Indian grocery startup Citymall raises $47M to challenge ultra-fast delivery giants

Citymall, an Indian e-commerce startup specializing in economical grocery delivery for tier 2 and tier 3 cities, has successfully raised $47 million in its Series D funding round. This round was spearheaded by Accel, with additional contributions from existing investors such as Waterbridge Ventures, Citius, General Catalyst, Elevation Capital, Norwest Venture Partners, and Jungle Ventures. This latest funding comes three years after Citymall's Series C round, which garnered $75 million and was also led by Norwest Venture Partners. Notably, the company's valuation has remained steady at $320 million throughout this period. Sources informed TechCrunch that investors based their valuation on nearly a fourfold multiple of Citymall’s revenue from the past year. To date, Citymall has raised a total of $165 million. Investors like Pratik Agarwal from Accel emphasize the importance of the online grocery market, particularly in the budget segment, describing it as one of the largest consumer markets in India. This investment reflects their confidence in Citymall's growth trajectory despite the unchanged valuation in a fluctuating market. As the Indian market experiences a surge in quick-commerce companies such as BlinkIt, Zepto, Swiggy Instamart, and BigBasket, Citymall is opting for a different strategy. The startup focuses on a customer base that prioritizes planned grocery purchases rather than immediate needs, distinguishing itself from the quick-delivery model. Citymall CEO Angad Kikla noted that while their product assortment is about half that of traditional quick-commerce apps, it surpasses the variety found in offline budget stores. He stated, “We aim to position ourselves as the online equivalent of Dmart,” a well-known superstore chain in India. Founded in 2019, Citymall initially engaged community leaders to promote its service, manage orders, and oversee delivery. The pandemic further pushed customers toward online grocery shopping, leading them to refine their operational approach by utilizing community leaders primarily for fulfillment to cut costs. Citymall's business model hinges on establishing private labels and collaborating with manufacturers to offer competitive pricing. Unlike quick-commerce competitors, Citymall does not impose handling or delivery fees and typically completes deliveries within a day, catering to customers who are not in a rush. The company predominantly serves users with monthly incomes ranging from ₹15,000 to ₹80,000 (approximately $170 to $910), achieving an average order value of ₹450 to ₹500 (about $5 to $6). Currently operating in 60 cities, including Delhi NCR, Uttar Pradesh, Haryana, Bihar, and Uttarakhand, Citymall plans to extend its reach to neighboring cities to better leverage its existing warehouses. Despite experiencing steady growth over the past three years, Citymall reported a negative EBIDTA margin exceeding 30% for the last financial year. While the startup claims to be operationally profitable, it has not disclosed a timeline for achieving overall profitability. The competitive landscape includes pressures from local stores and online grocery platforms, with quick commerce expected to account for 20% of e-commerce sales in India by 2035, according to Bloomberg Intelligence. Manish Kheterpal, co-founder of Waterbridge Capital, highlights that quick commerce encourages impulsive buying habits through targeted marketing. In contrast, he asserts that Citymall’s lower operational costs provide a competitive advantage, offering essentials at lower prices while relying on direct supplier relationships and community leaders for distribution, which leads to a healthier gross margin. Research by Bernstein indicates that food and grocery sectors dominate India’s unorganized retail landscape, projecting that online grocery shopping could represent 12% of e-commerce sales by the end of this calendar year. Despite the rapid growth of quick commerce, firms operating outside urban centers face higher per-order costs, which Citymall aims to mitigate by appealing to value-conscious consumers seeking lower fees and product prices.