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How e-grocers can make money and stay profitable


The Internet has revolutionized the way we make friends and connect with them, how we are entertained, and how we shop. From clothing and cosmetics to appliances and food, everything is available online and at your fingertips. The modern consumer is now used to convenience more than ever before. It therefore doesn’t come as a big surprise that we have used technology to simplify daily routine tasks and get our chores done wherever we can.

How e-grocers can make money and stay profitable
While e-commerce has captured a huge market share, online grocery shopping still remains relatively niche

While e-commerce has captured a huge market share, online grocery shopping still remains relatively niche. Complexities arising with building supply chains that can deal with perishables, customer inertia in changing a habit are the major reasons for this. Yet, one can’t really argue that online grocery shopping isn’t a more convenient and hassle-free experience than buying groceries yourself.

It’s quite apparent that online grocery has certainly provided a lot of convenience to busy households. As you start valuing your time, it makes much more sense to buy groceries online. On the one hand, the new age e-grocers like Bigbasket and Grofers, with their huge assortment, have literally brought the supermarket at your doorstep whereas, on the other hand, daily delivery platforms like DailyNinja and Morningcart have taken care of last minute shoppings and subscription of perishable products like milk, tender coconuts, curd, bread, eggs, pooja flowers etc. You can also always bank on a good bargain and discounts as all e-grocers are price competitive and are trying to gain market share.

The comfort of having choice to order groceries on-demand from Bigbasket and Grofers or the assurance of daily morning scheduled deliveries from DailyNinja have allowed many households to save several hours every month and put this chore of grocery shopping on auto-pilot. Delivery at doorstep has existed in our country for several decades – from milk delivery early in the morning by the doodhwala to the local kirana shop guy who home delivers the orders for houses in his shop’s vicinity. Yet all e-grocers seem to be struggling to make money and stay profitable. Several millions of dollars have been burnt and many shutdowns have been seen in the past few years. These can largely be attributed to mainly two reasons:

Warehouse operational cost: This is the labor cost of picking and packing orders, which doesn’t apply to kirana shops and supermarkets where people are happy to drag the cart themselves and do their own picking.

Logistics: The cost of delivering the order to the customer’s door at his convenience. Currently, even after optimised route planning, every delivery to your home costs Rs. 50-60 to your e-grocer. This can be largely attributed to the salary of delivery boys and fuel costs. If you take an average order value of Rs. 1,000, this shaves off nearly 5-6 percent margin right away. The struggle to be competitive with supermarket prices and still account for this additional costs on every order leads to a cycle of perpetual cash burn.

But, fortunately for everyone who has moved to e-grocers, these are not the problems that cannot be solved. In fact picking and packing in warehouses has already been automated by robots and put to practice in several of Amazon’s warehouses. This is an investment that well-funded online groceries are not going to shy away from as it not only cuts costs for them but also decreases the time to assemble and ship an order. It’s a well know fact that robots love to work 24×7 unlike humans who tend to get tired after working an 8-hour-shift and walking for miles in a warehouse, not to forget the week offs and sick leaves!

And as far as the logistics costs are concerned, they go down as order density (number of orders per square kilometer) increases. This is precisely why your milk vendor or kirana shop is able to provide home delivery and still stay profitable. As acceptance and dependence on e-grocers increases, this cost will become negligible. We, at DailyNinja, have already partnered with milk vendors to do our deliveries along with milk and managed to bring this cost to less than Rs 3 per delivery.

Another reason why a large section of population has abstained from shopping groceries online is their wish to touch and feel the fruits and vegetables to ascertain the quality. This is a process that is often so stringent that most husbands take years of practice to master the art of picking the right veggies. To win over these households, e-grocers need to do the basics of procurement, storage and grading right every single day to ensure that only the best produce reaches their customer’s kitchen. Once delighted and hooked to the quality, the customers start trusting the e-grocer and wouldn’t mind ordering again.

Substituting hours of offline grocery shopping with 15 minutes of online shopping is a proposition most households would love to adopt especially as they start to value their time more. E-groceries are already proving to be a hassle-free way to get fresh produce right at your doorstep and as the market matures, they will continue to add in more innovations to make this an even more pleasurable experience that it is now.