In The Age Of Millennials, Subscription-Based Grocery Delivery Shows Early Success

The Indian online grocery segment has finally come of age with investors back with funding. Two leading players in the sector— BigBasket and Grofers— recently closed $150 Mn and $200 Mn funding rounds, respectively. The investments have become a testament to the increasing trust in these high-cash-burn businesses which are exploring multiple ways to monetise— be it through subscription models or private labels.

According to the US grocery shopper trends 2018, 43% of all millennials occasionally or fairly often shop for groceries online. The trickle down effect of this trend can also be seen in India.

In India, the online grocery delivery market is expected to grow at 55% through 2021. While several companies have suffered tough times during the hyperlocal decline in 2015-16, the survivors have created their own set of survival guide. This includes exploring subscription-based services for their marketplace model of selling groceries.

The trend has been further pushed with increasing reliance on private labels to attract user base towards newer quality and prices of goods. With in-house labels, these online grocers are able to manage their cash burn in the increasingly competitive market, which is also under investor skeptic eyes.

Looking at the subscription-based model for online grocers, a RedSeer report has noted that online grocery verticals have taken the lead in terms of monetising their convenience seeking consumers. They have converted about 30-40% to the total consumer base to their subscription programmes.

The report emphasised that the key drivers of rapid subscription adoption are affordable pricing and a variety of benefits ranging from price savings via cashbacks and discounts. Users also get free/priority delivery with the subscription plans.

Notably, leading players in the grocery delivery market— BigBasket and Grofers— have been able to drive subscription adoption rapidly in less than 15 months of launch on an average. According to market intelligence provider Kalagato, BigBasket leads the online grocery market with a 35.2% share followed by rival Grofers at 31.5% and Amazon Now at 31.2%.

This sector has not only attracted the attention of startups such as Grofers, but also the country’s leading ecommerce players such as Paytm, Flipkart, and Amazon. Other players in the online grocery sector include, Satvacart, Godrej Nature’s Basket and DailyNinja, among others.

While players such as Amazon support subscription models with its Prime membership, the subscription-model for groceries is still a new phenomenon for India consumers, but the more adventurous among them have definitely embraced it in these early days.