The mighty trend of hyperlocal
Have you noticed the number of front page ads that come for apps these days? From food services to outsourcing your odd jobs - ‘there is an app for everything.’
You may wonder who is consuming these services and whether they’re actually making money amid huge marketing expenses and stiff competition. To make matters worse, most people don’t understand hyperlocal enough to build a business model around it. Yet new startups keep budding.
So is hyperlocal here set to become a big part of our lifestyle or is it just a fad destined to fade away? Let us find out.
For starters the Indian retail market in 2015 was pegged at $500-600 billion of which modern retail accounts for less than 10% and E-commerce companies are even less than that. But the dismal market size is not the only problem they face — unlike e-commerce retailers who rely on LSPs for fulfilling the transaction, hyperlocal mandates physical presence in every market they serve.
These companies have been forced to restrict themselves in certain areas to survived and function well. For instance, some companies (e.g. Box My Space, Swiggy, Russsh) are confined to the big cities, while others like iChef have limited their portfolio to pure veg food to avoid complications involved in long distance transport. To make matters worse, many startups have to compete on the basis of heavy discounts, seen prevalent in the emerging medical hyperlocal space.
However, not all is bad. On the bright side, the demographics is increasingly leaning in their favour. As of 2016 there are approximately 200 million smartphone users with 9 billion apps downloaded within 2015 alone. Interestingly, around 6 lakh jobs in India were generated in the last 2 years in just the field of app development. And this number is set to grow as the smartphone user base continues to expand.
Add to this the predictions that by 2020 many new cities will burgeon around metros and tier-I cities, all with young-working citizens, meaning more business opportunities for these companies. Even the rural landscape will see dramatic improvements, by 2018 about 40-50% population will have access to Internet and about 70% will have some form of smartphones, again a healthy market place for these companies.
Finally, the areas being served by hyperlocal have been smartly chosen to distinguish themselves from regular e-commerce retail and businesses, The biggest subcategories in this space are:
- Ordering from restaurants
- Offers from local stores
- Cooked meals delivery
- Grocery delivery
- Handyman and home services
They all take advantage of the increasingly busy working population having decreasing time to do their home responsibilities.
The only thing that worries them the most is sustainability. Historically, there has been no dearth of investments, for instance, Grofers has received $50 million investments, TinyOwl $30 million, and Zopper $20 million, among many more startups.
But since the history of hyperlocal itself has been too recent to do a trend analysis, it is hard to say how many will stand the test of time. And soon the gold rush may well recede as venture capitalists are becoming more cautious on where they put their money. To survive, hyperlocal companies need to keep an eye on on the following:
- Spendings on marketing
- Margins being let go to be competitive
- Workforce size being hired and fired so quickly
For now, it’s a waiting game. They may become big independent forces, or be acquired by say the e-commerce giants, or even evolve and merge the same way as the market is doing so today.