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India’s online packaged food, beverages, personal care and home utilities consumer goods compendium

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, a leading consulting firm across digital internet eco-system, and , India’s largest online groceries platform, partner to bring you India’s first compendium for online food and grocery…

RedSeer Consulting & bigbasket, have come out with a first of its kind Food & Grocery Consumption report. The report predicts that the retail market will touch $1,385 Billion by 2023. Consumers who are loyal adopters of online platforms reflect high levels of engagement. A worthwhile observation is that this high engagement metric is witnessed across city type: metro-centric and Tier I & II Indian cities alike and not restricted to the Metro cities. The evolved Tier I city consumers reflects the fastest growth of increasing spend. Tier I cities are marked by low modern retail penetration vis-à-vis Metro and Mini Metro cities and these modern retail stores are mostly located in the central region of these cities. Online channel has marked its presence across multiple catchments owing to wide product assortment and convenience off ered by online platform.

Commenting on the report, , Co-Founder and CEO, bigbasket said, “The online grocery segment has been one of the fastest growing e-commerce verticals in India and will continue to flourish in both metro and non-metro cities in the years to come. Given the lack of concrete data around user patterns, growth trends and consumer preferences related to online as well as offline grocery retail, we decided to partner with RedSeer Consulting to launch this report. It is a comprehensive study that delves into various customer segments, online shopping trends, citywise penetration and price elasticity displayed by the consumers across different retail channels. It will serve as a comprehensive compilation of the Indian online grocery retail market that can act as a reference to existing as well as upcoming players in the arena.”

Commenting on the report, , Founder RedSeer Consulting, share of modern retail segment will jump from 3.5 percent now to 6.7 percent in 2023 and of the online channel will witness 55 percent growth lending to a sizable $10.5 Billion market by 2023.

“This retail food & grocery report offers comprehensive coverage across 40 categories marking key consumption sectors of a typical grocery basket. Unique insights garnered cover how online platform facilitate creation of niche subcategories as well as evolution of challenger brands,” adds , Head – Retail & CPG, RedSeer Consulting. The food & grocery compendium will enable brands to defi ne potential consumer segments as
well as index categories for scale, growth and premiumisation.

The Report: Key Highlights

The report would test key hypotheses across consumer behaviour, shopping formats and category association that would be important to understand for effective near- and long-term business and revenue implications:
– Customer Segments: Define addressable customer segments basis online shopping spend, basket, city penetration
– Premiumisation & Price Elasticity: Do consumers tend to demonstrate increased premiumisation, lower price elasticity when shopping on online platforms? Do brands need to develop a premium offering exclusive for online platforms?
– Product Development: Do consumers shop different pack sizes on online and offline platforms? Do brands develop distinct product and price architectures for online and offline platforms
– Enhance Productivity: Mapping micro markets to identify high sales intensity catchments on online platforms across 10 metro-centric and Tier I Indian cities. How brands can leverage the above analysis to increase productivity, and hence sales across offline formats in the above catchments?
– Category Diversification: Mapping category and sub-category growth, branded and private label penetration. What are emergent and niche categories that reflect high potential?

Overall Retail Market in India and Penetration of Organized Channel

Modern Retail penetration currently is 10 percent ($82 Bn) of India’s total retail sector of $805 Bn (CY2018). This organized share is expected to grow at 20% over the next few years to 11.8 percent ($118 Bn) by CY2020 and 14.7 percent ($204 Bn) by CY2023. Online retail contributes 3% (CY2018) share and reflecting, expectantly, robust CAGR of 35 percent will increase to 4.6 percent and 7 percent penetration in CY2020 and CY2023 respectively.

Evolution of Modern Food and Grocery Retail

India’s organised food and grocery sector is poised for growth over the next five years. Modern retail share has increased from 1.6 percent in 2013 to 3.5 percent in 2018 and is expected to grow at a CAGR of 25 percent to reach 6.7 percent of food and grocery market by 2023 and amount to USD 60 Bn.

