online grocery market

The online grocery market is all set to see the growth

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Flipkart and Amazon India is ready for the online grocery market

Two of the biggest player in the market, Walmart owned Flipkart and Amazon India are planning to up its game in grocery delivery services. In 2017, Amazon pantry and Flipkart both were rolled out.  However, both these companies seem to have a different plan to capture the market. Amazon is planning to take its pantry services to 110 cities across India while Flipkart wants to cover tier II and III regions by creating a city-specific supply chain.

Grocery contributes almost 70% of the total merchandise retail basket in India. According to the reports, the grocery market is valued at over $500 billion out of which 0.2% share of online grocery amounting to $1.2 billion. By 2020 e-grocery segment is expected to grow at 71% CAGR to reach $5 billion.

The expected growth in the sector is the reason why food Delivery Company such as Swiggy and hyperlocal delivery companies like Milkbasket and DailyNinja are strengthening their presence which is dominated by players like Grofers and BigBasket. However, entering and making its presence into this swarming sector will not be easy for e-commerce biggies.

BigBasket: The Oldest Player

Grocery e-tailing has been challenging sector in India, especially in terms of scaling up. In FY-18, the oldest player and biggest player BigBasket claims to have clocked a GMV (gross merchandise value) of Rs 2,000 crore. Some of the other older players such as PepperTap and LocalBanya had to shut down.

Grofers launched in 2013, two years after BigBasket, recently reconstructed its business model.  The reconstruction of business involved shutting down of on-demand grocery delivery service and moving to an inventory-based model to cut cost.

Quick service with quality of products

“It is complicated because you are offering fresh and perishable products such as fruits, vegetables, and milk, and there has to be an entire cold chain managing that. Timelines, quality of these products and last-mile delivery are also big challenges,” Ankur Pahwa, partner and national leader – e-commerce and consumer internet, EY India.

Further, Pahwa said, “Unless you are able to increase your average order value or charge for logistics, the segment becomes more and more difficult to make money in.” The problem faced by most of the players in this sector is that they have to be quick to service the customer’s demand and at the same time maintain the quality of the product in the most cost-effective way.

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