Milk is poured into a glass. (Photographer: Brendon Thorne/Bloomberg)

Startup Street: This Ride-Hailing Startup Is Now Looking To Deliver Milk 

This week on Startup Street, we have a company which is reinventing itself to enter the milk delivery market in India. A group of around 500 restaurants in Bengaluru have accused food delivery biggies such as Zomato and Swiggy of unfair practices in an open (and entertaining) letter. And, a report by LocalCircles that highlighted the key challenges for startups going into 2019. Here’s what went on...

From Baxi Taxi To B-Fresh

Baxi Taxi is reinventing itself—from a company that offers people rides on bikes into a startup which will now deliver milk to households every morning for two hours.

B-Fresh, or Baxi-Fresh, is slated to launch operations in mid-January, Ashutosh Johri, co-founder and chief executive officer of the company, told BloombergQuint. The startup has a fleet of around 800 riders through its tie up with Bajaj Auto and TVS. It will deliver milk and milk products from Mother Dairy distributors in Delhi and National Capital Region. It also tied up with Patanjali for grocery products and Safal for fruits and vegetables, according to its website.

B-Fresh will compete in a different market as other grocery delivery brands such as Big Basket and Grofers keep their own inventories. But the startup isn’t the only one to think of a shop-to-home delivery system. Others such as Dhoodhwala and MilkBasket have already built a network. Moreover, India is still heavily reliant on a large system of local delivery men who supply packaged milk to households.

But what called for this switch?

Founded in 2015, Baxi Taxi started off as a last mile commute startup. It even became profitable on a per-bike basis around July 2018. But the startup realised that the pricing per ride would not allow it to create a sustainable business model, especially with the already crowded ride-hailing market.

“First, we realised that bike taxis were not a feasible full-time employment option for bikers. However, it is important to emphasise that bike taxis still remain a wonderful and stable part-time employment option for bikers,” Johri said. “Second, we also realised that bike taxis work better as road side pickup model than an app-assisted on demand-request model.”

(Source: Baxi Taxi)
(Source: Baxi Taxi)

A bike taxi trip could cost Rs 20-25 and was neither sufficient to provide full-time employment, nor provide enough incentive for a biker to go and pick up a customer from a distant location, he said. At the same time they observed that there was no hyper local company in India that was helping local and small-chain retailers for on-demand delivery.

We believe that an asset-light and inventory-light model is the most efficient and most scalable (as is seen with successes of Ola, Uber, Airbnb, Swiggy, Zomato and Deliveroo etc).
Ashutosh Johri, Co-Founder and Chief Executive Officer, B-Fresh

Through this model, bike riders will earn around Rs 6,000 a month as extra income for two hours of part time work a day, he said.

The startup also intends to include late evening deliveries using the same part-time bikers, Johri said. They plan to capture more than 1 lakh households in 2019.

B-Fresh bagged Rs 10 crore in funding so far with Hindustan Times as its largest investor among other angel investors like Alok Mittal, Manish Kheterpal and Nitin Singhal.

Restaurants Call Out Swiggy, Zomato For Unfair Practices

Application icons of UberEats, Swiggy, Zomato and Foodpanda are visible on a phone. (Source: BloombergQuint)
Application icons of UberEats, Swiggy, Zomato and Foodpanda are visible on a phone. (Source: BloombergQuint)

More than 500 restaurants across Bengaluru recently lost their patience with online food delivery companies such as Swiggy, Zomato, UberEats and Foodpanda. They wrote an open letter to them and their customers highlighting their woes.

It’s that time of the English calendar year,
When the wind is chilly, and a nip in the air.
When we write to our customers, and aggregators dear,
Asking them for simply one thing: play fair!

That’s how the independent group comprising restaurateurs opened the letter. It then immediately goes on to a timeline on how they reached a state of feeling “squeezed and helpless”.

The letter accuses these platforms of deep discounting, opening in-house kitchens to compete with restaurants on the platform and using data from the restaurants to “cannibalise” their business.

Swiggy and Zomato reportedly denied these accusations.

“What started out as an absolutely great and enabling value add for our market — online food delivery services in India — now seems to have transformed into an attempt at monopolising the market through practices leveraged towards utilising consumer data gathered with our involvement and furthering your own newfound business interests while cannibalising our existing businesses,” the letter said.

The deep discounts only eat into profits without the expanding customer base, the restaurants claimed. “In reality, these customers will simply never come back to us unless we continue discounts.”

The letter called for these platforms to play a fair game, while asking consumers to cut the platforms out as middle men.

The Key Challenges For Startups In 2019

Corruption, bureaucratic inefficiencies and securing loans or funding are seen as the major challenges for startups going into 2019.

Within responses from over 15,000 startups, SMEs and entrepreneurs found 45 percent respondents saying they foresee corruption or bureaucratic inefficiencies as the top challenge in 2019, according to a PTI report based on data by LocalCircles. Around 37 percent said the largest challenge is securing loans and funding, while 18 percent think its business growth.

Angel tax is one area that falls under corruption and bureaucratic inefficiencies as it takes the focus of startup entrepreneurs away from building a product or service to responding to tax notices and filing appeals, something that startups can clearly do without.
Local Circles Report

The study highlighted that 38 percent of the respondents said they had received at least one notice.

India’s startup ecosystem has been plagued by the issue of angel tax since years. However, the issue has recently been escalated to the Finance Ministry by Minister of Commerce & Industry Suresh Prabhu.

The government has now set up an expert committee to look into all the taxation issues faced by startups and angel investors.

Also, majority of the respondents said they feel there is an urgent need for the income tax authorities to be educated on startup valuations.