INTRODUCTION

E-grocer is an online platform for ordering groceries online with online

payment and cash-on-delivery options. There might also be a delivery charge on the
service, subject to the volume of purchase. The delivery type is personal delivery
with very fast and efficient same day or early next day delivery. Customers are
increasingly becoming comfortable with online buying which now includes groceries.
For the sellers also it is becoming relatively easy due to easy online payment
options and improving delivery services. And if one understands the online retail
market through consumer buying behavior patterns one can build a great business.

Grocery e-tailing is challenging, but it also has the advantage of high percentage of repeat
orders. All you need to do is impress a customer with the first order. Once a customer is
satisfied, you can have one more regular in your clientele.

The world has changed radically for online grocery startups in India in the past
few years. Three to four years ago the buzz was around grocery sites shutting
down. Now, the survivors and new entrants are thriving.

The tedious commuting, long working hours, rising internet penetration and of course
smartphone wave are giving space to online grocery players to serve the consumers. Time
has changed and buyers are now quite comfortable ordering apparel, shoes, electronics,
among others, online. With improving comfort with online payments, selling groceries
online has become relatively easy.
Though the challenges of selling groceries online remain in place, however startups
like Bigbasket, PepperTap, ZopNow are using combination of different business
models and technology to overcome them. The buzz around online grocery space in India
has reached new heights in the past few months with investors started pouring millions
into this space and big corporates like Tata and Reliance and Ecommerce giants like
Flipkart, Amazon & Snapdeal foraying to capture this multi billion dollar market. But the
million dollar question is:
WHY biggies have started entering into online grocery space?

Despite knowing the fact that selling perishable goods online is far more difficult than
selling non-perishables items. It is an entirely different ball game with low-margin and
requires expensive investments to build high-end IT infrastructure, an efficient supply
chain, quality warehousing and storage facilities, and an efficient delivery system, which
is again varies from place to place.

Quick Facts About Indian Grocery Market

The retail market in India is expected to hit $725 Bn (about INR 43 lakh crore) by 2017.
Retail consultancy Technopak estimates online grocery business to grow at a rate of 2530 per cent y-o-y basis in major cities of India.

India is the 6th largest grocery market in the world

Only 5-8% of grocery stores are organized corporations.

The vast majority are mom & pop type shops that are similar to
convenience stores in the US and are referred to as kiranas

The online grocery market is growing at 25-30% annually in

metropolitan areas and large cities

Margins are below 10%

43% of the countrys roads are not suitable for vehicles. Paired
with checkpoints, and duty collection points that slow down traffic,
infrastructure is an obstacle

Modern Retail

Business Models
Pure-play online grocery retailers are at the forefront of the boom in grocery ecommerce,
which has over tripled in size by number of players year-over-year. These companies
build large warehouses and distribution centers outside of major cities and own fleets of
GPS-enabled vehicles in order to serve online demand. BigBasket, LocalBanya &
Reliance Fresh Direct are the main players leading in this space.
Hyperlocal Delivery players provide a front-end and logistics management service for
smaller chains, as well as independent grocers for a recurring monthly/annual fee or
commission basis. This model has been praised due to its lack of inventory investment.
Peppertap, AaramShop, Grofers are few major players in this space.

Growth Drivers
In developed countries like US, driving/walking to the grocery store, park, shop for
yourself, load up your car, and drive home, it is very doable. However, Indias
infrastructure and overcrowded major cities do not provide this flexibility and make it
more difficult, time consuming for in and out shopping. In a variety of the major cities,
there are very few parking lots for grocery stores, and the prohibitive traffic makes the
time commitment and risk even higher when driving to crowded city centers that feature
more full-service grocery stores or modern retailers.
Besides, the industry infrastructure is also a challenge as only 5% to 8% of all grocery
stores in the country are organized corporations or entities. In terms of demand, growing
younger population, rising internet penetration, increasing disposable income, quality
products and customer driven mechanism are some of growth factors. And in terms of
supply, multiple channel distribution, flexible delivery options, presence of major players,
convenience and multiple mode of payments like Credit Cards, Debit Cards, Net
Banking, Mobile Payments are important growth factors.

