Grocery is the largest
consumer segment in India, estimated to be accounting over 60% of the country’s
total retail market. India’s grocery retail market has been primarily dominated
by neighborhood family-run Kirana stores, which make up 75%-78%
of the total consumer goods sales.
However, increased smartphone adoption,
expanding internet penetration, heightened digital awareness, growing
tech-savvy young population, and the rise of digital payment alternatives have
been reshaping the dynamics of the Indian grocery market.
Digitization has
increased a sense of convenience, providing customers the flexibility to
purchase items with just a click/tap and have them delivered at their home
rather than visiting a brick-and-mortar store to pick up the same.
The Boom of Online Grocery
Channels in India
The COVID-19 pandemic
acted as a catalyst in changing consumer behaviour and leading to a rapid
transition from offline grocery stores to online mediums. Fast, safe, and
contactless delivery, sealed food, safe handling and packaging, online
discounts, etc., helped online grocery brands to garner trust from online
grocery consumers and shift their purchasing behaviour. India online grocery
market registered a CAGR of 27.88% from 2017 to 2021, and the market
value is expected to reach USD6.40 billion by 2022.
Currently, the Indian
grocery retail segment has become a hyper-competitive space with the
pandemic-related surge in demand, growing omnichannel presence of offline
retailers, and the arrival of big players. The online grocery market has seen a
wealth of venture capital as multiple market players are launching their
e-commerce businesses.
With around 560 million internet subscribers and 450
million smartphone users, the e-commerce players are projected to register
growth at a rapid rate. Thus, the new players in the rapidly growing industry
are coming up with innovative offerings and sharp value propositions to add
millions of new users. Currently, the grocery e-commerce segment is composed of
five types of players.
Grocery e-commerce
specialists such as BigBasket and BlinkIt (previously known as
Grofers) account for the majority of the market share in the Indian online
grocery market. They offer a variety of products to a wide base of regular
customers and have a strong focus on customer satisfaction. Other e-commerce
players like Amazon, Flipkart, Swiggy, Zomato, Shopclues, Perpule, and Paytm
Mall are heavily investing in developing their platforms for building grocery
capabilities.
Additionally, micro delivery companies such as Country Delight,
Milk Basket, Licious, Fresh to Home, etc., are focusing on selected categories
and offering limited assortment to their loyal base of customers. Some leading
offline grocery retail chains have introduced their private labels at
affordable prices to attract customers, considering that consumers usually
stick to an affordable brand or one of their likings. For instance, D-mart has
a good retention rate, and it has grown much faster than its competitors.
Big Basket-Leader in India
Online Grocery Market
India’s first online
grocery store, Big Basket, has achieved sustained growth in the last ten years,
which managed to enter the unicorn club in 2019. Despite aggressive competition
in the segment, Big Basket has maintained its leadership position, capturing a
large portion of the India online grocery market.
BigBasket had gross sales of USD1.1
billion in March FY2021 and USD1.7 billion in March FY2022. Being
the early mover, Big Basket captured the top layer of customers who were willing
to spend more for convenience, and thus it gained the upper hand over its
rivals. The startup company relied on superior customer experience to grow
sustainably and retain customers rather than providing discounts to maintain
the retention rate of loyal customers.
Big Basket sells grains, pulses, as well
as fruits and vegetables under its own brands on the online platform and Kirana
stores, retail chains, hotels, and restaurants, which is contributing
significantly to the company’s profit margins.
Big Basket has created a
hybrid of warehouses and dark stores to fulfil the same-day orders and make
express deliveries, and the sourcing of products is done domestically as well
as locally. The start-up has a gamut of offerings ranging from delivery within
three to four hours, daily deliveries for daily produce, vending machine, and
next-day delivery.
Currently, Big Basket processes 20,000 orders per day
and has partnered with 1800 local grocery stores across India. In 2021,
Tata acquired a majority stake to introduce the quick-delivery service with USD1.2
billion investment to take the quick-delivery service model to the next
level as it is hotting up with well-capitalized companies like Swiggy.
BigBasket operates in around 30 cities across India, but the company has
plans to expand its user base beyond metros to Tier III and IV towns.
New Players Marking Entry
in India Online Grocery Market
·
Zomato Buys 9.3% Stake in Blinkit
Leading online food
aggregator in India, Zomato has planned to re-enter the online grocery segment.
The online food delivery platform had entered the grocery delivery segment in
2020 to meet the rising demands, but the company stepped out in 2021 to focus
on its core market, food delivery. However, Zomato will be launching its online
grocery application soon after strengthening its network in the grocery
delivery business.
