Cart full of orders

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May 17, 2021 7:00 AM

E-grocery players strive to meet rising demand

According to a Red Seer report, the e-grocery market in India is projected to grow at a CAGR of 8% to reach $850 million by 2025. Groceries account for 66% of the total retail spend in India.According to a Red Seer report, the e-grocery market in India is projected to grow at a CAGR of 8% to reach $850 million by 2025. Groceries account for 66% of the total retail spend in India.

In the wake of the second wave of the pandemic, e-grocery platforms are seeing a substantial uptake as consumers seek safe and convenient shopping channels. The online grocery delivery market saw a 30% month-on-month growth in April 2021, with a 15% growth in monthly traffic in March 2021, according to a report by JM Financial. E-grocery players like BigBasket are seeing a twofold increase in daily orders currently, compared to pre-Covid times.

Last year, e-grocery marketplaces had hastened omnichannel delivery ecosystems to cater to rising demand. This year, they have introduced token systems, different sections for high-demand items, and more collaborations with offline retailers to enable hyperlocal deliveries and prevent potential disruptions brought on by unexpected lockdowns.

According to a Red Seer report, the e-grocery market in India is projected to grow at a CAGR of 8% to reach $850 million by 2025. Groceries account for 66% of the total retail spend in India.

Better placed

Sensing a big opportunity, several e-commerce companies, both start-ups and established players, have forayed into the online grocery market in India over the past year. Social e-commerce start-up Meesho, Paytm Mall, Snapdeal, Shopclues and Bengaluru-based real estate operator No Broker are among the new entrants.

Further, established players are increasing their penetration in tier II markets. Grofers and BigBasket, for instance, have expanded beyond the metros to reach 25-30 more cities. “Due to deeper collaborations with manufacturing, merchant and brand partners, there has been an almost 25% increase, to Rs 2,000, in average ticket size,” says a Grofers spokesperson. “We have hired over 2,000 people across our branches, and plan to add 7,000 more to enable seamless supply chain and delivery.”

Flipkart is strengthening its supply chain, and investing in building capacity in order to reach more than 50 cities in the country. A spokesperson from Flipkart says, “We have leveraged our partnership on ground, and are working with our brand partners, sellers and MSMEs to ensure timely availability of essential products for consumers along with contactless payments all over India.”

Growing basket size

During the lockdown last year, the e-grocery industry grappled with last-mile delivery issues — fewer delivery executives and scarce inventory being the primary hurdles. The big challenge this year is managing inventory in sync with the demand, observes Swapnil Potdukhe, senior analyst, JM Financial.

To tackle this, retailers looking to refine their storage and distribution processes may widely adopt the dark store model to save on real estate costs, and cater to the surge in orders from their online-only fulfilment centres, says Anand Ramanathan, partner, Deloitte India.

Strengthening their presence and increasing acceptance for online grocery shopping in tier II markets will further aid growth for these players. “The entry of new players will heat up competition in the country’s online food and grocery retail market, and also mark its shift from being a largely unorganised segment to an organised one,” adds Ramanathan. Tata Sons will soon enter the online grocery market, after acquiring over 60% stake in BigBasket.

Potdukhe says the pandemic has provided shoppers a compelling reason to transition to online shopping. While marketplaces like BigBasket and Grofers have been registering growth even pre-Covid, the newer entrants and newer models of online grocery shopping — such as WhatsApp orders being enabled by JioMart — along with seamless delivery and discounts, are likely to accelerate growth for this segment. “The new models are expected to continue to remain relevant given the wide variety and quick deliveries offered,” Ramanathan adds.

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