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Hurdles ain’t a thing as the e-grocery sector rises through the years
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Grocery is very important for all of us. It is essential for our day to day food and hygiene. The rise of the e-grocery sector is so unprecedented that it has crossed another level. Both retail and e-commerce continue to grow, with urban homes adopting more modern lifestyles, making modern retail outlets preferable because of their convenience. In response, modern food retailers develop new marketing strategies to attract these families. These strategies include new pricing strategies and market value schemes alternatives by developing private label products. Like FoodHall and Star Bazaar, supermarkets and hypermarkets also offer customers free home delivery and online shopping with their mobile apps. Because of changing lifestyles and shopping habits, more consumers choose to shop weekly or monthly, instead of shopping in conventional modern retail stores (hypermarkets and supermarkets.

The online e-grocery sector is expected to reach 18.2 billion dollars by 2024, at an annual growth rate of 57 percent. However, it will remain at 2.3 percent of the country’s overall food market from a macro perspective. Online food currently represents 0.3 percent of India’s total food sales (1). At the beginning of the lockout, most food supply and e-commerce companies turned to the food supply, as non-essentials were restricted. Although companies such as Zomato have slowly restored their focus on their core business, the Swiggy unicorn and e-commerce majors such as Flipkart and Amazon India have doubled in the category of eating products. With the addition of the JioMart, which is supported by Reliance, e-grocery will only grow.

The market share of the e-grocery sector is consistent over the forecast period, as it serves one of the most important needs of every household. The overall market has been affected by the improvement of living standards, a strong desire to live well, and an increasingly rich, medium-sized population. In India, many rural and low-income consumers continue to consume loose and unequaled food and food. However, the market will increase substantially as more consumers turn to packaged food and food. Luxury and ready-to-eat food demand will lead to higher food and food expenditure.

Since the lockdown, Grofers has bought 18 lakh new customers (2). Over 70 percent of customers continue to shop on the platform in the first month of the pandemic. Around 64 percent of our total user base are online food shoppers for the first time, and 20 percent are online shoppers for the first time. Between January and July, BigBasket saw its new customers increase by 84 percent (3) on its delivery platform. The company claimed that the customer retention rate increased by 50 percent. The demand for online foodstuffs during the pandemic was so strong that even large companies such as BigBasket struggled to keep pace because of the supply chain’s constraints. E-Grocery has also seen express deliveries return in recent months, including the launch of Flipkart Quick (4), a Walmart-owned Flipkart, its 90-minute hyper-local supply service in Bengaluru, and the start of Instamart, its 45-minute delivery service for grocery.

The rise of the E-Grocery sector

The Indian grocery business is distinctive in many ways, mainly due to consumers’ diversity and the retail sector’s unique distribution models. However, most of India’s grocery stores are run by the unorganized sector, consisting of small shops, known as kiranas. There are over 12 million small shops in India, accounting for over 90 percent of the Indian F&G market, which is expected to reach 810 billion dollars by 2020 (5). These stores have a personal attachment with their customers and are well versed in customer preferences, enabling them to store locally relevant products. Indians prefer to purchase their monthly supplies from these local stores for various reasons, such as proximity, availability of credit, and the possibility of returning/exchange goods.

In contrast to grocery retail, as some may know, India’s millions of market stalls and specialist shops, kiranas, and kiosks collectively known as unorganized retail account for around 98 percent of the country’s grocery store sales (6). Important not only due to its size but also the long heritage of unorganized grocery retailers brings a wealth of experience and understanding. Modern grocery retailing, on the other hand, has been established for more than a decade. But India’s strong growth prospects and eased government legislation make it an increasingly attractive market for foreign investment. This has led to fears that competition from foreign multi-branded retailers may pose too great a threat to the industry.

India’s online grocery sector is expected to see a 76 percent yearly increase in sales in 2020 to 3 billion dollars in value (7). As the COVID-19 lockdown and quarantine measures force Indian consumers to change their buying habits, platforms such as BigBasket, Amazon, JioMart, and Grofers have benefited from this situation. While these companies have been struggling to deliver food and grocery goods earlier, they have recently seen unprecedented growth in grocery supplies due to the pandemic. These stores make up about 90 percent of Indian grocery retail sales. Customers are increasingly expecting a similar experience with a mobile app without leaving their homes. By 2023, the online grocery sector is expected to reach more than 10 billion dollars in sales, accounting for 1.2 percent of all retail sales, up from 0.2 percent in 2019 (8). 

 

How traditional kiranas function

India is the sixth biggest food market globally, and the growing population and the growing income sow a huge potential for the e-grocery market to grow. The Indian market in food, representing 69% of India’s total retail market, offers retailers many opportunities. Without substantial results, many retailers have tried to exploit this potential. With 90% of its distributed goods, local Kirana is still the Indian food business’s epicenters. Even as retail giants fight each other for the habit of buying food, small stores have maintained their ground (9). 

