In February, food delivery major Swiggy announced it would put its cloud kitchen business on the front burner expecting to get more high-ticket orders. Unaware of what was coming in the next few months, it had also earmarked USD 35 million for this vertical.
However, the ruckus created by COVID-19 forced Indian startups to make extreme changes in their plans. Swiggy, not only decided to cut down on its cloud kitchen model, it also had to lay off 1,100 employees. It was neither the first nor the only company to do so.
In a recent survey, industry body Nasscom found that COVID-19 induced slump has left 70% of over 9,300 technology startups with less than three months of cash runway. And that 30-40% of them have temporarily halted the operations or are on the brink of shutting down.
Amid all this, there is still a small glint of hope as businesses have not given up and are finding ways to come out of the slowdown. According to the Nasscom survey, 54% or 5,022 tech startups are looking to pivot, with growth verticals like healthcare and edtech becoming one of the most sought after sectors.
The resilient businesses that see themselves coming out of this healthcare crisis stronger are quickly adapting and pivoting to meet the needs of the new world. Many are expanding into sectors that are seeing heightened demand.
KrASIA looked at some of the leading companies in the three major sectors that have been hit the hardest and how they have been improvising to survive one of the worst slumps of all time.
When the government announced the nationwide lockdown in late March to protect over a billion Indians from COVID-19, it left a majority of online retailers high and dry. To survive through the crisis, e-tailers deployed a three-pronged strategy: they started delivering essential products, onboarded retailers and FMCG brands, and pushed the sale of private labels.
During the lockdown, India allowed the home delivery of groceries and medicines which became the saving grace for many e-commerce companies.
In the first few weeks of lockdown, major online retailers directed all their energy towards e-grocery. Compared to others, the transition worked better for Amazon India and Flipkart as they have been building their grocery delivery muscle over the past few years. While Snapdeal and Club Factory, that have never delivered grocery products, ventured into this segment, ShopClues went beyond grocery and started delivering medicine as well.
In the past two months, Flipkart has partnered with Uber and Meru to bolster its last-mile delivery service in select cities. To ensure the supply of essential products, it has inked deals with retail store chains like Spencer’s and Vishal Mega Mart as well as FMCG company Tata Consumer Products Limited. Recently, it partnered with Karnataka State Mango Board to deliver the popular fruit across the country.
To stay relevant during the pandemic, the Walmart-owned e-tailer expanded its private-label ‘Flipkart Smart Buy’ offering and introduced medically-certified hand sanitizers and surgical masks under the ‘Health+’ range. Amazon India, on its part, expanded its partnership with Indian Railways to transport consignments via rail across the country. Through its B2B marketplace, Amazon Business, the Seattle-headquartered company launched a store for the healthcare and government sectors, allowing bulk buying of critical medical supplies such as N95 masks, surgical masks, sanitizers, and personal protective equipment (PPE) kits.
In May, as the restrictions for online shopping were relaxed, Amazon India pushed private brands in the most sought after products such as face shields, digital thermometers, mobile phone sanitizers, PPE kits, disposable gloves, and DIY (do-it-yourself) smart sanitizer dispensers.
Flipkart didn’t limit itself to selling essential products. Seeing the rising demand for COVID-19 related insurance products, it partnered with insurance providers such as ICICI Lombard and Digit Insurance in April, to launch health insurance policies for the novel coronavirus.
Even though India lifted the lockdown earlier this month, the focus for e-commerce companies continues to be grocery delivery, given the lackluster demand in non-essential categories.
“Only need-based purchases are happening,” Satish Meena, senior forecast analyst, Forrester, told KrASIA. “Categories like smartphones, laptops, masks, home sanitization are selling, but there is not much demand for fashion, or appliances, because those who wanted to upgrade, might postpone their plan due to the uncertainty of the crisis.”
Experts predict that e-commerce players are in fact waiting for the right time to come.
“Even if the [coronavirus] cases go down in the next couple of months, a lot of purchases are going to shift online. So whenever people start spending again, e-commerce will be the first to benefit from it,” said Meena. “There is a window of six to nine months for consumer spending to come back. This time will allow e-commerce companies to add more customers, who are likely to experiment with more categories.”
Overall, he expects e-commerce to grow at around 6-7% this year, as opposed to the pre-COVID-19 forecast of 20%.
2. Food tech
Food delivery companies started to feel the heat even before the lockdown was announced as people preferred cooking food instead of ordering online.
Beginning March, food delivery giants Zomato and Swiggy saw a 60% drop in monthly orders that hovered around 100 million in January and February. The nationwide lockdown, not only further dampened the demand but also disrupted the supply as the majority of restaurants temporarily shut down. However, both the food delivery unicorns saw a new opportunity in the grocery delivery segment.
