How Online Grocers Keep Prices Competitive

SPEAKER_1 (0:00)

It's the Morning Drive, this is Mira Business FM. UAE petrol prices are increasing, diesel prices at 4 dirhams 80 a liter at the moment. So transport and delivery costs are another factor that businesses have to account for. For online grocery platforms, that raises a practical question. How do you manage sourcing logistics and operations while you keep competitive prices for customers?

It was ever thus, I think. But we're joined now by Pravin Rai, who is the CEO of Quickart, the man who's building Quickart, to be more precise, to look at how the online grocery business is managing cost. Just nice. Good to see you again.

Pravin Rai (0:42)

Pleasure. And thanks for inviting me.

SPEAKER_1 (0:45)

You're very welcome. The man who's building. I know you don't like the kind of corporate speak. The man building Quickart, driving the cart or something.

Pravin, let me start here. How are changes in fuel prices reflected in the day-to-day operations of your business?

Pravin Rai (1:03)

On the last mile a lot, because that's where the customer gets the end product that they have ordered. However, for us, scheduled delivery is one of the aspects that helps us go deep down in a particular community, and density-wise order helps us to keep control on our fuel costs. For example, in this particular building, I had five customers earlier. My vehicle comes and delivers to five consumer, but due to penetration through marketing, word of mouth and referrals, that five has turned into ten.

So the same vehicle comes and delivers to ten consumer in one community. So for us, we go deep into a particular community to make sure that fuel cost per order remains constant or keeps coming down as we keep scaling the number of deliveries.

SPEAKER_1 (1:50)

Okay, so what are the main costs that go into delivering a grocery order to a customer? How does it break down?

Pravin Rai (1:57)

A lot of warehouse, fulfillment, making sure that the product, with freshness, whenever you are delivering something which is fresh, it takes a lot of efforts to keep the freshness of the product intact. Because at the end of the day, the customer wants the same product that the customer has seen on the app while ordering. So fulfillment, storage, the entire operations of running that fulfillment store, the middle mile, the last mile. There's a lot of this that goes as a cost when it comes to delivering it to the consumer. However, as a business, we keep a very strong eyes on our unit economics.

And that's where the entire game keeps changing month on month, making sure that we are growing, scaling, but at the same time improvising our unit economics.

SPEAKER_1 (2:42)

Okay, you focus particularly on farm fresh produce, daily dairy delivery. How much harder is it to manage transport costs when you're dealing with short shelf life goods, try saying that quickly, compared to dry shelf groceries?

Pravin Rai (3:00)

So one of the aspects on our operations is to make sure that the team follows a FIFO model, which is first in, first out. So for all our chilled product, or product that needs the right temperature to be stored, we have a very clear SOPs for every SKU which falls under dairy, starting from milk to yogurt to butter to cheese and all of that. We have a very set process that a milk cannot be in the store for more than 24 hours. If it is there, it needs to be completely moved out.

SPEAKER_1 (3:36)

If you sent yesterday's date to a customer, you're going to get a message, of course you are.

Pravin Rai (3:41)

And that's where we initially, we were doing a lot of wastage, because we were understanding the data. Now from couple of years, we have understood the data. Our app has a subscription element which allows us to see the deliveries, the forecast and all of that.

So we always take a 5-10% buffer and store it on our warehouse. But at the same time, we make sure that it gets utilized and whatever is left, then goes back to the farm or it is discarded completely.

SPEAKER_1 (4:13)

I'm with you. So how do you set the costs of products, the cost of transportation and operating?

When those things change, how do you reset the cost? How do you set the cost? How do you think the costs through?

Pravin Rai (4:28)

So I'll be very honest.

Any temporary increase in pricing, we do not go ahead and increase any pricing for our consumers. Unless it's something that will not change or it is something that is there to stay. For instance, with whatever happened during the initial months of the year in the region, there was and there is an impact on getting a lot of products from outside UAE, especially the feed for the cattles or certain medicines that needs to come. So that takes a longer duration. And if you need it early, the farm has to pay some extra prices.