Independent small-scale food retailers, also known as Kirana stores, remain the most popular in India, with more than 12 million stores, especially in cities and rural districts. Kirana shops in 2019 are expected to increase by almost 10 percent, but modern food retailers in first-level cities face significant competition as independent small grocery suppliers complement a modern supermarket. They can offer their customers timely service and have established close ties due to each store’s family or individual possession because of their neighborhood locations’ convenience. Few of these retailers have chained themselves and are unlikely to expand into a more organized retail sector. The retailers work via a fragmented distribution network with many intermediaries to supply products from local markets or distributors linked to larger food suppliers or manufacturers (10). 

 

BigBasket’s growth through the pandemic

BigBasket signed up new customers during the pandemic as people relied on e-grocers to shop for essentials, and restricted movements were imposed. The company said the rise of new consumers has increased by as much as 84 percent compared to the pre-Covid levels in a survey released on Tuesday. The retention rate grew by 50 percent compared to the previous 30 percent to 45 percent. During the January-July period, BigBasket (11) claimed that the subscription-based service of the online grocer Bbdaily that delivers milk and fresh products saw a growth of 139 percent. More household items such as chocolates, cup noodles, namkeens, and savory snacks added more indulgence categories, registering a 50 percent to 140 percent increase in household penetration during the pandemic compared to February as homework increased in-home consumption. The company claims to have about 20 million orders recorded per month. BigBasket recently said it had reached a run-rate of 1 billion dollars in annual revenues.

 

How the pandemic has re-evolved the grocery sector

In India, growing digital literacy improved access to the internet, and increasing consumer awareness of online shopping benefits have led to increasing acceptance of online grocery platforms. The ongoing spread of the coronavirus disease pandemic across the nation has changed consumers’ shopping habits, boosting food products’ sales via online platforms (12). To minimize the spread of the disease, vendors are now offering contactless deliveries of essential products and digital payment methods. Also, significant growth in the e-commerce industry, increasing smartphone usage, attractive online portal discounts, and increasing consumer purchasing power are some of the other factors that are expected to impact the industry positively.

According to Euromonitor’s report (13), the global e-commerce market for food and groceries is estimated to reach 6.5 trillion dollars by 2023. The report revealed that consumer behavior had changed radically during this period to focus on health and hygiene, turning during prolonged periods of lockdown to e-commerce for fresh food, groceries, and even dairy products. Furthermore, the market analytics firm predicted that changes in consumer buying habits are here to stay. The nation-wide lockdown prompted many Indian clients in March to embrace online grocery and food delivery platforms such as BigBasket, Grofers, and Licious.

Groceries are the largest consumer segment in the Indian market, with Indians spending more than 50 percent of their monthly grocery revenue. “For all retailers, whether it’s offline or online, it’s a must-capture space,” said Harminder Sahni, founder and managing director of consulting firm Wazir Advisors. The grocery business is very hyper-local. Once they have established a strong delivery system and have a strong customer base, it is the logical next step for e-tailers,” said Sreedhar Prasad, partner, business consulting at KPMG India.” Moreover, India’s retail market has undergone a major transformation and has experienced tremendous growth over the past ten years (14). According to Invest India’s data, the overall retail market is set to cross the 1.75 trillion dollar mark by 2026. During this time, India’s e-commerce market is set to grow at a CAGR of 30 percent for gross merchandise value worth 200 billion dollars by 2026.

Due to the pandemic problems, online grocery platforms in India has rapidly re-designed their strategies and adopted innovative solutions to overcome challenges and drive their businesses. For example, with an ‘online store finder’ application, ready-to-eat food e-retailer iD Fresh addressed long queues at its physical stores and frequent stock-outs. To overcome the shortage of delivery staff, online meat and seafood seller Licious teamed up with third-party logistics providers such as Shadow fox and Yulu. Logistics start-up Delhivery, for example, started using advanced data science to map optimal delivery routes and track containment zones so that its delivery staff could fulfill their orders in a timely and safe manner. 

 

What the future holds for the sector

During 2016-2021, India’s online grocery market is projected to grow at a CAGR of 55 percent. The easy access to a wide range of products in one place and the improvement of companies’ logistics services are expected over the next five years to fuel the country’s online grocery market (15). Over the last few years, the growing e-commerce market has increased consumer awareness, increased disposable income, and the advent of various technological advances. Online grocery companies operating in India have been spending heavily on digital marketing over the last couple of years to increase their visibility and consumer awareness. India has a huge userbase of young customers who make up most of the workforce and barely get time for grocery shopping due to time constraints, increasing online grocery stores’ adoption, especially in metro cities.

Consumers in urban centers such as Delhi, Mumbai & Bangalore drive significant growth in India’s online food market. Many Indian customers residing in Tier II and Tier III cities are still untapped due to lack of trust, low awareness, and price-conscious behavior. A growing number of e-grocers are strategically targeting these markets to increase their footprint in the country to remain competitive in the market.

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My passion is Reading and writing. Basically, an optimistic introvert. Always striving to be better. Writing as a passion leads me to become stronger and focused.

Disclaimer: The views, thoughts, and opinions expressed in the article have been curated for our audience and does not warrant a 100% accuracy. All the information mentioned in the article is subject to change according to the changing viewpoints. Feel free to reach us at [email protected] for any change or copyright issues.

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Abraham George
Abraham George
My passion is Reading and writing. Basically, an optimistic introvert. Always striving to be better. Writing as a passion leads me to become stronger and focused.

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