Indian Grocery Startup Citymall Raises $47M to Compete with Rapid Delivery Giants

Citymall, an Indian e-commerce startup focused on affordable grocery delivery for tier 2 and tier 3 towns, has announced that it has raised $47 million in Series D funding, with Accel leading the round. Existing investors including Waterbridge Ventures, Citius, General Catalyst, Elevation Capital, Norwest Venture Partners, and Jungle Ventures also joined the round.

This latest financing follows Citymall’s $75 million Series C round three years ago, led by Norwest Venture Partners. Throughout this period, the company’s valuation has remained steady at $320 million. Sources close to the deal disclosed to TechCrunch that this valuation is based on nearly a 4x multiple of the previous year’s revenue. In total, Citymall has raised $165 million to date.

Investors informed TechCrunch that the earlier valuation reflects a robust market context, which explains the stable valuation despite the company’s growth. Nevertheless, there is significant optimism about the company’s future.

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

Citymall’s recent funding emerges amid a boom in quick-commerce within the Indian market, where competitors like BlinkIt, Zepto, Swiggy Instamart, and BigBasket are striving to fulfill orders within 10 minutes. In contrast, Citymall is focusing on a distinct customer demographic.

The startup aims to engage price-sensitive consumers who prefer to plan their grocery shopping rather than relying on quick-commerce for immediate needs. CEO Angad Kikla remarked that their app offers around half the product selection (SKUs) of a traditional quick-commerce platform, while providing double the variety found in an offline value store. SKUs, or “stock keeping units,” represent the range of available products.

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

Founded 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 became accustomed to online grocery shopping during the early phase of the pandemic, many required personal assistance. Post-pandemic, the startup transitioned to employing community leaders solely for fulfillment to reduce costs and improve operational efficiency.

Their strategy emphasizes developing private labels and forging partnerships with manufacturers to supply products at competitive prices, simultaneously improving margins through operational efficiencies in supply chain management. Unlike quick-commerce startups, Citymall does not charge handling or delivery fees and typically delivers within a day rather than minutes, catering to value-oriented customers who do not require immediate access to their orders.

The startup mainly serves customers with monthly incomes ranging from ₹15,000 to ₹80,000 ($170-910), with an average order value between ₹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 nearby cities to make the most of their existing warehouses.

While Citymall has witnessed steady business growth over the last three years, it reportedly faced over 30% negative EBIDTA margins in the last financial year, as per research from Entrackr. The startup indicated it is operationally profitable but didn’t specify a timeline for achieving overall profitability.

The company is navigating a challenging sector, competing with local stores, online grocery platforms, and quick-commerce businesses. Bloomberg Intelligence anticipates that quick-commerce platforms will capture 20% of e-commerce sales in India by 2035.

Manish Kheterpal, co-founder of Waterbridge Capital, an investor in multiple Citymall funding rounds, highlighted that quick commerce often encourages impulse buying through extensive marketing. Conversely, he pointed out that Citymall’s operational cost advantages position it well against quick-commerce competitors.

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

According to Bernstein Research, food and grocery comprise a significant share of India’s largely unorganized retail sector. The firm predicts that online grocery sales will represent 12% of e-commerce transactions by the close of the current calendar year.

Despite the remarkable rise of quick commerce, companies operating outside urban areas face higher per-order costs, as analyzed by the strategy firm Redseer. Citymall believes that value-driven customers will lean towards its platform over quick commerce, thanks to lower fees and better pricing. By integrating these advantages with minimized delivery costs, the startup aims to achieve enhanced economies of scale by catering to a wider audience.