CityMall Raises $47M to Disrupt Indian Grocery Delivery

Citymall Secures $47 Million in Series D Funding

Indian e-commerce company Citymall, specializing in affordable grocery delivery to tier 2 and tier 3 cities, has announced a $47 million Series D funding round. This investment was spearheaded by Accel, with contributions from existing investors like WaterBridge Ventures, Citius, General Catalyst, Elevation Capital, Norwest Venture Partners, and Jungle Ventures.

Funding Details and Company Valuation

This Series D round arrives three years following a $75 million Series C round, also led by Norwest Venture Partners. Interestingly, the company’s valuation has remained consistent at $320 million during this timeframe. Sources indicate that investors utilized a revenue multiple of approximately 4x the company’s previous year’s earnings as a benchmark. To date, Citymall has raised a total of $165 million in funding.

Investors have conveyed to TechCrunch that the previous valuation reflected a particularly optimistic market climate. They maintain a positive outlook on Citymall’s future growth potential, despite the stable valuation.

Accel’s Investment Rationale

Pratik Agarwal of Accel explained their continued investment, stating, “Having invested in Citymall since the Series A, we are reinforcing our commitment. We believe the online grocery market, particularly the value segment, represents the largest consumer opportunity in India.”

Navigating the Quick-Commerce Landscape

Citymall’s funding occurs amidst a surge in quick-commerce activity within India. Companies such as Blinkit, Zepto, Swiggy Instamart, and BigBasket (owned by Tata) are focused on delivering goods to customers within a 10-minute timeframe. However, Citymall is pursuing a distinct strategy by concentrating on a different consumer demographic.

Targeting Value-Conscious Consumers

The startup is geared towards customers who prioritize value and make planned grocery purchases, rather than relying on the immediate gratification offered by quick-commerce applications. Citymall CEO Angad Kikla notes that the app provides roughly half the product variety (SKUs) of a quick-commerce app, but twice the selection found in a typical offline value store.

Positioning as the Online Dmart

“While the overall e-commerce sector is expanding, online grocery penetration remains relatively low,” Kikla stated. “A significant portion of Indian consumers are price-sensitive when purchasing groceries. Our aim is to serve this segment, functioning as the online equivalent of Dmart,” referencing the well-known superstore chain.

Evolution of Citymall’s Fulfillment Strategy

Founded in 2019, Citymall initially leveraged community leaders to promote its services, process orders, and manage last-mile delivery. During the initial stages of the COVID-19 pandemic, many customers required assistance with online grocery ordering. Subsequently, the company transitioned to utilizing community leaders solely for fulfillment to reduce expenses and improve operational efficiency.

Focus on Private Labels and Supply Chain Efficiency

The company’s approach centers on developing private label brands and establishing partnerships with manufacturers to offer lower prices. Margins are generated through operational and supply chain optimizations. Unlike quick-commerce models, Citymall does not impose handling or delivery charges, and typically delivers goods within a day, catering to customers who are not in immediate need.

Target Demographic and Average Order Value

Citymall’s primary customer base consists of individuals earning between ₹15,000 and ₹80,000 per month ($170-$910). The average order value is reported to be ₹450-₹500 (approximately $5-$6).

Geographic Expansion

Currently operating in 60 cities and states, including Delhi NCR, Uttar Pradesh, Haryana, Bihar, and Uttarakhand, Citymall intends to expand into cities adjacent to its existing markets to maximize the utilization of its current warehouse infrastructure.

Financial Performance and Profitability

According to research from Entrackr, Citymall experienced negative EBIDTA margins exceeding 30% in the last fiscal year. The startup acknowledges operational profitability but has not provided a specific timeline for achieving overall profitability.

Competitive Landscape

The company operates within a highly competitive market, facing challenges from local stores, established online grocery platforms, and the rapidly growing quick-commerce sector. Bloomberg Intelligence projects that quick commerce platforms could capture 20% of India’s e-commerce sales by 2035.

WaterBridge Ventures’ Perspective

Manish Kheterpal, co-founder of WaterBridge Ventures, highlights the difference in consumer behavior. He suggests that quick commerce encourages impulsive purchases through marketing tactics. Conversely, he believes Citymall’s lower operating costs provide a competitive advantage.

“Citymall provides essential goods at lower prices to customers who typically order a few times a month. Direct sourcing from suppliers and leveraging community leaders for cost-effective distribution contribute to healthy gross margins,” Kheterpal explained.

Market Trends in India’s Retail Sector

Bernstein Research analysis indicates that food and grocery dominate India’s largely unorganized retail sector. The firm also forecasts that online grocery shopping will account for 12% of e-commerce sales by the end of the current calendar year.

Economies of Scale and Long-Term Strategy

According to a Redseer analysis, companies operating outside of major metropolitan areas encounter higher per-order costs. Citymall’s strategy is predicated on the belief that value-conscious customers will favor its platform due to lower fees and product costs. By combining this with reduced delivery expenses, the company aims to achieve greater economies of scale by serving a larger user base.