Swiggy had an upper hand, having already entered the segment a year ago. It aggressively expanded its grocery delivery business and reached over 300 cities by mid-April, leveraging its idle food delivery fleet across India. Its arch-rival, Zomato, which had stayed away from the segment, partnered with local retail chains, and launched Zomato Market in early April.
Meena said Swiggy and Zomato can be considered serious players in grocery since they have the supply chain network, manpower, and money in the bank. “For them, grocery is the easiest extension. If they don’t move into grocery, how will they make up for 60-80 million lost orders?” he said.
Swiggy also rebranded its hyperlocal delivery offering Swiggy Go as Swiggy Genie and expanded it to over 60 cities. Zomato, on its part, is reportedly looking at similar consumer-facing pickup and drop service.
As India allowed liquor shops to open for business, food-delivery giants grabbed the huge opportunity to cash in on the pent up booze demand in the country. In the second half of May, they started delivering alcohol in the state of Jharkhand, and since then have expanded to Odisha and Kolkata.
What also helped Zomato and Swiggy weather the storm is their partnerships with FMCG brands and hotels.
Most of the big consumer brands realized customers won’t come to them anytime soon, so they needed to go to them. Since April, Swiggy has cracked deals with top FMCG companies including Hindustan Unilever, P&G India, Godrej Consumer Products, and Dabur India. Meanwhile, brands like FieldFresh Foods Pvt. Ltd, which owns premium brand Del Monte, homegrown health and wellness brand Gaia, and Skincare brand Nivea India listed their products both on Swiggy and Zomato.
Last month, premium hotel chains including ITC Hotels and Marriott International opened up their kitchens to Swiggy, to create an additional revenue stream. Other global hotel chains like Hilton and Hyatt have tied up with both Swiggy and Zomato to deliver gourmet food.
Mobility sector was one of the first casualties of COVID-19, which forced millions of Indians to stay indoors.
Rides to workplaces and airports had been the two primary revenue drivers for cab-hailing firms Uber and Ola. The two-month-long lockdown brought the demand from these two segments to a screeching halt resulting in a 95% drop in revenues. Shared mobility startups like Rapido, Bounce, and Yulu, among others, met with the same fate.
To cope up with the situation, most of these players have adapted to tap the only two prominent opportunities out there–providing transportation services for the healthcare sector and delivery of essential items.
When the nationwide lockdown started on March 25, Uber was quick to act. Within a week, it launched UberMedic to offer transportation for frontline healthcare professionals. By the first half of April, the Silicon Valley-based startup had started delivering essential items for Flipkart, Bigbasket, and Spencer’s Retail, among others. It launched Uber Essentials for emergency travel such as trips to hospitals and pharmacies.
When India partially lifted the lockdown in May, the SoftBank-backed firm started Uber Rentals to enable users to rent a cab by the hour instead of per ride. The idea, the company said, is to let users complete their errands “in one go.”
The same month, it launched Uber Connect, a delivery service for users to send and receive parcels within a city, similar to Swiggy and Dunzo’s concierge offering.
Having shut down its grocery ordering service in 2016, Ola steered clear of this segment. Instead, it has been pushing its food business, Ola Foods, under which it operates private label brands like Khichdi, Paratha Experiment, and Bowlsome.
The Bengaluru-based ride-hailing firm recently raised USD 27 million from hedge fund Falcon Edge and private equity investment firm Matrix Partners to accelerate the innovation in the financial services segment. It has been using the lockdown period to focus on its financial arm Ola Money, which provides services such as short-term credit, e-wallet, insurance, and utility bill payments. It has also rolled out discount deals for users to purchase or rent laptops and furniture to set up work from home stations.
Ola is reportedly joining shared mobility startups such as Bounce, Yulu, Rapido, and others to expand its offering in the self-drive business. It is mulling over providing its vehicles to consumers as well as businesses on a subscription basis. Its arch-rival Uber is also said to be exploring new categories including rentals to corporates, deliveries for e-commerce firms, and long-term consumer leasing.
Meanwhile, Rapido rolled out a hyperlocal delivery service in 30 cities in the first week of May and partnered with Zomato, Swiggy, Delhivery, Myntra, Bigbasket, Big Bazaar, and Spencer’s Retail, among others. At about the same time, it launched Rapido Box, an on-demand delivery service where customers can request a pick and drop of food, groceries, and medicine from or to another customer. Similarly, bike-sharing startup Yulu has tied up with several e-tailers and hyper-local delivery firms for the delivery of groceries and medicines.
Even though the government has lifted restrictions, the market is expected to pick up slowly over the next six to nine months. Till then, these companies are likely to continue adapting and evolving to survive.