Future of Grocery e-tailing in India

India’s online grocery market is a fledgling worth $100 Mn (in 2016), with a few online retailers like Bigbasket and Amazon, and negligible presence of modern physical retailers (like Big Bazaar, Reliance fresh, D-mart and ABRL More). Indian consumers have graduated to buying their smartphones and apparels online but are still hesitant in shopping online for their food.

(Pic credit: CNBC.com)

The early takers of grocery e-tail are time-starved urban young working couples, who perceive grocery shopping as a mundane task. However, there is a meek possibility that the Indian consumer would ever be awed by a shopping experience, to the likes of retailers like Waitrose, UK. This coupled with traffic jams, parking hassles, long queues at checkout on weekends, can facilitate the switch over to digital channels.                                                                          

Modern retail chains have their own set of challenges competing with the large unorganized retail and thus, have either faltered in online selling (Big Bazaar), or have a very limited presence (e.g. Reliance Fresh was selling in 2 cities as opposed to stores in 93 cities) or have not dread into it (Dmart). They lag on the fulfilment front too as Reliance offers next day delivery, in comparison to the 60 minutes delivery promise of Bigbasket.

(*Hypercity & More delivering in a few cities through partnership with Zopnow)

Missing the Opportunity of Omnichannel

Internationally, retailers like Target and M&S are leveraging their stores and digital channels like online, mobile, and social, to create a an omnichannel shopping experience, where the retailer is able to create single view of its inventory and customers.

The problem is when physical retailers disregard the small percentage of sales obtained from their digital channels, usually <5%. Instead they should view the overall impact of the digital channels on their business through KPIs like average spend of omnichannel customers (shopping in both stores and digital channels) versus store-only customers, increase in store footfall due to digital marketing, etc. 

Example: In case of Target ($15Bn food business) 

• online subscribers spend 6 times more online than non-subscribers and still make the same number of trips to the store as the non-subscribers. 
• omnichannel customers shop 3 times more often, producing 3 times more sales as compared to store- only customers.

Modern retailers like Future Group, Reliance, ABRL More need to not only embrace digital selling platforms but also think of an omnichannel strategy to retain and delight its existing customers. These retailers also to rethink the role of the stores, from being only point-of-sales to being distribution centers to serve the catchment areas, for their online orders. They can rope in skilled third-party logistics services to manage last-mile deliveries or even offer Buy online pickup in stores (BOPIS) so that customers are saved from long checkout queues.

Major Players in India’s Grocery E-tail

Bigbasket, launched in 2011, services 25 cities with a listing of 18000+ products. It has set good standards of customer service through its wide assortment, quick fulfilment through its largely inventory-led model (inventory is sourced and stocked by the e-tailer) and no-questions asked refund policy. It attempts to compete with neighborhood stores through express delivery (within 60-90 minutes) for certain common grocery items and same or next day delivery for all the listed items. It launched its robust mobile app at an appropriate time when the acceptability for mobile apps among urban Indian consumers had increased.

Amazon- Gaining foothold : Companies have to compete with Amazon not only in terms of product assortment but also customer experience. In US, Amazon Fresh partners with local specialty stores for delivery of fresh groceries and Amazon Prime Now app sells both food and non-food items, delivered within 2 hours. In UK, It has a tie-up with supermarket Morrisons to offer 1 hour paid grocery delivery in London and neighboring areas. In China, Amazon is experimenting with drone deliveries to reach shoppers within 30 minutes. In India, Amazon has launched - Amazon Kirana Now mobile app, which follows a hyperlocal model and delivers in 2 hours, and Amazon Pantry, which delivers groceries the next day.

Amazon has futuristic innovations in Retail like Amazon Dash, where FMCG products can be ordered through the press of a button placed in consumer’s home; or Amazon Go, the no-queue no-checkout store, created using IoT technology. Such innovations can be a game-changer for the grocery landscape if launched in India.

Potential of Grocery E-tail

Indian grocery e-tail will carve its own path and may not replicate the results of other countries. The partnerships of some of the modern brick and mortar grocery retailers like Big Bazaar, Spar, Hypercity, etc. with Amazon may give short-term gains to the former but it may result in these online retailers to be the winners in the long-term. Instead, modern physical retailers need to devise out their omnichannel strategy to win and retain their customers. The time to act in online grocery space is now, lest you miss the bus!

(Disclaimer: The blog strictly reflects my individual opinion.)