How online grocers are betting big on discounts this festive season

By: |
Updated: Nov 01, 2020 10:20 AM

As per Forrester Research, grocery will have a 5-6% share in this year’s overall festive period sales, estimated to be at $6.5 billion

One of the biggest trends this year for the grocery category is a huge increase in orders from tier II citiesOne of the biggest trends this year for the grocery category is a huge increase in orders from tier II cities

E-commerce festive sales are no longer limited to the usual categories like fashion and smartphones this year; with online grocers, too, holding several sales events for daily essentials, all eyes are on whether the segment can finally clock in significant numbers.

BigBasket is offering a minimum of 33% off in over 2,000 products on its platform, while Grofers has discounts up to 82% on grocery and staples, and up to 67% on household items. Amazon offered as much as 70% discounts on groceries as it kicked off its annual festive sales event last month. The scale of these sales events is set to accelerate in the week leading up to Diwali.

As per Forrester Research, grocery will have a 5-6% share in this year’s overall festive period sales, estimated to be at $6.5 billion. Last year, as per the research firm, the category had contributed only 2-2.5% of the overall $4.8 billion in festive sales.
The average order value on e-grocery platforms has also gone up, currently ranging between `1,400 and `1,600 as compared to `800-900 in the pre-Covid period, say industry experts.

E-grocery platforms have strategies in place to tap this surge. Grofers is launching several private labels across categories like snacks, hygiene, disinfectants, staples and personal care products.

“We are working with 800 MSMEs to build in-house brands. Currently, private labels contribute about 40% to our business and we plan to increase this to 60% in the next six months,” says Bikram Singh Bedi, chief strategy officer, Grofers.

The company has also partnered with Cadbury’s for a marketing initiative, wherein consumers clicking on the brand’s social media ads are being directed to Grofers. It is also working with brands to offer better value to customers. “For instance, laundry detergent brand Tide has launched a bigger pack of 10 kg exclusively on our platform,” says Bedi.

Similarly, Del Monte launched its range of flax and pumpkin seeds exclusively on e-commerce channels last month. “We plan to further extend this range and launch dry fruits on e-commerce platforms around Diwali,” says Yogesh Bellani, CEO, FieldFresh Foods, a joint venture between Bharti Enterprises and Del Monte Pacific, which markets Del Monte products in India.

Besides gifting items like dry fruits and chocolate, the health and hygiene segment is a focus area for these companies this year due to the pandemic. According to Saurabh Srivastava, director, category management, Amazon India, the company witnessed a huge spike in demand for products such as Savlon Disinfectant Spray, Whisper Sanitary Napkins, Chyawanprash, Dettol and Dove bathing soaps in the first 48 hours after launching its sales event. The company also saw demand for cooking supplies, spreads and dry fruits.

Though the orders for grocery have risen substantially on e-commerce platforms, the volumes are still not enough to make deliveries cost-efficient — a persistent challenge for these companies. Consider this: while the average order weight for groceries is 8-10 kg, the margins lie in the range of 4-5%.

“While grocery deliveries require more effort and resources, they also have thin margins and this makes it difficult for the companies to keep their costs lean,” says Satish Meena, senior forecast analyst, Forrester Research.

Moreover, while players have increased their focus on hyperlocal deliveries and tied up with general stores across the country to address this issue, it is not going to be easy to cater to demand from across geographies. One of the biggest trends this year for the grocery category is a huge increase in orders from tier II cities. Grofers reports it has seen an increase of 54% in orders from non-metro markets.

“It is very challenging for these players to predict demand and plan their assortments as the extrapolations from the previous year do not apply to the new customers coming in from regions which have never shopped online,” says Anand Ramanathan, partner, Deloitte India.

Follow us on Twitter, Instagram, LinkedIn, Facebook 

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

BrandWagon is now on Telegram. Click here to join our channel and stay updated with the latest brand news and updates.

Next Stories
1SIN join hands with ATK Mohun Bagun and Hyderabad FC as Official Partner
2Greg Barclay elected as Independent ICC Chair
3Kinnect bags creative digital mandate for Himalaya Men