The local mom and pop shops – kiranas, have been at the heart of how India shops for its essentials for ages. The ability to forge a personal connection with the vendors and the regular visits mandated by convenience and familiarity have ensured the longevity of the local neighbour shops. And now we just Dunzo It. 

A boom of hyperlocal commerce saw a number of start-ups emerging and attracting marquee investors during the funding boom of 2014 and 2015. The hyperlocal segment, in its bare essence, is simply cementing a strong connection between local retailers and consumers set in a particular geographical area. The USP of hyperlocal e-commerce businesses lies in their ability to deliver products and services from local offline businesses to their targeted customers with agility. The service ambit of a hyperlocal business could fall anywhere, starting from a few meters to a few kilometres from the location of the business.

Soon after the boom, 2016 and 2017 saw a bunch of hyperlocal start-ups shutting shop due to a variety of factors including the lack of a sustainable business model, wafer-thin margins, high logistics and customer acquisition costs, and fierce competition. The system had cost efficiencies focused on long-distance travel alongside the inability to address fluctuating demand and difficulty in coordinating efforts on a smaller scale to remain profitable.

Bengaluru-based Dunzo’s model of hyperlocal commerce is based on a strong partner, source and delivery rather than a mere two-sided marketplace delivery. During COVID, Britannia partnered with the firm to deliver food essentials while Cloudnine Group of Hospitals tied up with Dunzo for the supply of medicines at the doorstep. Dunzo’s average order value (AOV) during the COVID period has seen a 4x increase. The primary growth rate in perishable goods and F&B has also seen a 3x growth, while orders on essential goods have gone up by 2x. AI proved to be pivotal in managing the smooth functioning of the system as orders piled up. 

Nextbillion.ai, a diversified enterprise Artificial Intelligence (AI) platform, recently raised $7 million in Series A funding, led by Lightspeed India Partners and Falcon Edge Capital. Nextbillion.ai is aiming to build AI-based hyperlocal solutions, starting with total mapping solutions comprising of routing, navigation and identifying high footfall landmarks. Indian start-up Locus uses AI-based algorithms in supply chain decision-making that utilise historical data for making future projections, such as identifying optimal time windows for delivery which leads to increase in a delivery rate.

In 2019, FarEye, a logistics SaaS-based platform had announced the launch of its AI-based real-time dynamic routing feature to empower on-time and cost-effective deliveries which would majorly impact the hyperlocal and grocery delivery industry that demands quick turn-around-time. AI effectively empowered these businesses to minimise empty mile journeys, eliminate vehicle idling time and optimise the productivity of delivery executives by assigning them highly efficient routes.

The hyperlocal industry needs AI to cull new methods that are flexible and adaptable to each particular situation. The capabilities of AI are boosting company efficiencies in the arena of predictive demand and network planning. Generating clean data has become a crucial part in the AI task-list as many firms do not have usable figures to implement. 

Profitability for hyperlocal firms’ rests on two key factors: Route Density i.e. how many packages can be delivered on a given delivery run, and Drop Size, the number of packages or items delivered at each stop. Companies get to be on their toes thanks to an AI aid for accurate demand forecasting and capacity planning. By knowing what lies in store, they can decrease the number of total vehicles needed for transport in a particular route and direct them to the locations where demand is expected, which leads to significantly lower operational costs. 

Hyperlocal services had been largely focused in and around food and grocery service, which only constitutes a fraction of its potential. UrbanClap took its business model several steps further by including almost all kinds of home services like maintenance, cleaning, repair, pest control, beauty services to its hyperlocal set of offerings.

As the offerings increase, so do the complexities. AI is helping untangle some of the issues that hyperlocal commerce may encounter to ensure success and sustainability.