Ola May Book A Ride Into Online Grocery Business With Foodpanda

Cab-hailing company Ola may leverage the 125K food delivery riders from its food delivery unit, Foodpanda, for grocery fulfilment. The move comes as Ola’s global rival, Uber, looks to launch a few pilot projects for grocery delivery in India by next year.

Foodpanda’s Indian business was acquired by Ola from its Germany-based parent firm Delivery Hero Group in an all-stock deal for $31.7 Mn (INR 202 Cr) in January.

It is being speculated that Ola has been working on a grocery-specific platform for the last five months and aims to launch it in early 2019, a media report said, citing unnamed sources.

The Bengaluru-based company is also in talks with major retail chains and cash-and-carry companies across the country to work on a few partnerships and plans to offer retailers a revenue-sharing model.

An email query sent to Ola didn’t elicit any response till the time of publication.

Interestingly, this is not the first attempt by Ola to foray into the grocery delivery segment. Earlier, in March 2016, the company had shut down its grocery arm, Ola Store. Here are a few facts about Ola Store:

• Ola started beta testing its app ‘Ola store’ for grocery and daily needs in June 2015
• The app was operational in Bengaluru, Hyderabad, and Gururgram, with tie-ups with retail chains such as PNP Retail, Top N Town, and Namdhari’s Fresh, among others
• It started with more than 12,000 products under 13 product categories including fruits and vegetables, breakfast, dairy, bread and eggs, etc
• Ola Store’s Android app had over 250 grocery stores providing over 16,000 products in 13 categories

Ola, founded in 2011 by Bhavish Aggarwal and Ankit Bhati, has been expanding its presence across the globe — including New Zealand, the UK, and Australia. At the same time, it is working on strengthening its foothold in India.

Recently, Ola announced the integration of food delivery app Foodpanda into its cab-hailing app. Foodpanda claimed to have witnessed a substantial increase in the number of food orders after the introduction of new offerings and upgrading its delivery logistics in India.

Ola’s plans to leverage Foodpanda’s delivery network for its grocery business comes at the time when online grocery sector is expected to almost quadruple over the next three years to touch $1.38 Bn (INR 100 Bn) in terms of revenues.

A Goldman Sachs report forecast that the Indian online grocery market is set to reach $40 Mn (INR 270 Cr) by FY19, growing at a CAGR of 62% from 2016 to 2022.

The sector, which has seen with high-investor attraction from the likes of SoftBank, Tencent, Temasek, etc, has been struggling for growth and to manage high rates of cash burn. Here are a few highlights about the big players in the segment who could challenge Ola:

• Gurugram-based online grocery startup Grofers may soon raise $140 Mn-$150 Mn (INR 1100 Cr- INR 1200 Cr)in a fresh round of funding led by Japanese conglomerate SoftBank’s Vision Group, with participation from German retail group Metro AG
• Flipkart Supermart, Walmart-Flipkart’s online grocery arm, is currently operational in all major pin codes of Bengaluru with plans to expand to five to six major cities by the end of 2018
• Amazon Pantry, Amazon Prime Now, and the Google-backed Dunzo are some of the other big players making their way into the online grocery segment in India
• Micro-delivery players such as Milkbasket, Daily Ninja, ZopNow, Satvacart, and Godrej Nature’s Basket also hold a significant share of the online grocery market
• With plans to touch a $1 Bn (INR 7283 Cr) gross sales run rate by the end of FY19, BigBasket is aiming at slashing its cash burn rate

A report by Kalagato suggested that as of March 2017, BigBasket held about 35% of the market share in the online grocery segment, closely followed by Grofers at 31.5%, and Amazon at 31.2%.

With leading ecommerce companies like Flipkart and Amazon already waging a war against established players such as BigBasket and Grofers, Ola’s entry into this segment is sure to intensify the competition further.

[The development was reported by Business Standard.]