do they act as an additional channel for my sales, it also is a chance for my brands to connect better with customers. More importantly, if I make right infrastructure investments, I can measure customer behavior and market my products more efficiently than my offline efforts.

If I am a food chain/restaurant owner; I can extend my brand to food delivery without spending a dime on personnel or infrastructure.

However, there is a small hitch for brands: your brand is exposed to your own loyal customer base via an external entity. Any bad experience driven by hyperlocal alliance can ruin your brand reputation and cost severely on loyalty.

It is important for brands to

• Breathe in the changing environment, understand the new business and choose alliances well.
• Optimise the supply chain. If your product is not available at the right place at the right time, consumer will try out a different brand.
• Understand the customer on these new hyperlocal channels
• Take regular feedback from end customers
• Compare the offline vs marketplace vs hyperlocal customer

It’s a whole new arena for brands and can be their biggest opportunity yet.

What it means for customers?

It’s called a fiesta; keep an eye out for who is spending the most on customer acquisition and enjoy the service/product, because this is the lowest you are ever going to pay for these services.

About the author:

Vaibhav Mehrotra is an e-commerce, startups and digital marketing enthusiast and can be contacted at @life_maven. He is a tech-savvy digital marketer who spends most of his time in reading, writing and marketing brands.