CityMall is preparing to launch fresh grocery deliveries in the next quarter, people aware of the matter said.

The startup had struggled with supply chain issues despite attracting demand the first time around, a person aware of its plan said. CityMall is now working toward building a decentralised supply chain closer to the source and integrating its backend for dry staples and fresh produce, the person added.

The startup focuses on fashion, delivering fast-moving consumer goods and electronics through a community group-buying model in small towns. CityMall’s bet on fresh groceries comes at a time when it is in talks to close a $70 million funding round from new and existing backers, sources said.

“If you want to crack the tier-2 and 3 markets, you have to get to the non-discretionary part of the customer’s spending,” said a person privy to the developments at CityMall.

Vidit Aatrey, cofounder of Meesho said that it will expand its grocery offering Farmiso by investing significant capital into the vertical next year.

A marketplace model can become a dumping ground for produce according to experts tracking the fresh groceries space as there is no standardisation in this category. They said that deep supply chain capabilities will be among the decisive factors for the company that wins.

“There will have to be a significant number of investments that these startups will need to make in terms of strengthening their supply chain, overall customer experience and also ensuring quality and standardisation. At the same time, they will have to increasingly advertise,” said Kartik G Iyer, head of e-commerce consultancy firm Publicis Commerce.

In the short term, Iyer added that these players are not looking to make money in this category but tap the massive opportunities that non-metro towns and cities present.

“In just two years, we have serviced more than 3 million consumers and over 20 million orders. We are confident of hitting a $1 billion GMV run rate by the end of the year and building a 10-million-on-strong customer base,” DealShare cofounder Sourjyendu Medda said.

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