Zomato’s announcement for the new app launch comes after
Tata Digital bought a majority stake in Big Basket. The company had also
invested USD100 million, acquiring a nearly 10% stake in Grofers
during the IPO announcement in 2020. The deal is aimed at better competition
against rivals like Swiggy and Big Basket. Zomato already provides fresh and
high-quality supplies such as vegetables, fruits, groceries, spices, etc., to
restaurants under the initiative called HyperPure.
·
Swiggy Invests USD700 Million in Instamart
India’s top food delivery
service platform, Swiggy, has invested around USD700 million in its express
grocery delivery segment, Instamart. The move by Swiggy is to strengthen its
hold in the quick commerce in the world’s second-largest market. Instamart
fulfills the daily needs of fruits, vegetables, bread, eggs, drinks, and other
cooking necessities of consumers.
In 2020, Swiggy had launched Instamart in two
Indian cities, which is now available in 18 cities and clocks million
orders per week. Instamart is set to reach an annual gross merchandise value
run rate of USD1 billion in the next three quarters at its present
development trajectory.
·
Zepto’s Quick Rise in Express Online Delivery Segment
Mumbai-based startup,
Zepto (formerly known as Kiranakart) promises to deliver groceries within 10
minutes. The startup is emerging as a tough competitor to well-established
Indian grocery delivery market leaders like Big Basket and Blinkit. The company
has managed to double its valuation to USD570 million from USD225
million in just two months, securing investments from Y Combinators and
Nexus Venture Partners.
Reducing the express grocery delivery time from 15-20
minutes to under 15 minutes, Zepto aced the same-day grocery delivery model.
The company has been opening stores every 4 hours and currently managing
4 million orders every day in major cities like Mumbai, Delhi, Gurugram,
Hyderabad, and Pune.
·
Flipkart Quick Reduces Grocery Delivery Time from 90 minutes to
45 minutes
Amidst the quick commerce
chaos, Walmart-owned Flipkart has decided to take a sane route, making its
grocery delivery time cut by half to become a more relevant player in the segment.
Flipkart Quick has been making delivery of groceries within 90 minutes since
the pandemic rolled out, but it has reduced the time to 45 minutes in several
cities such as Bengaluru, Mangalore, Hyderabad, Delhi-NCR, Nagpur, Pune,
Lucknow, Kolkata, and Chennai.
With longer delivery times than Instamart and
Zepto, Flipkart Quick aims to offer a much wider range of products, which could
prove to be a differentiator. Flipkart currently operates in 14 cities and aims
to expand to more than 200 cities by the end of 2022.
Challenges
The quick delivery service
model is expected to be successful in locations with a high concentration of
people who are willing to pay more for urgent and critical last-minute needs.
However, it is highly unlikely that express online delivery stores could
replace Kirana stores in their niche micro business. Although India is the
third-largest grocery market in the world, the penetration of online groceries
is less than 1%.
Q-commerce is expected to disrupt the under-penetration in
groceries, developing a strong habit among customers on the back of
convenience. As customers continue to make purchases through online channels in
the post-pandemic era, quick commerce will continue to grow at an exponential
rate. Quick commerce is going to be the next game-changer for e-commerce.
India’s quick commerce is anticipated to grow 10-15 times and become a USD5
billion market by 2025.
According to TechSci
Research report on “India Online Grocery Market By Product
Category (Packaged Food & Beverages, Personal Care, Household Products,
Fruits & Vegetables, & Others {Pet Care, Baby Care, etc.}), By Platform
(Mobile Application & Desktop Website), By Region, Competition, Forecast
& Opportunities, FY2017-FY2027”, India online grocery
market is anticipated to grow at a CAGR of 33% during the forecast period. The
factors attributing to the growth are rising personal disposable income and the
rise of quick e-commerce. Besides, the rapidly growing working population and
entry of offline grocery chains into online are driving the growth of India
online grocery market.
According to another TechSci Research report
on “UAE Online Grocery Delivery Market By Product Category (Fresh Foods, Household
Products, Packaged Foods & Beverages, Personal Care, Baby Care, Beauty
& Health) By Platform (Mobile Application & Desktop Website) By Mode of
Payment (Pre Delivery Online Payment, Card on Delivery and Cash on Delivery),
By Region, Company Forecast & Opportunities, 2027”, UAE online grocery delivery market is
anticipated to register double-digit growth during the forecast period. The
growth can be attributed to the rising internet penetration and added
convenience of online grocery delivery market players.