An increasing number of Indians are switching to smartphones with data connections and making online purchases. Thanks to this ever-increasing consumer base, the Indian ecommerce sector has witnessed a steady growth in the recent years. Currently at $53 billion in annual revenue, the country’s ecommerce industry is expected to exceed $100 billion by 2020.
It’s the food and grocery segment that is fueling this growth. According to a recent report by CRISIL (Credit Rating Information Services of India Limited), a rating and research agency, the online grocery business is set to expand at a compound annual growth rate of over 65% between fiscal 2017 & 2020. Generally, basic need related income is relied upon to relatively fourfold to Rs10,000 crores (around $1.5 billion) over these three years.
A startup retailer called Big Basket alongside Grofers, a basic need conveyance firm, and Amazon are driving members in the beginning on the web basic supply showcase in India.
It’s the food and grocery segment that is energizing this development.
High-volume Factor
Ecommerce in India initially focused on electronics and apparel. Millennial drawn to Western clothing brands and electronics readily jumped on the ecommerce bandwagon. Be that as it may, the underlying enthusiasm for these fragments is presently abating.
Groceries, then again, are a high-volume business, however the per-crate estimate is small compared to electronic goods. People will buy, like – processed foods, grains, and cleaning supplies at least monthly if not weekly. Ecommerce businesses are betting that grocery shopping will bring consumers back to their sites on a regular basis.
“If you want to change a person’s shopping style you need to look at where a customer spends the most time. The answer is FMCG (fast-moving consumer goods) & grocery. Customers collaborate and engage on a daily basis in this category.
While Amazon and BigBasket were the first to jump in, Indian ecommerce giant Flipkart unveiled its grocery segment on its home turf, Bengaluru, last year. Kirana11, a startup grocery marketplace (also in Bengaluru) is another competitor. And the current Flipkart and Walmart deal is likely to redraw the online grocery sector map in the coming years.
Thin Margins
Selling groceries online in India is challenging. There is a high rate of repeat orders, but the industry produces narrow profit margins. According to Raj Subramanian, founder of Paisool, another Bengaluru-based grocery startup, it has more to do with the lack of reform in the country’s agricultural sector and corruption-prone agricultural produce market committees.
To battle the thin edges, online retailers need to go higher in the inventory network and purchase rural create in mass. At the end of the day, online stores are making their private names or in-house brands to expand the benefit, particularly for staples, for example, grains, vegetables, dry organic products, sugar, and handled nourishments.
Big Basket has three in-house variants: BB Popular (entry-level products), BB Royal (high-quality products), and BB Royal Organic (high-quality organic products). “On an average, private label margins vary from 25 to 45%, which makes them an important factor for profitability,” Hari Menon, CEO of Big Basket, told The Economic Times. “We are aiming to hit the Rs500-crore ($75 million) mark in March 2019.”
Grofers, on the other hand, offers premium-quality products under the labels G Mother’s Choice, G Happy Day, and G Happy Home. It offers entry-level products under the private labels Have More and Save More. The company plans to enlarge its private label business with the launch of 250 food and non-food products ranging from fruit jams and detergents to kitchen tools and accessories.
“We are focusing on an income of Rs5,000 crores (around $750 million) by 2020 of which Rs3,000 crores (around $450 million) from private marks, that would be 60 percent of our aggregate best line,” said Saurabh Kumar, author of Grofers, in a meeting with The Financial Express. “Today we have more than 700 items inside the Grofers brand of results of which more than 250 items are in the FMCG space. This will increment to more than 1,500 by 2019, wherein we will include another 500 things in the FMCG portfolio spread crosswise over different classes.”