India’s e-commerce startup City Mall is focusing on budget-focused grocery delivery for Tier 2 and Tier 3 towns, saying it raised $47 million in Series D funding led by Axel, and has today attracted participation from existing investors such as Waterbridge Ventures, Citius, General Catalyst, Elevation Capital, Norwest Venture Partners and Jungle Ventures.
The Series D round comes three years after the company’s $75 million Series C round, led by Norwest Venture Partners. The $320 million company’s valuation remains flat over this period. According to a source familiar with the transaction that spoke with TechCrunch, investors have used almost four times the number of CityMall’s revenue over the past year as a benchmark. The company has raised $165 million so far.
CityMall investors told TechCrunch that the previous ratings reflected the bullish market environment of the time. However, they remain optimistic about the company’s trajectory.
“We have been investors at City Mall since Series A. We wanted to double this investment because we consider the online grocery shopping and the value segment within it to be India’s largest consumer market.”
CityMall funds come at a time of rapid commercial frenzy in the Indian market. Companies such as Blinkit, Zepto, Swiggy Instamart and Tata-owned Bigbasket are rushing to serve their customers within 10 minutes. CityMall wants to take a different approach by targeting different customer segments.
Instead of ordering immediate needs through the Quick Commerce app, startups target value-conscious customers who plan their grocery. CityMall CEO Angad Kikla explained that the app offers about half the product selection (SKU) of the quick commerce app, but doubles the offline value store selection. (SKUs, or “stock retention units,” refer to the number of different products available.)
“E-commerce is growing as a segment, but online groceries are low,” Kikula said. “Most people in India are value-conscious when purchasing groceries. We want to accommodate that cohort. We want to consider ourselves as the equivalent of DMART in the online world.”
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Founded in 2019, the startup initially relied on community leaders in various cities to sell, order and process last mile filling before Covid-19. In the early days of the pandemic, when people were just introduced to ordering groceries online, some customers needed practical help. After that period, the company switched to using community leaders only for fulfillment, in order to reduce costs and streamline operations.
The company’s strategy focuses on building partnerships with private labels and manufacturers, providing products at a lower price than their competitors, and creating margins through operational and supply chain efficiency. Unlike quick commerce startups, CityMall does not charge you any handling or shipping charges. Usually, value-oriented customers who don’t need items immediately will deliver products in one day rather than one day.
According to CityMall, customers who spend between 15,000 and 80,000 pounds ($170-$910) a month are their primary user base. The company reports an average order value of £450 -500 ($5-6).
The company operates in 60 cities including Delhi NCR, Uttar Pradesh, Haryana, Bihar and Uttarakhand. Kikula said CityMall is aiming to expand to cities adjacent to the current market and make better use of existing warehouses.
CityMall has seen stable business growth over the past three years, but research firm Antrackr said the company had a negative margin of over 30% in last fiscal year. The startup said it was operationally profitable, but did not provide a timeline to achieve overall profitability.
The company operates in its competitive sector, which faces pressure from local stores, online grocery platforms and even rapid commercial platforms. According to Bloomberg Intelligence, the Quick Commerce Platform is poised to win 20% of India’s e-commerce sales by 2035.
Manish Kheterpal, co-founder of Waterbridge Capital, said it was a company that invested in CityMall in multiple rounds. In contrast, he said Citymall has lower operating costs compared to its Quick Commerce competitors.
“CityMall offers cheap essentials to users who may order several times a month. The company will buy products directly from its suppliers, use community leaders to achieve low-cost distribution and build a healthy total margin,” Kheterpal told TechCrunch.
According to an analysis by Bernstein Research, food and groceries dominate India’s little-organized retail sector. The company also estimates that online grocery shopping will account for 12% of e-commerce sales by the end of this calendar year.
Despite the rapid growth of commercials, analyses by strategic company Redseer shows that companies operating across metropolitan areas have higher costs per order. Citymall’s paper shows that value-oriented customers choose the platform over rapid commerce, due to reduced fees and product costs. By combining this with lower shipping costs, the company believes that by serving more users, it will achieve a better economies of scale.
