Online grocery market set for big action in 2017

By: and |
Bengaluru | Published: April 6, 2017 4:54:28 AM

The Indian food and grocery (F&G) market has witnessed the entry of many online players, but so far only a few have remained operational.

The existing players including BigBasket, Grofers and Jugnoo are also looking to expand their presence.

The Indian food and grocery (F&G) market has witnessed the entry of many online players, but so far only a few have remained operational.

However, the year 2017 promises much more action with the online grocery market set for a big bang entry of Amazon and Flipkart this year. The existing players including BigBasket, Grofers and Jugnoo are also looking to expand their presence.

Amazon has plans to invest around $500 million in the food retailing segment in India and there has been similar foreign direct investment proposals by BigBasket and Grofers also. Flipkart will be making an re-entry into the online grocery market during this quarter.

The online F&G delivery market alone is estimated to be around $600 million in India and is pegged to touch $5 billion by 2020 at a CAGR of 72%. This market has been largely dominated by three key players Amazon, BigBasket and Grofers with many others closing down their operations such as PepperTap.

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“The reason why online grocery business works well is because of the convenience it offers to buyers and the deals offered by online grocers,” Sreedhar Prasad, Partner – Internet Business & Start-ups, KPMG said.

He added “Many of the existing established players are preparing to enter the online grocery business. They have already created their online channels and could become a huge challenge for start-ups.”

For instance, Reliance Fresh has started its online grocery business and is currently running a media campaign in Bengaluru.

BigBasket is concentrated in around 25 cities and have no plans to expand further. The company which reported a loss of `277 crore on revenue of `563 crore for FY16 has plans to raise fresh round of funding to expand its infrastructural facilities.

Amazon Now has been operational in just four cities. It has plans to enter into newer territories. “The company is now gearing up to expand the service to more pin codes in these cities as well as extend it to many other cities in the next few months,” Saurabh Srivastava, director, category management, FMCG, Amazon India told FE.

The hype over the F&G online delivery segment seems to have died down with stability returning to the business models. “The space is little more mature than in the past from both the demand and supply side,” said, Mrigank Gutgutia of Redseer Consulting.

According to him, the companies have experimented with various models and are getting a hang of what consumers want while they realise this is an effective platform.The big challenge in the grocery delivery segment is the hyperlocal nature of this business which puts considerable strain in setting up the logistics and storage facilities. Added to this, per unit cost of delivery is high even as the consumption from individuals remains stable.

Nitin Seth, COO, Flipkart said, “Over the last 18 months we have been studying the online grocery market very carefully and developing our model aggressively. We will unveil our online grocery business model very soon.” Jugnoo, which primarily operates in the auto hailing space has also plans to expand its network of grocery and food delivery business to more number of cities.

“This is a high repeat and easy-to-buy category and no wonder more players are looking at it,” said Gutgutia of Redseer.

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