India’s Grocery and Online Grocery (E-Retail in Grocery) Business

Realizing The Huge Opportunity in Online Grocery Retail, E-Retail and E-commerce

Out of $525 Billion Retail Market in India, 60% is spent on Groceries which makes it a $350 Billion or Rs 20 Lakh Crore Market as of now. India is also 6th largest Grocery Market in the world, and every major e-commerce portal wants a share of this pie. However, Online Grocery market is still in a nascent stage, as only 1% of the groceries which Indians purchase as of now are online. It is expected that by 2020, Online grocery market would be 2% of the overall groceries market, making it a niche market worth $10 billion (Rs 60,000 crore).
In India, BigBasket, the country’s largest e-grocer which began operations in 2011, expects to break even in the next 36 months. It is already operationally profitable in its home market, Bangalore. “Labor and logistics costs are much cheaper in India than in western markets, so e-grocers here can make money faster,” says Hari Menon, BigBasket’s Co-Founder and CEO. BigBasket currently has a kitty of over 10,000 products across 1,000 brands and over 450,000 active customers across five cities. By December 2015, the company plans to expand its presence to around five more cities. And over the next two years, it expects to grow to Rs. 1,800 crore (US$288 million).

Despite knowing the fact that selling perishable goods online is far more difficult than selling non-perishables items. It is an entirely different ball game with low-margin and requires expensive investments to build high-end IT infrastructure, an efficient supply chain, quality warehousing and storage facilities, and an efficient delivery system, which is again varies from place to place.

Quick Facts About Indian Grocery Market

• India is the 6th largest grocery market in the world
• Only 5-8% of grocery stores are organized corporations. The vast majority are “mom & pop” type shops that are similar to convenience stores in the US and are referred to as “kiranas”
• The online grocery market is growing at 25-30% annually in metropolitan areas and large cities
  Margins are below 10%
• 43% of the country’s roads are not suitable for vehicles. Paired with checkpoints, and duty collection points that slow down traffic, infrastructure is an obstacle

Business Models
Pure-play Online Grocery Retailers are at the forefront of the boom in grocery ecommerce, which has over tripled in size by number of players year-over-year. These companies build large warehouses and distribution centers outside of major cities and own fleets of GPS-enabled vehicles in order to serve online demand. BigBasket, LocalBanya & Reliance Fresh Direct are the main players leading in this space.
Hyperlocal Delivery Players provide a front-end and logistics management service for smaller chains, as well as independent grocers for a recurring monthly/annual fee or commission basis. This model has been praised due to its lack of inventory investment. Peppertap, AaramShop, Grofers are few major players in this space.

Who Is Shopping Grocery Online
The online grocery delivery market in India has some very unique demographic statistics –

• Women ages 30-35 are the largest adopters of online grocery shopping
• 11% of orders are done in 10pm – midnight slot.
• Institutional clients make up 29% of orders for select major retailers
• The report suggests that that women-influenced sales will be 35% of Indian ecommerce by 2016. The rise of women in ecommerce has been attributed largely to convenience, as well as increased privacy and safety. The middle class is also expanding in India and these consumers will subsequently find that grocery shopping via the internet is a high value-add service.