Players in online grocery business and their strategies:

The top five online grocery startups in India have raised over $120 million just
this year. Four years ago, a number of startups had come up in this sector but
most shut down pretty soon mostly due to lack of investment and customer
base.

Out of about 40 beginners, we are among the very few who survived, says
Hari Menon, Co-founder of Bigbasket, which was founded in 2011.
Now BigBasket, along with other survivors ZopNow and Localbanya, and the new
kids on the block like Grofers, PepperTap, and Jugnoo are expanding rapidly,
launching in new cities, hiring new talent and raising fresh funds.
So, what changed
The biggest change is the habit change of consumersto buy grocery online.
We are changing the way people shop for grocery, says Mukesh Singh, Cofounder and CEO of ZopNow. The startup was founded in 2011 and had an
inventory model. ZopNow changed this model earlier this year and now partners
with hypermarkets to source products and is targeting over $80 million in
revenue this fiscal. The increased consumer traction has helped attract
investment in this category which further accelerates the process.

The food and grocery industry in India is now worth $383 billion and is
expected to touch $1 trillion by 2020, according to a study by advisory
firm Technopak. This is the market these startups are targeting.
Despite the large market size, experts like Arvind Singhal, Chairman of retail
advisory firm Technopak, say the growth these startups have registered has
been surprising. This is because grocery is a tough segment to crack online even
globally. Poor execution had led many an e-grocer in the USWebvan,
HomeGrocer and PublixDirectto bankruptcy in the last decade.
This is a complex, execution-oriented business; understanding the execution
and supply chain makes the real difference, says Hari of Bigbasket, the only
major player that still maintains inventory. The company, the largest in this
segment, operates in seven cities and is targeting $ 1 billion revenue by end of
FY 2017.
Last-mile logistics and procurement are the two areas that complicate
operations in this segment and each startup is tackling these challenges
differently.
Bengaluru-based BigBasket is expanding its warehouse network and going to
smaller towns. ZopNows new model has seen them partner with hypermarkets
like More and HyperCity. Bengaluru-based ZopNow and its customers have realtime visibility of this inventory. ZopNow handles the pick-up and delivery.
The new companies have opted for a hyperlocal model. Grofers, which has
raised $45 million in funding just this year, started out as a provider of ondemand delivery services to local stores. Late last year, the company launched
its mobile app through which consumers can place their grocery orders.

The initial stages were tough as the e-grocers needed to educate and convince
merchants of the advantages of coming on an online platform. Hiring and
training the workforce70% of which is delivery boyswas challenging too.
Inventory-model vs hyperlocal-model

Chandigarh-based Jugnoo and Gurgaon-based PepperTap too follow the

hyperlocal model. Jugnoo, in fact, started out as a provider of auto-rickshaws on
demand and then diversified into using this network to supply groceries.
Grofers, Jugnoo, and PepperTap are of the view that grocery deliveries for online
players are more a logistics problem than a problem of procurement.
Hyperlocal is the way forward. The burden of inventory management is much
reduced and it is more time efficient. The inventory model brings with it a
limitation to scale, says Samar Singhla, Founder-CEO of Jugnoo.
But Technopaks Arvind believes that what will differentiate the leader from the
rest of the pack is its ability to make an extra margin to cover the costs of
infrastructure and logistics. For this reason, he believes that inventory model is
the future. Even the biggies will need dark stores or strategically placed stores
of their own, he says.

Rahul Chowdhri, Partner at Helion Venture Partners, which has invested in

BigBasket agrees, Delivery alone does not give enough margins to make a

profit. Merely being a logistics firm does not help you beyond a point. Integration
of backend services is very important.
Localbanyas Karan Mehrotra believes that hyperlocal is one part of the
ecosystem. You must build the product that best fits the market. Most recently,
we started offering grocery shopping plans via subscriptions which have been
well received by our customers, says Karan.
Biggies enter the fray
Competition has increased for the online grocery-focused startups with biggies
like Ola, Flipkart, and Amazon entering the space. However, the categoryfocused players seem unfazed. Jugnoo, in fact, looks at players in a similar
space as potential partners. We would love to do deliveries for Amazon at some
point, says Samar.
Also, there is a belief that just throwing money at the problem wont work.
We have tested and optimised our service in the last three years. Simply
entering a market with brand and resources is not a factor for long-term
success, says Karan of Localbanya.
Logistics in grocery is a different beast. Their (e-commerce biggies) logistics
and supply chain wont help here. Their orders come to the warehouse, they
plan and go. But groceries should be delivered immediately, says Saurabh of
Grofers.

