PepperTap, the grocery delivery app is shutting down operations in ten locations including metros like Mumbai, Chennai and Kolkata. The move by PepperTap is aimed at cutting costs in the middle of a fund squeeze that has hit crowded sectors like hyperlocal and food delivery which saw many 'me-too' ventures spring up last year.
A big chunk of PepperTap's workforce, its delivery fleet, was on contract and who have been let go in cities where it has shuttered operations. PepperTap had 2,500 employees — a mix of contract and permanent staff — according to previous reports.
Backed by online retailer Snapdeal and venture fund Sequoia Capital, PepperTap will continue operations in eight cities and suburbs – including Delhi, Gurgaon, Noida, Hyderabad, Pune, Ghaziabad, Faridabad and Bangalore - out of the 18 it was present in.
These contribute as much as 70% of revenues. PepperTap had previously announced plans to expand into 75 cities when it raised $36-million last year. It had also announced plans to raise an additional $20 million from a US investor. However, the on-demand delivery firm only managed $4 million in venture debt from Innoven Capital.
The move to consolidate comes in the backdrop of e-commerce majors like Amazon launching separate verticals for hyperlocal grocery delivery. Earlier, SoftBank-backed Grofers withdrew from nine cities saying non-metros and smaller markets did not contribute significantly to revenues. Having raised $120 million led by SoftBank, Grofers is now operational in 17 cities.
For grocery and household products in particular, fulfilment of orders without the support of an inventory-led model has emerged as a big challenge for most of these hyperlocal players like PepperTap. The dynamics of grocery delivery business vary from other online businesses as it is extremely local in nature.