SUMMARY
Locking horns with cash-rich Reliance and well-funded startups, like Zepto and Blinkit, The New Shop aims to accelerate the adoption of convenience retail in India
The New Shop is aiming to set up 10,000 stores, which would operate 24*7, across India in the next 7-8 years
The startup is banking on its cost-efficient model and 360 degree experience for customers through integration of physical retail with technology for expansion
The word quick commerce has become a part of daily language over the last year or so. As the buzz for 10-minute delivery grew, investors lined up to get a stake in quick-commerce startups, like Zepto, Blinkit, and BigBasket, and their valuations zoomed. However, as the physical retail stores opened up with the waning effect of Covid-19, many questions were raised on the sustainability of the quick-commerce startups and their high cash burn.
Only time will tell about the future of quick-commerce delivery startups, however, there is one startup which is further trying to disrupt the consumer market, albeit in a different way. Delhi-based omnichannel convenience store startup ‘The New Shop’ is aiming to set up a network of its 24*7 stores across the country.
Founded in 2019 by the brother-sister duo of Charak and Aastha Almast and their friend Mani Dev Gyawali, The New Shop (TNS) has raised $720K till date from a bunch of angel investors. Besides, the startup is also in talks with investors to raise a larger Series B round.
Taking cues from countries like the US, China, Japan, and, more recently, Indonesia, the startup aims to accelerate the adoption of convenience retail among India’s young population. As the young working population in these countries took to 24*7 retail stores, large giants like 7-Eleven, Alfamart, FamilyMart, Speedway, Casey’s, and Circle K were born.
TNS is solving a huge issue for customers – delivery of food and essentials, particularly at night hours between 8 pm and 8 am, according to Charak Almast and Gyawali. Night deliveries account for more than 60% of the sales of the startup, they said during an exclusive interview with Inc42.
However, 24*7 is not exactly a new idea in India now, especially with corporate giant Reliance signing a master franchise agreement with American 24*7 convenience retail network 7-Eleven for India last year. Competing with cash-rich Reliance and well funded quick-commerce startups will not be easy for TNS.
However, its cofounders are betting on cost efficiency, franchise model, and first-mover advantage to help the startup navigate the initial challenges and reach its target of setting up 10,000 stores across the country in the next 7-8 years.
“The target market for TNS is huge. The market in India for convenience stores is huge. As per a recent study, it foresees 1 Lakh possible convenience stores within India,” Gyawali said.
The startup currently has over 50 outlets in Delhi-NCR, Mumbai, Lucknow, Ahmedabad, and in some parts of UP and Haryana. It is now planning to expand to more geographies in UP, MP, Haryana, Gujarat, Karnataka and Maharashtra.
Cost Efficiency At The Core Of Business Model
India’s $1 Tn retail industry is ripe for technological disruption even as ecommerce is rapidly expanding its reach within the country. Both retail and e-commerce companies are trying to penetrate the huge market. However, this requires a large capital infusion for leasing stores, hiring manpower, inventory management, offering discounts, acquiring customers, among other things.
TNS is relying on cost efficiency to solve the problem of capital requirements. The startup says that the cost for opening its franchise store is as low as INR 20 Lakh, with TNS promising “best in the industry” payback in less than two years.
In line with its expansion plans, TNS will soon announce a partnership with a big real estate player. “More than 90% of TNS stores are on a revenue sharing model, meaning the store shares a part of the revenues with the original owner( landlord),” said Charak.
“With our unique franchising and revenue sharing model, we were able to scale up so rapidly despite Covid-19. Our tech is built inhouse and is one of the biggest innovations in omnichannel retail tech. We are 50% retail and a 50% tech company, we come from the knowledge of retail and tech both, and that is what sets us apart from others,” he added.
TNS’ neighbourhood stores have a maximum employee strength of six people, which reduces the cash burn, unlike quick-commerce startups which are reliant on dark stores.
“TNS stores are open and delivering 24*7, with a team of six people per store enabling all operations and deliveries. TNS does central warehousing and logistics for all FMCG products. All the distributors and vendors are connected via the TNS’ inventory management solutions that use predictive IM technology for forecasting and automating purchase orders. This helps TNS maintain just-in-time inventory to achieve working capital,” Charak explained.
Phygital Model Stands Out
TNS sees the integration of physical retail with technology as a way to reach a wider base of customers. The 360-degree experience which this integration offers to the customers sets TNS apart from ecommerce behemoths like Flipkart and Amazon, according to the cofounders.
“Our omnichannel approach and multiple touchpoints for our consumers are the biggest differentiators which sets us apart from others. TNS app can also be used to make purchases offline, so the move between offline to online is at a ratio of 60:40. TNS products can be bought not only offline at our stores but from the app as well, and the fast food items can be purchased from Swiggy, Zomato, etc,” the cofounders explained.
Besides, TNS also has a digital loyalty and referral programme to attract customers.
The major difference between TNS and other quick commerce players, as per Gyawali, is that the startup serves about 200-300 customers offline per day per store.
“While dark stores have to spend millions of dollars on marketing to acquire customers, TNS’ offline stores and branding attracts customers organically and the offline sales pay for all the operational expenses. The online sales are a bonus and added advantage of convenience for the customer base. By selling to customers at all touchpoints both online and offline, as well as marketplaces, we are able to increase the lifetime value of our customers,” said Gyawali.
On being asked about its financial performance, he said, “We have grown 30X to generate sales worth over INR 6 Cr per month this year from sales worth INR 1.2 Cr per month in 2021 on the back of capital-efficient business model.”
Currently, personal care and homecare segments contribute about 25% to TNS’ sales, while the remaining 75% comes from other services and products.
The startup is targeting a revenue of INR 100 Cr this year, and aims to become profitable by the end of FY24.
