Unorganized retail (friendly neighborhood stores) still constitutes 98% of the country’s grocery sales. Online grocery stores are very nascent.
India is the sixth largest grocery market in the world and one of the fastest growing markets for online groceries. According to industry estimates, of the $500 billion-plus retail market in the country, food and groceries account for the biggest chunk with around 70% market share. Of this, organized food and groceries is estimated to be around $12 billion and growing at a compound annual growth rate of around 30%. Research firm IGD predicts that by 2016, the Indian grocery market would have overtaken Japan to become the third largest.
Meanwhile, India’s online grocery market, which is estimated to be less than $100 million at present, is expected to be worth billions in the coming years. “We anticipate it to cross $20 billion by 2020,” says Hari Menon, BigBasket’s cofounder and CEO. Source: Wharton Upenn Edu
Triggers behind the change
- Cheap labor
- Rapid urbanization
- Booming smartphone ownership
- Cash on delivery model
- Access to large variety including imported goods
- Accessibility to niche categories – organic, etc.
- Convenience – changing lifestyles of Gen X, Y and Z
Findings from Nielson Report, April 2015
- On a global scale, one-quarter of online respondents say they order grocery products online, and more than half (55%) are willing to do so in the future.
- Willingness to use digital retailing options in the future is highest in Asia-Pacific, Africa/ Middle East and Latin America regions.
- Use of online or mobile coupons and mobile shopping lists are the most cited forms of in-store digital engagement in use today.
- Current usage of six e-commerce options (home delivery, in-store pickup, drive-through pickup, curbside pickup, virtual supermarket and automatic subscription) is greatest among the youngest respondents, and they are also the most willing to use all of the e-commerce options in the future. For example, 30% of Millennials (ages 21-34) and 28% of Generation Z (ages 15-20) respondents say they’re ordering groceries online for home delivery, compared with 22% of Generation X (ages 35-49), 17% of Baby Boomers (ages 50- 64) and 9% of Silent Generation (ages 65+) respondents.
- More than one-third (37%) of Asia-Pacific respondents, and even more in China (46%), say they use an online ordering and delivery service. Adoption levels for online automatic subscriptions are also particularly high in this region (22% vs. 14% globally), with China once again leading the way (30%).
Popular online grocery stores in India
Trends & innovation
- Online grocery stores are moving to non-metros as well. There’s CartMeal in Chandigarh, SatvaCart in Gurgaon, Salt n Soap in Kolkata, Freshetarian.in and PinkCityKirana in Jaipur.
- Ecommerce is slowing going hyperlocal.
- Partnerships with kirana stores. For example, LocalBanya, PepperTap, Amazon’s Kirana Now. (PepperTap that currently operates in Gurgaon and West Delhi, has partnered with selected kirana stores in certain pockets. A PepperTap employee stationed at the store helps list the store’s products on its app, receives orders, packs the items and hands them over to a delivery man.)
- On-demand model versus warehouse storage.
- Godrej Nature’s Basket tied up with Snapdeal in January 2015.
- Investments are pouring into online groceries this year:
- PepperTap mopped up $10 million funding from SAIF Partners and Sequoia Capital
- Grofers raised $35 million funding from Sequoia Capital and Tiger Global
- ZopNow raised $10 million from Dragoneer Investment Group, Accel Partners, Qual-Comm Ventures and Times Internet
Are we heading to a complete digitalized grocery experience?
No, not anytime soon. Indians still love their grocery shopping. They want to touch, smell and feel their food and staples.
Local stores are now delivery at home, for free and within an hour. Larger brands are unable to manage this yet so they are not a good fit for immediate needs.
What do online grocery stores need to worry about to succeed?
Those who have succeeded in the online grocery market offer suggestions to enter the field – focus on:
- On time delivery
- Reducing time to delivery
- Offering a wide range of products
- Overcoming sourcing challenges in fresh provisions
- building an on-demand model to stay agile & profitable
- quality products and service as a single rotten carrot can spoil the customer relationship
- aligning to local fulfillment
Are offline stores trying to win back their share?
Yes, Big Bazaar is working on a mobile app and a price match strategy. Future Groups is also investing heavily on data science and data analytics get its 28 million loyalty club customers to increase their spend to at least 100,000 rupees ($1,600) a year at his stores.
Kishore Biyani, founder & CEO of Future Group is taking the battle further into e-commerce territory by countering online discount offers with his own ‘price match’ offer. “If we are more expensive than online retailers, the difference will directly get credited to customers’ wallets,” says Biyani.
Opportunities of improvement for traditional grocery outlets
There is a lot of scope in improving the in-store experience at large malls as it is largely impersonal and detached. Improving those aspects would retain customers and make them brand advocates.
- Enable QR code scanning in product aisles for customers to get more details, comparison charts, offers, etc.
- Enable in-store Wi-Fi in large outlets for customers to get info on offers, product ranges, etc.
- Launch a mobile application.
- Offer competitive pricing.
Monica is a digital marketer, blogger and technical writer. She’s helped small businesses with content strategy and development since 6+ years and is now extending the value with online marketing. Her goal is to introduce more businesses to this exciting and profitable marketing medium. She is a regular blogger for WMA. Connect with her on Linkedin or Twitter for digital marketing assistance or to say hello!