India’s Online Grocery Battle: Amazon Fresh Heads To Smaller Cities, Adds 50+ Towns

Amazon Fresh has expanded to more than 50 cities in India, against only 22 cities a year back. Talking to BusinessLine, Srikant Sree Ram, director of Amazon Fresh, said that more than 50% of its customers are from Tier-II and III cities. 

The company aims to penetrate the Indian market deeper, ensuring full basket products’ availability. The platform which started in 2007 as an add-on grocery service for prime members, launched as a segregated store for grocery items in 2021.

The ecommerce behemoth also launched Amazon Pantry in 2016 following the online models of offline supermarkets such as Spencer’s, Big Bazaar, Dmart among others. However, it pivoted to launch Amazon Fresh in 2021 and discontinued Amazon Pantry to become hyperlocal. Currently, it offers free delivery on INR 249 above orders to its prime members.

Amazon Fresh follows the model of slotted grocery deliveries and has claimed to have doubled down despite stiff competition from BigBasket which follows the same model, and the ones following quick service delivery such as Blinkit, Zepto, Swiggy Instamart, etc.

“Our focus has remained squarely on ensuring we provide high-quality products, especially in fresh fruits and vegetables and ensuring that we offer our customer the best value. Whether it comes through pricing or through offers. Grocery for us has been one of our fastest growing categories nationally,” Srikant told the publication.

According to a study conducted by Grand View Research, the Indian online delivery market was valued at $2.9 Bn in 2020 and is estimated to expand at a CAGR of 37.1% by 2028. The increasing customer base of such types of services has caused the Food Safety Standards Authority of India (FSSAI) to think critically. Recently, FSSAI has ruled that these online grocery markets may need to display key health and nutritional alerts alongside the retail price for packaged food items sold on their platforms soon. 

In the embroiling online grocery market, BigBasket has kept posing consistent competition to the other players in the market. Last year, it raised $200 Mn from Tata Digital and other investors, hitting a valuation of $3.2 Bn. Investing $100 Mn in 2019 to set up vending machines in the housing complexes for quick service, was a significant move towards strengthening its supply chain.

India’s Online Grocery Battle

While the demand for online grocery has been increasing by the day, the execution of such business models demand a lot. Smooth inventory management, managing dark stores and technology play all together pose a greater challenge for players including the likes of Zepto, Blinkit, Swiggy Instamart among others. 

Presently, Zomato owned Blinkit has been reeling under disruption due to the delivery personnels’ ongoing protest. The situation erupted on the back of the quick-commerce company slashing the delivery fees to INR 14 per order from INR 50 earlier. Due to the protest, around 100 BlinkIt dark stores have been shut.

Presenting its side of the story, a Blinkit spokesperson said, “We have introduced a new payout structure for our partners that compensates them based on their effort to deliver an order. This is an opt-in exercise, and our teams are on the ground to answer any questions from the partners. We believe this is a positive step for our partner ecosystem, as it is fair to them and our customers. Although some locations have experienced disruptions, we are actively engaging with our partners to get the stores back up and running for our customers.”

Mumbai-based Zepto too has been struggling with its loss of INR 390.3 Cr on a standalone basis in its first year of operations in financial year 2021-22 (FY22).