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Can India’s Digital Grocery Players Sustain The Covid Boom?

Can India’s Digital Grocery Players Sustain The Covid Boom?

The market conditions soon after the lockdown allowed newer grocery apps to come into the market, while existing ecommerce and retail discovery players stepped in to fulfill the demand

Despite the high potential opportunity in online grocery, it still remains a low-margin business even in the face of high demand, while scaling up in the lockdown has proven more expensive

While the consumer preference for low-touch delivery models has led to higher average order values and cheaper acquisition costs, India's biggest grocery apps have likely hit their growth ceiling during the lockdown boom

Online grocery is a tough nut to crack. Extremely low margins and struggles to maintain scale amid changing consumer trends, environmental factors and the greater degree of difficulty when it comes to fulfilment — it’s pretty much a challenge at every step.

As Willy Kruh, global chair, consumer & retail business at KPMG International says, “Very few retailers get their online grocery model right, but when they do, it can be very successful.”

In the last few years, we have seen the likes of Bigbasket, Grofers, FreshToHome, MilkBasket among others looking to conquer this sector. With their undying hunger to innovate, integrate technology, build one product after another while facing price wars to maintain the market share yet create revenue streams, these players have been leading the pack. In close competition there have been other players such as Amazon and Flipkart Supermart and hyperlocal delivery startups such as Dunzo among others, but these never really challenged Bigbasket, Grofers & Co for grocery delivery. But as the pandemic showed, there’s room for at least a dozen more players in the Indian market and this has brought unprecedented focus on the grocery delivery industry.

Once the lockdown came into play from March 25, 2020, existing grocery delivery players faced a string of challenges in maintaining supply chains and building up capacity to fulfil demand. Moreover, the model of warehouses and dark stores was not favourable at this time as transport was severely hampered. The build-up of inventory, lack of manpower and consumer fears also made things worse. If scale was the motivation, it also became a fear for many. This kerfuffle resulted in the entry of new grocery delivery services, while existing ecommerce and retail discovery players stepped in for last-mile demand.