The Rise of the Online Grocery Market in India
India’s online grocery delivery market is expected to see a 76% year-on-year increase in sales in 2020, reaching $3bn in value. As COVID-19 lockdown and quarantine measures force Indian consumers to change their buying habits, platforms like BigBasket, Amazon, JioMart and Grofers have benefited from this situation. While these companies have dabbled with food and grocery delivery earlier, they have lately seen unprecedented growth in grocery deliveries thanks to the pandemic.
Indian buyers have traditionally shopped from neighbourhood family-run kirana stores, which aren’t supermarkets but never let their customers feel the absence of one. These stores offer a variety of fresh produce and provisions, free delivery to customers’ homes, informal credit and an understanding of customer needs at a personal level.
Such stores make up about 90% of India’s grocery retail sales. Customers are now increasingly expecting a similar experience with a mobile app without stepping out of their homes.
By 2023, the online grocery retail market is expected to touch over $10 bn in sales, translating to 1.2% of all retail sales, up from 0.2% from 2019 as per consulting firm Redseer. As the demand for online grocery delivery rises, competition has picked up. It is now a war on time – those offering faster delivery and better prices are expected to retain more users.
The Demand for an Online Grocery Market
What sets grocery deliveries apart as an e-commerce subdivision is that Indian consumers took years to relinquish control over purchasing the vegetables and fruits they bought. As factors like increased internet penetration, improved digital literacy and reduced product cost began influencing buyers, online delivery services began to settle in as the new normal. The COVID-19 pandemic nudged buyers towards choosing online avenues for staples and groceries as well.
Within this fairly new yet competitive landscape of grocery e-deliveries, we see a bifurcation based on from where the products are sourced.
- The first type is an inventory-based model where orders are processed and dispatched from their respective warehouses after a customer places an order.
- The second variant is the hyperlocal model, comprising last-mile delivery from local stores, akin to services offered by Swiggy Stores and Dunzo. This model is dependant solely on existing retail outlets, so processing and dispatching is far more simplified.
- Some digital platforms offer a mixed model, combining aspects of the inventory and hyperlocal formats.
It is the hyperlocal delivery format, however, that buyers are increasingly warming up to since they can choose specific shops to order their groceries from.