Solution To Case Study 1 — Grofers Assignment 2

The challenges that Grofers should forsee are as follows:

  1. Cost parity vs Retail giants : The Big bazaars and the Dmarts lure in customers with attractive discounts due to bulk purchase from companies. As showcased Grofers is working on capturing max retailers so as to gain bulk purchase advantage to bargain in a similar fashion with supply Cos. Driving discounts through thier retail partners is still a challenge they would need to sort
  2. Tier 2 & Rural markets: The acceptance of technology and the digital shopping and selling experience by the consumers and sellers in these markets is still very questionable. The kind of marketing and advertising spends that would be required to excite these markets would definitely create huge stress on the overall operation cost of Grofers. Thus a leaner monetization model needs to be worked out in these markets
  3. Quality of Products: Since Grofers is in the business of groceries and perishable goods, the reponsibility of delivering fresh and quality product to the company is on the brand. They do incur losses due to degradation of products (if they begin a supply chain) and would also increase spends in setting check mechanism to ensure quality as they do not supply the groceries, thus creating a Catch 22 situation for the company to deal with.
  4. Stiff Competition from E-commerce Giants — With companies like Amazon and other ecommerce giants with an already existing and tested logistical mechanism entering the competition, Grofers is likely to feel the heat and hence would need to decide between consolidating its position in Urban markets or go for Growth
  5. Margins — The stickiest and the murkiest of all the above problem is the profit margin and the average ticket size in the field e.g; The Average ticket size (Grofers) is Rs 560,

Conventional Method considering No commission based delivery

Expense

Avg Salary = Rs 15000/ month = Rs 500/ day

Bike with Fuel = Rs 200/day

Uniform (1 Tshirt) = Rs 200/ month = Rs 7/day

Reporting & Communication = Rs 60/day (for 60 mins/day)

Company Tech for tracking = Unaccounted

Back end = Un accounted

Total = Rs (500 + 200 + 7 + 60) + unaccounted

= Rs 767 + Unaccounted

Profits

Working hours/day = 7 hours = 420 mins (barring 45 mins lunch)

Time for one delivery = 20 mins

Delivery/day = 420 mins/ 20 mins = 21 deliveries

Average Ticket Size = Rs 560/-

Total sales/day = Rs 560 x 21 deliveries = Rs 11760/-

Profit Margin = 7%

Gross Income = Rs 11760 x 7% = Rs 823

NET Income = Profit — Expense

= Rs (823–767)

= Rs 56/-

The actual grofers model will be far more leaner and the net profit a little higher than the one mentioned above however the exhibit is used to showcase the stress cause on the operations on every delivery that is below the average case size

6. Fact = Grofers is running at 10% losses on its operation (Source : Internet)

Disclaimer: Do excuse grammatical, spelling and info errors. The source for each is the internet.

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