From pure-play and omni-channel to hybrids, the grocery e-tailing roll call in India is well and truly on.
Grocery – given the perishable nature of some products and logistics bottlenecks – is not an “in favour category” with Indian e-tailers so far due to high capex requirements. Apart from Bigbasket, Localbanya and some limited-distribution formats such as myneeds.in and anantfresh.com, among others, the country’s largest e-tailers have focused on fashion, electronics, home and beauty as the key business drivers.
But that was yesterday’s news. The number of online food and grocery retail outlets rose to 44 in 2014 from just 14 in 2013 on the back of growing Internet users in the country, according to a USDA report. Online retailers are competing with kirana stores that provide quick (often within an hour) home delivery and credit to neighbourhood consumers. Compared to these stores, online retailers will need to overcome delivery challenges, it said.
According to industry analysts, the Indian online grocery market is set to hit $10 billion by 2020, and 50 per cent of that is set to be centered around Mumbai, Bengaluru, Pune, Hyderabad, Chennai, NCR-Delhi and Kolkata, given that these cities account for nearly 60 per cent of the total Internet penetration in the country.
“Growth in online retail use has been greatest among younger and professional population segments,” the USDA report noted. The number of online grocery retail outlets is expected to rise in future with total Internet users increasing from 120 million to 213 million in the past year as well as a fall in mobile handset prices and a rise in smartphone penetration, it added.
Emphasizing the opportunities for continued growth in online grocery retailing, the report read: “Currently, most online retailers limit their distribution to a particular city, but operations may expand quickly if some business models prove successful.”
Endorsing this outlook, consulting firm Technopak also predicts that at least 20 Indian metropolises could be fully covered by e-grocers during 2015.
Getting real on virtual
Acknowledging the inevitable rise of online grocery shopping, brick-and-mortar majors are also scrambling to get their digital grocery act together. In November 2014, in a pilot project, Reliance Retail launched an online grocery shopping platform in a few select areas of Mumbai, including Navi Mumbai, South Mumbai and Thane.
Operated by Reliance Fresh, the website reliancefreshdirect.com allows consumers to place orders for fresh fruits and vegetables, groceries, dairy, confectionery, packaged foods and personal care items. The purchases are then home delivered through the closest Reliance Fresh outlet in the neighbourhood. There is also a pick-at-the-store option.
Among the pure-play grocery e-tailers, Localbanya and Bigbasket are the more visible channels. While Localbanya currently operates only in Mumbai and adjoining Thane, Bengaluru based Bigbasket, which launched in 2011, has spread its wings in Mumbai, Pune and Hyderabad. In September 2014, it also raised a funding of Rs 2 billion. Using a marketplace-cum-inventory based model, it offers a product range of over 10,000, including fresh fruits, vegetables, grocery, staples, meat, personal care and home and kitchen appliances.
The e-tailer now plans to expand delivery to further geographies, targeting a turnover of Rs 1,800 crore by FY17. A key area of focus will be strengthening its private label portfolio of bread and vegetables.
Speaking to media after the official announcement of the Chennai operations, Hari Menon, Co-Founder & CEO, BigBasket.com, said: “This is the fifth city after Bangalore, Mumbai, Hyderabad and Pune where the company has its presence. We will soon be rolling out operations in the entire NCR, Kolkata and Ahmedabad”
Mumbai’s first online grocery store, localbanya.com, was launched by Karan Mehrotra, Amit Naik and Rashi Choudhary in May 2012. Aimed at young working professionals who have no time to spare, the portal is especially popular with consumers aged between 25 and 40.
Currently operating in Mumbai in the areas of Thane and New Bombay, Localbanya processes 600 orders daily and is targeting a 20 per cent month-on-month growth story.
Unlike Bigbasket, Localbanya decided against an inventory-based model, nor did it invest in delivery vehicles. Their model envisaged a small inventory and tie-ups with wholesalers and cash-and-carry partners across the city. This significantly lowered the capex, since warehousing cost was nil. The e-tailer has just-in-time partners for fresh fruits and vegetables, and 100 strategic tie-ups with retailers across Mumbai and Thane, in addition to revenue-sharing alliances with brick-and-mortar retailers such as Breadkraft, Bagelwala and Shor Sharaba.
Amazon’s hybrid fix
Amazon, no stranger to innovation in creating hybrid ecommerce formats, is at it again. The e-tailing giant is now reportedly working to take neighbourhood kirana stores online, through an express delivery platform in partnership with mom-and-pop stores, calling it Kirana Now. Starting first in Bengaluru on a pilot run, Amazon intends to scale this up nationally, a senior executive from the company was quoted as saying.
The strategy is being lauded by analysts for its inclusive approach – engaging traditional retailers to participate in the e-commerce world, while enhancing the experience for customers. Also, it is being seen as a sharp business strategy to create customized models for a country beset by debate and arguments on the debilitating effects of modern retail formats on mom-and-pop businesses.
In the launch phase, Amazon has introduced this service only on the mobile platform and will deliver orders within two-four hours. “These corner stores, which would be listed as sellers, will upload their catalogues online on our platform and we would help with the back-end and technology,” Amazon India country head Amit Agarwal was quoted as saying. Deliveries would be managed by Amazon, the kiranas and third-party logistics.
In 2014, Amazon launched an exciting business strategy via a shipping mechanism called Kirana Store Pick-ups. This model allowed customers to order and pay for grocery products on the Amazon portal, while physically picking up the purchases from a local Kirana store.
Amazon started the store pick up service in Mumbai and Delhi in March 2014, with Bengaluru following shortly after. Speaking to media at that time, Agarwal said, “We are continually innovating to find solutions that enhance convenience and experience for our customers. We have identified and trained staff at small kiosks and stores, run by individual entrepreneurs, to be our shipment pick-up points.”
With this latest hybrid, Amazon, which already has a rapidly expanding portfolio under the gourmet and specialty foods vertical on its portal, may have found a way to boost online grocery shopping habits, while not threatening the traditional Indian grocer.
Interestingly, so far, the big boys of Indian e-tailing – Flipkart, Snapdeal – have remained invisible on the online grocery radar. But that could be only until the weather clears to offer them a clearer view of the cost-benefit equation.