Citymall Raises $47M to Compete with Rapid Delivery Leaders in India’s Grocery Sector

Citymall, an Indian e-commerce startup focused on delivering affordable groceries to tier 2 and tier 3 towns, has successfully secured $47 million in Series D funding, led by Accel. The funding round also saw contributions from existing investors such as Waterbridge Ventures, Citius, General Catalyst, Elevation Capital, Norwest Venture Partners, and Jungle Ventures.

This new funding follows Citymall’s previous $75 million in Series C funding raised three years ago, which was led by Norwest Venture Partners. Throughout this time, the company has maintained a consistent valuation of $320 million. Sources close to the transaction informed TechCrunch that this valuation indicates nearly a 4x revenue multiple from the previous year. In total, Citymall has raised $165 million to date.

Investors told TechCrunch that this earlier valuation reflects a robust market environment, which helps clarify the stable valuation despite the company’s growth. Significant optimism remains regarding the firm’s future prospects.

“We have been investors in Citymall since Series A and chose to increase our investment because we believe that online grocery shopping, particularly in the value segment, represents the largest consumer market in India,” stated Pratik Agarwal from Accel during a conversation with TechCrunch.

Citymall’s latest financing comes amidst a rising trend in quick-commerce within the Indian market, where rivals like BlinkIt, Zepto, Swiggy Instamart, and BigBasket compete to deliver orders in as little as 10 minutes. In contrast, Citymall is focusing on a distinctly different customer segment.

The startup aims to appeal to price-sensitive consumers who prefer to plan their grocery purchases rather than depend on quick commerce for immediate availability. CEO Angad Kikla highlighted that their app contains roughly half the product range (SKUs) of a typical quick-commerce platform, while presenting double the variety available in a conventional value store. SKUs, or “stock keeping units,” indicate the variety of products available.

“Even though e-commerce is growing, online grocery penetration remains relatively low,” Kikla noted. “Most consumers in India prioritize value when buying groceries. We aspire to be the online equivalent of Dmart,” referring to the publicly listed superstore chain.

Established in 2019, Citymall initially relied on community leaders in various cities for marketing, order processing, and last-mile delivery before the COVID-19 pandemic. As customers adapted to online grocery shopping during the onset of the pandemic, many needed personal assistance. Post-pandemic, the startup transitioned to utilizing community leaders solely for fulfillment, aiming to reduce costs and boost operational efficiency.

Their approach emphasizes the creation of private labels and collaboration with manufacturers to provide products at competitive prices while enhancing margins through operational efficacy in supply chain management. Unlike quick-commerce firms, Citymall does not charge handling or delivery fees and typically delivers within a day, catering to value-oriented customers who don’t require instant access to their purchases.

The startup primarily targets consumers with monthly earnings ranging from ₹15,000 to ₹80,000 ($170-910), with an average order value of ₹450 to ₹500 (approximately $5-6).

Citymall operates in 60 cities, including Delhi NCR, Uttar Pradesh, Haryana, Bihar, and Uttarakhand. Kikla mentioned that the company plans to expand into surrounding cities to leverage their existing warehouse infrastructure.

Although Citymall has experienced consistent business growth over the past three years, it reportedly faced over 30% negative EBITDA margins in the last financial year, as per research from Entrackr. The startup asserts it is operationally profitable but did not disclose a timeline for reaching overall profitability.

The company navigates a competitive landscape, facing challenges from local retailers, online grocery platforms, and quick-commerce businesses. Bloomberg Intelligence predicts that quick-commerce platforms will represent 20% of e-commerce sales in India by 2035.

Manish Kheterpal, co-founder of Waterbridge Capital, an investor in several rounds of Citymall’s funding, emphasized that quick commerce often drives impulse buying through aggressive marketing. In contrast, he noted that Citymall’s operational cost benefits position it well against quick-commerce rivals.

“Citymall offers affordable essentials for customers who may only place orders a few times each month. The company procures products directly from suppliers, utilizing community leaders to minimize distribution costs, which facilitates a healthy gross margin,” Kheterpal commented during his conversation with TechCrunch.

According to Bernstein Research, food and grocery make up a significant portion of India’s largely unstructured retail market. The firm anticipates that online grocery sales will constitute 12% of e-commerce transactions by year’s end.

Despite the rapid growth of quick commerce, businesses in rural regions face increased per-order costs, as reported by strategic analysts at Redseer. Citymall is confident that value-driven consumers will choose its platform over quick commerce, owing to lower fees and better pricing. By capitalizing on these strengths and reduced delivery expenses, the startup aims to enhance economies of scale by reaching a larger audience.