Snapdeal-backed PepperTap has decided to shut down its cash-burning grocery delivery operations and instead focus on expanding its logistics business.
Citing issues like high customer acquisition costs and poor app integration with partner stores, PepperTap chief executive Navneet Singh said the company was "losing cash on every order" and has decided to "preserve a large amount of the investor capital" rather than "be at the bottom of the abyss".
"We couldn't shake off the feeling that we were walking (not racing like some other companies) towards the edge of a cliff hoping that things will get better before we reach the abyss ... the unique challenges of this business are not solvable in the short term and certainly not solvable without massive injections of capital.
''We would have to confront this issue sooner or later," Singh told PTI.
PepperTap, which is controlled by Nuvo Logistics, has raised $40 million so far and counts ecommerce major Snapdeal, Sequoia India, SAIF Partners, Ru-Net, Beenext and JAFCO Asia among its investors. Last year, it had also acquired Bengaluru-based delivery startup Jiffstore for an undisclosed amount.
A Snapdeal spokesperson declined to comment on the matter.
The decision to shut operations will result in about 150 job losses. "We have about 200 people. While about 50 are being absorbed in the logistics business, we will have to let go of the others. We are offering compensation packages with up to three months of salary depending on the seniority and tenure of the employee," Singh said.
The company will now focus on expanding the logistics business. "We are already working with many ecommerce firms and have strong reverse logistics operations. In the next few months, we will focus on strengthening our forward logistics," Singh said. Nuvo has a presence in 32 cities in the country and works with ecommerce players like Snapdeal, Patym and Shopclues.
According to industry analysts, hyperlocal delivery startups like PepperTap, BigBasket and Grofers have been feeling the heat of a slowdown in investment as they operate on wafer-thin margins and end up losing money on every delivery.