How PepperTap Failed?

PepperTap is an amalgamation startup story of a great start and a miserable failure. It shows a startup company that has a great idea and an amazing team, and even though it has millions of funds, it fails miserably due to the lack of some of the most important factors that drive the company. So, in this post, we are going to explore some of the important reasons why PepperTap failed. We'll See How a Startup with a company value of over $100 Million failed after six months.

Story Begins…

PepperTap was founded by two friends Navneet Singh and Milind Sharma in September 2014 in Gurgaon. The idea of PepperTap was to deliver groceries online with huge discounts so that people can enjoy their extra time with families instead of shopping and bargaining at vegetable vendors. They began to expand their business to 31 cities with over 20 thousand orders per day, and their sales also grew exponentially by thirty percent to forty percent. They were earning 70% of revenue from Delhi-NCR only. PepperTap was India's third-largest grocery delivery company in 2014.

What went wrong?

There are multiple reasons why this high-flying startup becomes dead within two years:

1.    Failed PMF (Product Market Fit):

Product market fit means being in a good market with a product that can satisfy the market. In this model a product is created and tested at its initial stage or level, then customer feedback is taken to create an improvement cycle, and finally after making improvements companies enhance (scale-up) the products.

You have a good PMF model if:

·      Your product is solving the customer’s problem and they are buying the products as soon as they are manufactured.

·      Your product is actually reaching your customers and their usage is increasing exponentially.

·      Your customers are happy to pay for the product because you are focused on the quality.

PepperTap was expanding their loose products to approximately 17 cities and because of this, they were unable to resolve the problems regarding their products. Instead, they should try out their product on a smaller scale, spot the problems, and then scale the products.

“Never scale the products first, first solve the problems then scale your products”.

They should target one city at a time instead of going straight to 17 cities in their first year. You can't achieve anything by scaling your products only, first of all, you have to make your products the best.

2.  Inventory Less Model:

PepperTap was an inventory-less model, with PepperTap's main function being to deliver groceries only. They pick up the groceries from the vendors and deliver them to their customers directly. What if the products are not available at the grocery store, how will they deliver the products?

Grofers and BigBasket had their own inventory stores which already have all the essential groceries in bulk so that they can deliver the ordered products to their customers timely.

PepperTap was getting more than 20 thousand orders per day and was operational in 31 cities but still, they did not have any inventory model which left the customers disappointed.

3.   Complex Technology for vendors:

PepperTap was a one-sided consumer-centric model which is not good for an aggregator business. Aggregator businesses always have two customers like OLA, Zomato, Swiggy, etc.

For Zomato, both the restaurant and the one who orders the food are their customers, Zomato has to take care of both the customers otherwise, they may face some major problems.

The same thing happened with PepperTap. They created user-friendly technology for their consumers but their application did not bode well for the vendors. vendors were unable to list their products on the website and application because they were not tech-savvy in 2014.

4. Heavy Cash Burn:

PepperTap was only known for huge discounts, they were offering discounts in the form of coupons without any delivery charges. There were higher COCA (cost of customer acquisition) negative margins.

For example, if the product is priced at Rs.200, PepperTap will give Rs.110 cashback and if you refer the product, you will also get an additional 100 INR cashback. So according to this, there was a negative flow of Rs.10.

PepperTap was losing some amount on each product which eventually resulted in a cash burn.

5.  Experience Sabotage:

People were not very tech conscious in 2014, they preferred to buy groceries from vegetable vendors only. PepperTap was offering huge discounts, but it was destroying the shopping experience for many Indians that they were used to.

PepperTap's policy was to deliver products within 2 hours, but if we look at the 2014-2016 timeline, there was no COVID, due to which people don't prefer online shopping. Instead of getting the product delivered on time, people want to go out and spend their time gossiping and bargaining while shopping.

6.  Other Companies also failed:

In 2016 new startups decline by 67% and was considered a rough year for Indian startups. Many companies were failing miserably for various reasons, due to which investors did not show any interest in these startups and stopped the funding. PepperTap was one of them, it was already running on a cash burn process and inventory less model hence investors stopped investing their money in PepperTap.

 

The Bottom Line:

No Doubt Peppertap was a great idea at the time, it had a lot of potential and could have been a tough competitor to Grofers and Big Basket too but unfortunately, due to some reasons it didn't work out well and this startup ends in April 2016. 

If you have some more reasons why PepperTap failed, don't forget to use the comment section.

Thank You! ❤