Online food and grocery retail, though at a nascent stage, with only 0.2 percent penetration is expected to grow at a whopping 55 percent to reach 1.2 percent of the overall market in 2023 and amount to US $10.5 Billion. Increased comfort and trust of customers in e-tailing, especially electronics and fashion coupled with strong value proposition of e-grocery players, wide varied assortment and express delivery options, will drive this growth.
Though the share of modern retail is growing over the years with expansion of players and realignment of business model the share of modern retail in India is lower than leading developed and developing nations of the world.

Evolution of Online Grocery Market in India

India’s online grocery space has gone through a significant evolution in last few years – from explosive growth and funding in CY15 to growth challenges and funding winter in CY16 and then kickstart and accelerated growth phase 2018 onwards. In this stop-start journey, many new business models have evolved, and many themes have been proven and disproven.

Key Metrics for Success of Players: The key success metrics for any grocery player are typically selection width, delivery speed and quality. These metrics can be measured using following factors:

1. No. of Categories sold for selection width
2. % Scheduled vs Express Orders for delivery speed
3. % Inventory model share for quality

Note: Various players and their business models have been analysed in the report based on the above metrics

Consumer Analysis

The consumer analysis survey was an outcome of 1930 consumer interviews with a mix of evolved, evolving and non-users across 13 cities. The key highlights from the survey are as follows:

– Increase in online spend share
– Emerging segments based on frequency of purchase and Average Order Value (AOV)
– Consumer segment
– Factors driving online purchase
– Challenges to purchasing online
– Reaction to new product launch
– Reaction to discounts and promotions
– Online purchase experience
– Micro Market Mapping – Online vs
– Offline Retail

Food & Grocery Online Spend Share

Consumers who are loyal adopters of online platforms reflect high levels of engagement. A worthwhile observation is that this high engagement metric is witnessed across city type: metro-centric and Tier 1/2 Indian cities alike and not restricted to the Metro cities. The evolved Tier 1 city consumers reflect the fastest growth of increasing spends.

Consumer Segments

Key consumer segments marking the online grocery market are detailed out in the report; snapshot of “Budding Shoppers” is highlighted here. Consumer segment also deep dive on the following aspects:
a. E-grocery value proposition
b. Online ordering habits
c. Channel spend across online, organized B&M and local kiraana
d. Preferred categories in each channel

Factors Driving Online Purchase –Beverages

We have analysed the key triggers that drive online purchase across all the categories; key triggers for Beverages are highlighted.

In the case of Beverages, online reviews are important to metro and mini Metro consumers, but not for Tier 1 consumers, who are also evolving users. While the evolving users do not place much importance on convenience and deliveries, the evolved customers stated promotions and convenience as major drivers to purchase Beverages online.

Challenges Associated with Online Purchase – Personal Care

We have analysed the challenges associated with purchase across all the categories; key challenges associated with personal care are highlighted. Lack of trust is a barrier to shop Personal Care products online, followed by concerns related to product quality.

Beside this, delivery related issues are other concerns which is common across all categories. Evolved consumers mirror the behaviour from other categories with product availability being the largest challenge, and delivery related concerns being prominent as well.

The catchment areas with the highest demand for online grocery have been highlighted for 13 cities in India. Penetration of modern retail (offline channel) has also been highlighted for those catchments to understand the purchase dynamics.

Micro Market Mapping – Jaipur

Tier 1 cities are marked by low modern retail penetration vis-à-vis Metro and Mini Metro cities and these modern retail stores are mostly located in the central region of these cities. Online channel has marked its presence across multiple catchments owing to wide product assortment and convenience offered by online platform.

For example, in Jaipur, modern retail stores are present in popular catchments within the city i.e. Pink City and Kanakpura while online players have marked their presence across the city including catchments like Malviya Nagar, Nirman Nagar etc.