Who Is Shopping Grocery Online

The online grocery delivery market in India has some very unique demographic statistics

Women ages 30-35 are the largest adopters of online grocery

shopping

11% of orders are done in 10pm midnight slot.

Institutional clients make up 29% of orders for select major

retailers
The report suggests that that women-influenced sales will be 35% of Indian ecommerce
by 2016. The rise of women in ecommerce has been attributed largely to convenience, as
well as increased privacy and safety. The middle class is also expanding in India and
these consumers will subsequently find that grocery shopping via the internet is a high
value-add service.

Challenges For New Players In Online Groceries

Market

Alteration in Business Model For Different Cities

Competition from Local Stores

Difficult for New Players to Attract Investments

Lack of Trust in Online Mode of Shopping

Existing Players in the City

Fresh is an entirely different category from standard ecommerce SKUs since it is
perishable, sourcing is not standardized; there is also a lot of local and seasonal
variability. Maintaining consistent quality is a huge challenge. Any company in this space
has to build its own brand of staples and other items. Again this requires deep sourcing
expertise on where and how to source the best products at a competitive price The
companys own brand items provides most of the profit in this category, said K
Ganesh.

Positive Side Of Online Grocery Platforms

Frequent Buyers Grocery etailing has the advantage of high percentage of repeat
orders. All you need to do is impress a customer with the first order. Once a customer is
satisfied, you can have one more regular in your clientele.
Limited Area To Focus On Given the nature of the business, online grocers are in a
different league from other eretailers. Most online grocery e-stores cater to a specific city
or certain areas due to the logistic limitations.
Advantage Over Giant Online retailers Perishable products are also a challenge for
online retailers. Vegetables, dairy and meat products cannot be stored for long. So many
etailers stick to packaged food items, giving room to grocery platform to perform.
You Can Start With Bare Minimum Cost The cost of owning a domain and hosting
an online store is negligible when compared with the investment in its physical
infrastructure.
Offline Grocery market:
Organized vs. Unorganized Sector: Future of retail sector in India is swerving- on one side
organized retail is marching into life of urban consumers, while on the other our own
neighborhood Grocery stores are resisting fiercely with their existing strong foothold. India
today is at the crossroads with regard to the retail sector. A shift between organized and
unorganized retail sector is evident, which has led to a number of speculations on the fate of
Indian retail. Unorganized sector cannot ignore. In any newspaper or television channel, we find
hordes of news about happening in organized retail sectors, which is indeed fairly real situation.
While the role of organized retail sector in growth of economy cannot be denied, but one thing is
also of extreme importance that unorganized retail format is a support to a large chunk of
population- providing direct employment to 39,500,000 individuals. So there is no way that
government or anyone can discount these foundation stone of Indian economy.

Can an offline retailer build any source of competitive advantage?

Yes, by making following strategies:Make Customers Want to Buy Offline

For retailers, this has implications not just for the expertise you need in problem solving, but
also for the products you stock and how they are displayed.

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CONCLUSION
The research shows that increase in purchasing power, ease of shopping,
quality delivery, convenience and growing internet penetration is fuelling the egrocer market. Customers look for deals with zero delivery charge but they dont
mind paying delivery charges of up to INR 50. Labor and logistics costs are much
cheaper in India than in western markets, so e-grocers here can make money faster.
Right now, its a growing market and there is place for everyone. But in time we will
see a shakeout and mergers and acquisitions.

Labor and logistics costs are much cheaper in India

than in western markets, so e-grocers here can make
money faster.
Reference:
http://yourstory.com/2015/09/online-grocery-takes-off/
http://www.businesstoday.in/moneytoday/smart-spending/online-groceryshopping-vegetables-new-trend-in-india/story/197141.html
http://inc42.com/buzz/realizing-the-huge-opportunity-in-online-grocery-space/
http://www.iamwire.com/2015/11/grocery-startups-ecosystem-india-challengesthreats-competition/126209