Citymall which is an Indian e-commerce startup has recently closed Series D funding worth $47 million which will aid the company in expanding its brand across the country. With this funding, the startup will be able to take its next step towards the goal of providing cost effective grocery shopping to the people. The start of funding has grown from the investment of Accel along with company’s previously existing investors which includes Waterbridge Ventures, Citius, General Catalyst, Elevation Capital, Norwest Venture Partners, and Jungle Ventures. Almost three years ago, the company was invested 75 million dollars Series C funding led by Norwest Venture Partners.
Unlike other funding rounds, Citymall’s company valuation was said to be $320 million through out this round which is still the same. This is the case even with the growth the company has had since the prior valuation. Reportedly, 4 times the annual revenue of the company is the reason the investors put the valuation to be $320 million. Citymall still remains able to take advantage of the current market climate which has dropped since the gains in 2021, seeing as investors still believe in the company’s growth.
Rethinking Grocery Deliver
As India’s grocery delivery market has been thriving with BlinkIt, Zepto, Swiggy Instamart, and BigBasket’s ultrafast delivery, Citymall is taking a different route. Citymall is not in the race to deliver groceries in ten minutes. It focuses on tier two and tier three towns and serves families that strategically schedule their grocery shopping. These families earn 15,000 to 80,000 rupees a month and would prefer groceries at a reasonable price, as opposed to the merchants’ instant delivery
In the value segment, Citymall has more products than a local store, but fewer than a quick commerce app. Customers purchase groceries in the range of 450 to 500 rupees, which is in the bulk grocery shopping range, a deliberate strategy defined by their customer base. Angad Kikla, the CEO of Citymall, has compared Citymalls strategy with Dmart, the popular retail chain, but unlike Dmart, Citymall is digital first. Dmart’s approach is to make the products available online for the smaller cities at much lower rates.”Citymall’s manner of undertaking business.
Citymall started business in the year 2019 whereupon it established its network in communities where the leaders aided the patrons to qty orders, taught them how to operate the application, and also assisted in the deliveries. As and when the pandemic started, the leaders became increasingly useful as many shoppers were trying grocery services. As people became comfortable using the digital methods of shopping, there was no longer a need for the community leaders. Citymall, at this time, streamlined operations keeping the community leaders on last mile delivery and asset management.
Citymall does not charge a delivery fee. They also handle the least competitive delivery fee. Citymall also spends the least amount on their handheld services. City mall pays a competitive price to their suppliers, keeping their ownership health basic. By doing this, the company ensures that most essential goods are sold at lower rates while the company’s gross margin is higher. More people prefer Citymall as their delivery time is around a day. Most people prefer delivery services that are not urgent, to save money on purchase.
Citymall has business in 60 cities. These include, Delhi NCR, Utter Pardesh, Haryana, Bihar, and Uttarakhand. In order to operationalize their business further, the Citymall is planning to operationalize their warehouses. This will make the the supply chain management more efficient.
The journey won’t be easy. As reported by Entrackr, Citymall had over 30% negative EBITDA margins last fiscal year, but claims it is operationally profitable on a per order level. Moreover, quick-commerce giants and local stores will require the startup to improve on its already established cost deduction. Citymall is more profitable due to lower operational cost, Analysts argue, when compared to ultra-fast delivery apps, which operate at losses due to highly subsidized prices through discount policies and promotional spend. As an example, Manish Kheterpal, co-founder of Waterbridge Capital, argues rapid-commerce stimulates a large volume of spontaneous purchases but is burdened by exorbitant servicing costs. In contrast, Citymall’s direct purchasing from suppliers, coupled with its distribution network, ensures much healthier margin.
Market Outlook
The Indian online grocery market is still at a nascent stage. According to Bernstein Research, food and grocery sales are the most dominant and unorganized retail line of business in the country and the online grocery component is forecasted to reach 12% of total e-commerce sales by 2025. At the same time, Redseer projects ultra-fast commerce in the country to capture 20% of e-commerce sales by 2035, albeit, a question mark in profitability still hovers above a lot of players in the market.
Citymall’s hypothesis is that the shoppers in Tier II cities would prefer value for money over the speed of service. This holds true in the markets where every rupee is hard earned for. By concentrating on efficiency instead of the costs of instant delivery, Citymall believes it can scale more sustainably. Should this hypothesis prove true, Citymall can follow the path of Dmart and capture the value driven grocery market in India.
Reflections and Projections
Citymall has managed to establish himself despite the competition growing in tandem, Citymall has often managed to grow in stealth. The firm was able to raise $11 Million in Series A funding in the year of 2021 and in the year 2022, managed to raise $75 Million in
Series C funding. Every expansion and every effort to bolster the distribution network has been backed by funding and it seems that the vision of the company, to serve the middle class people, is encouraging the investors to work with the company.
Citymall can now move on to the next chapter with $47 Million that have just been received. The firm hopes to spread throughout the country and be the first to serve the towns with reliable and low cost options. The model they seem to be following with the instant and local grocery order seems to be true, as it seems they want to be the first in the industry to achieve the level of profitability that other competitors seem to lack.