An overview of online grocery market in India and it’s future: We all evolved from living in a world with no Internet to living in a world that cannot be imagined without Internet. Yes, we exist in the era of digitisation. From our daily needs to our daily activities we are surrounded by online apps, which have now become an integral part of our lives.
This article is to throw a light on how digitisation is taking over the ‘Indian Online Grocery Market’.
Food & Grocery Market in India stepping into the Digital Age
Let us recall the time when the only means to buy groceries was from brick & mortar stores or roadside peddlers and hawkers. From the time of stepping outside of home to the time when one can buy from home just at the tip of the hand, the Indian Grocery Market has enlarged.
In the year 2018, online F&G i.e. Food and Grocery stood at approximately $1 Billion and grew at almost 110% CAGR in its initial years of penetration from 2014 to 2018. The online F&G market in India as of CY19 accounts for almost 0.2% of the overall market share. It is expected to reach 1.2% and touch a $10.5 Billion by the year 2023.
However, the offline F&G dominates the market and holds the maximum share but the dynamics of this industry are changing drastically. The online F&G is growing by almost 25-30% rate and the anticipated CAGR for it is 66% from 2018-23. (Source- LIVEMINT, Financial Express)
Market Players in Online F&G Market in India
The rising start-up culture across the globe was the foundation that supported and motivated the application based modern age ideas like Byju’s, Cure.fit, Flipkart etc. Among these, the start-ups in the F&G industry were ‘Big Basket’, ‘Grofers’, ‘Ondoor’, ‘Godrej Nature’s Basket’ etc.
Moreover, in all of these, the most popular ones are ‘Big Basket’ and ‘Grofers’ with 1,00,000 and 40,000 orders in a day.
Apart from the newly established companies in this online space, there are few other giant offline F&G retail players that are now entering the online-based selling like ‘D-Mart’; ‘Reliance’ etc.
Additionally the large e-commerce players like Amazon and Flipkart’s FarmerMart have also initiated their operations in this segment. Online food delivery platform ‘Swiggy’ owned ‘Supr-Daily’; Dunzo; Milkbasket etc. are some other popular players.
Key Factors Influencing the Growth of Online F&G Industry in India
— Changes in Consumers Purchasing Patterns
The changing behavioural patterns in consumers purchasing habits is one of the most influential factors that has encouraged the ‘Online Grocery Market’.
With the rising e-commerce, consumers are more inclined towards purchasing online at the tip of the palm. The online transaction value of a retail shopper buying at-least once in a month is between Rs.900-1200.
It is a commonly notable habit nowadays where an individual with a free time is mostly scrolling through his/her social media accounts or other app-based services offered online.
Taking out time from a busy work schedule in office along with tiring days calls for much more suitable and convenient ways of living. Online purchasing is one such means, which eases one’s effort and offers a hassle-free purchasing from anywhere and at any time.
— Offline Players entering App-Based Online Space
On one hand where online purchasing is seen as a new way of living some others are facing a high competition and business model threat from the same.
Giant offline store-based retailers like D-Mart and Reliance, are now extending their operations from brick & mortar supermarkets to online-based selling websites. This implies that the how much big competition and opportunity is this online retail industry.
— Business Model
In order to succeed must have a strategically proven and tested business model that forms a strong base for the business idea. Selling groceries online is an idea which is supported by two types of business models-
— Internet Penetration
The average rate of using Internet per user is increasing at an exponential rate. With JIO’s price disruption the price for using Internet went down drastically and so the usage of Internet went up within last few years. Telecom operators are introducing more cheap plans for its users, which have increased the user dependency on Internet and related activities.
Indirectly this led to benefitting a large number of e-commerce players. Due to low-cost Internet, its accessibility among lower income level groups also increased thereby creating a larger customer base for online-based businesses.
— Heavy Discounts and Offers
In order to attract a large number of customers these online F&G players offer huge discounts and cash back schemes. Selling at high discounts calls for the ability to absorb losses as well. Being backed up by large private equity investors like Softbank backed Big-Basket, these players are well funded and stable financially. Thus having an added advantage.
— Low Cost of Establishment
The biggest expenditure for an offline store is the cost of establishing the store, which demands a suitable location, rental cost, construction cost (for self-owned outlets), staff salary, maintenance and other expenses. While on the contrary, an online store saves on all these costs.
— No-Geographical Barriers
A brick & mortar outlet calls for physical location and has a limitation of serving that area only, an online store has no barriers of servicing a specific area. Although it calls for a strong supply chain to reach interiors but this has been overcome by the online operators.
— Other Benefits
No time bound purchasing as apps are working 24×7. A wide variety of products are available. Certain players like Big-Basket offer specific delivery time in order to confirm the availability of the customer at the time of delivery and enhance consumer experience. Websites have a customer feedback on the product, which gives a much realistic view before purchase.
Drawbacks of Online based F&G Industry
Like every coin has two sides, similarly, this attractive online F&G market has its own limitations.
On one hand, where it is highly convenient and user-friendly it has its disadvantages like there is a lack of touch of the merchandise before purchase, frauds associated while purchasing online, delay in delivery, damaged or expired goods delivered, vegetables and fruits ordered online may not be fresh.
The rising awareness of health and eating healthy food raises concerns about buying groceries online.
Consumer behavior is a very crucial aspect of any industry. Where we are witnessing newer business models with every passing year based on the changing preferences of consumers, online business models are on the rise. This is due to the changing habits in our daily lifestyle. The future of online grocery market in India only looks bright despite its drawbacks that are being resolved by the existing players, and is an opportunity to make big money.
The existing online F&G market is at its nascent stage and is growing with more and more opportunities.
I am an MBA graduate specialised in Finance. I am a passionate stock market investor and a movie buff. I have always been inclined towards learning and development through different styles and new experiences. I believe knowledge is a vital ingredient for success. So here I am trying to contribute my best to add to your financial knowledge via this knowledge centre ‘Trade Brains’.