The fight could be bruising — BigBasket’s losses in 2017-18 were Rs 310 crore while those for Grofer’s were Rs 258.30 crore, but experts said Walmart, which bought a 77% stake in Flipkart in May 2018, wouldn’t mind the expense
E-retailer Flipkart will soon join BigBasket, Amazon, Grofers and others for a share of the $500-billion food and grocery market in India of which the online piece accounts for just 0.2%. That business may be worth just about $1 billion today but experts reckon it could grow at a blistering 50-60% compounded and be worth $4-5 billion in a few years. Given how large investors such as SoftBank and Alibaba are investing in online food retailers, the estimates, it would appear, are not unreasonable.
A clutch of investors, including Alibaba, infused $150 million in BigBasket earlier this year, taking the total investment to $1 billion. In May, Grofers received a chunky $200 million from investors led by SoftBank.
The fight could be bruising — BigBasket’s losses in 2017-18 were Rs 310 crore while those for Grofer’s were Rs 258.30 crore, but experts said Walmart, which bought a 77% stake in Flipkart in May 2018, wouldn’t mind the expense even as it leveraged its fabled expertise in supply chain management, logistics and vendor development.
In fact, it has done a good bit of the spadework working with farmers and suppliers and would be able to scale up the business quickly, analysts said.
Ankur Pahwa, partner, EY, observed that while the competition had, no doubt got a head start, Flipkart’s war-chest would help accelerate growth. “The grocery business is extremely sticky with the highest repeat behaviour and only companies with the ability to scale up and streamline logistics will thrive,” Pahwa said.
Kalyan Krishnamurthy, Flipkart Group CEO, said Flipkart was looking forward to investing more in the local agri ecosystem, supply chain and working with small farmers and producer organisations.
Flipkart has registered a new entity — Flipkart FarmerMart — to undertake retail trading of food products in the country, according to the company’s regulatory filings sourced from business signals platform paper.vc.
The entity will carry on the business of retail trading of food products manufactured and produced in India through offline and online distribution and other sales channels (by way of e-commerce through web, mobile or any other online channel). It will also invest in and set up infrastructure throughout the country and provide all other ancillary services for seamless business operations, according to the e-commerce firm’s memorandum of association filed earlier this month.
Flipkart said it is applying for appropriate licences from the government and secured internal approvals for the same already. Flipkart’s will be an inventory-led model with the company working directly with farmers and food processors, the executive explained. No physical stores would be set up; sales would be made online, he said. Amazon undertakes food retail in the country through subsidiary Amazon Retail India (ARIPL). In 2017, the firm received government’s approval to invest $500 million in retailing food products in India. Earlier this year, ARIPL received infusion of over Rs 200 crore from its US-based parent.
The government permits 100% foreign direct investment (FDI) in the food processing sector. As per norms, a foreign company can open a wholly-owned subsidiary in India to retail food products produced and or manufactured in the country by way of opening stores or online.