The Future Of Online Grocery In India

Ripe for innovation

Anybody following the recent developments in online grocery segment of ecommerce in India would know that the space is poised to see some interesting innovations happening sooner or later.

The flurry of hyperlocalstartups – focused entirely on pick up and drop – that had ventured into this business operating on wafer-thin margins are now beginning to see the harsh realities of scaling up beyond metros. Grofers, Zomato et al have been forced to scale down operations after venturing probably too soon into towns that weren’t ripe enough for hyperlocal delivery firms.

What’s working and what’s not

Although a lot has been written about such developments – it is too early to dismiss the business model itself. Most of these firms tend to break even at 25 to 30 orders per day with their delivery costs per order tending downwards with increasing scale of operations. More than the business model – it’s the lack of demand in smaller towns for niche services such as these – that are to be blamed since convenience as a value proposition is an easier sell in metros than in non-metros.

The future ahead

The recent entry of established ecommerce companies like Amazon with Kirana Now and Flipkart with Nearby app – have heated up the competition and the pecking order in this space might see some changes down the line.However, it would require some serious soul-searching for the horizontal ecommerce players and it’s not a given that the incumbents will be seriously under threat from the likes of Amazon or Flipkart. Amazon’s own experiments in this space have seen limited growth in its home town of Seattle where it controls 40% of online grocery sales but does only 1.2% of total grocery sales.

So, what does the future hold for all these companies and their business models?

Which ones make the most sense to the investor community? Should they invest in a warehouse-centric model with supporting warehouses in Tier 2 cities? They can, but what about the scalability and the humongous costs of setting up distribution and warehousing. An asset-heavy model will always be a tough one to scale up.

Will it be an era of marketplaces that seem to have scaled up pretty fast? Again, speed of deliveries is good but the choices for customers are severely limited since most of the deliveries happen from local neighbourhood stores that would keep 3000 to 5000 odd SKUs.

Moving towards Omni-channel retailing

A recent survey on ecommerce in India reports that 52% prefer the online retail experience over that of offline one. With Indian ecommerce market poised to be $100 billion by FY2020 (Source: Goldman Sachs) there is a clear need for big retailers and consumer brands to ensure a seamless experience for customers navigating both online and offline retail for purchasing consumer products.

The need of the hour, therefore is a robust technology platform for brands and premium hypermarkets to reach out to their customers directly across online and offline channels. Imagine a popular hypermarket’s customer browsing the aisles for a protein supplement on Day 1 and coming back on ashopping app the next day to check its availability in real time and eventually place an order for home delivery the same day.The brands and hypermarkets can leverage this capability to provide a seamless omnichannel experience to their customers wherever they choose to be present.

Growth of Omnichannel

Ever since we at ZopNow pivoted from a warehouse centric model to being an omnichannel partner for hypermarkets such HyperCity and More MegaStore, there has been no looking back and the back-end integration has allowed a uniform experience for most customers who have become accustomed to purchasing from their preferred hypermarkets at a time and place of their convenience. With the range of choices available through omnichannel partners and the ease of same-day delivery through apps, the customers have little reason to look elsewhere. Although, it’s a work in progress, the early results indicate that this could very well be the future for tapping the potential that online grocery market holds in India.

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.