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Online Groceries: Welcome The New Leader of e-Commerce In India!

 

Online Grocery market will increase from Rs. 14,000 crores ($2 billion) today to Rs. 1.4 lakh crores ($20 billion) in just 5 years! Groceries will lead the aggressive e-commerce growth in India for the next 5 to 10 years.

Back in 2006, when I used to live in the United Kingdom, I was super happy when the two supermarket giants, Tesco and Sainsburys started to take online orders and do door delivery. I was never a fan of going to the supermarket, drag the cart along to pick my groceries, stand in long queues to checkout and stuff. I always wondered if this would ever find ground in India with such a strong presence of neighborhood Kirana stores and the fact that still, only a minor segment of the overall groceries market is branded or organized.

 

Online Groceries and Indian Market

Back in India during the first half of this decade, I was pleasantly surprised at the rise of online grocery marketplaces. It only made sense with all the fast-changing lifestyles, busy professional careers, nuclear families, affinity to convenience food products, increasing levels of disposal income levels, etc.,

The two top players Big Basket and Grofers together occupy 80% of the online grocery market of Rs. 14,000 crore ($2 billion). This number might look big but it is just 0.5% of the total grocery market of Rs. 27 lakh crore ($380 billion) approximately, which itself is 60% of the total retail market of India. Now, just imagine the growth potential of online groceries with increasing digital connectivity and online adoption that is happening holistically in the country!

While the online groceries market has been growing with a Year-on-Year (YoY) growth rate of over 50% for the last 2 years, it is now set to take off like never before in the next 5 years

 

How Corona Virus pandemic is influencing Online Groceries growth story?

One definitive disruption that Corona virus is causing to the traditional supply chain of Fast-Moving Consumer Goods (FMCG), where people are growing uncomfortable going to stores to do their grocery shopping. The shift to online order and direct delivery is being expedited.

The Indian e-commerce growth will now be further expedited and led by groceries and apparel segments. The e-commerce market is expected to be Rs. 7 lakh crores ($99 billion), approximately, by 2024 with a YoY growth rate of 25%. Whereas the Online grocery segment is set to register a YoY growth rate of over 80% until 2024. Thus, the size of the online grocery market will be about Rs. 1.4 lakh crore ($20 billion) by 2024 from Rs. 14,000 crores ($2 billion), today, a tenfold increase in just 5 years! Now, that is one incredible growth story to be realized!


What new opportunities will online adoption bring to product companies?

No more rental fee to be paid to stores
No more big-budget advertising in traditional media
No more middlemen: Connect directly with your customer
 

The overall digital connectivity and expansion of online groceries market will reduce entry barriers to new product companies and democratize the market participation process in a great way. For example, one big barrier that new and small-scale product companies face is the rental fee charged by stores to display their products. Starting from well established and multi-unit supermarket chains to single unit grocery stores in prime locations, almost everyone charges a rental fee on top of hefty margins on the Maximum Retail Price (MRP), sometimes up to 40%-50%.

To market your product to a wider audience and expand geographical reach, companies no longer need to spend a fortune on advertising. Smart Social Media campaigns will give the same level of reach and spread with a fraction of the budget.

Online B2C - Connect directly with your customer! While the e-commerce, in general, and online groceries, in particular, is dominated by marketplace business models, there is a beautiful niche story evolving, where product companies are executing Business-to-Customer (B2C) marketing strategy through online medium. Through a website or mobile application or social media platform, one can directly engage with customers, take orders, and provide doorstep delivery. This is picking pace with those product companies that have a distinct or unique value offering to their customers! Especially, niche food product companies could gain tremendously through online B2C execution.

 

Online B2C: The case for niche food product companies



A company offering food products with unique and/or distinct value proposition, I believe, will gain much greater traction in the fast evolving and expanding online groceries market through the Online B2C execution.

Diet management and balanced meals have been a growing realization over the last 4-5 years, especially among urban working professionals. However, this was mostly focused on weight loss rather than holistic healthcare. The corona virus pandemic has evoked, rather rudely, the need for holistic healthcare through a healthy diet leading to immunity-boosting and healthier living. Thus, the adoption of healthier and functional food products will pick up a tremendous pace.

For example, Dosa, a pancake made with a dough of rice and black gram (a kind of pulses) is a staple breakfast food in the southern part of India. A healthy functional and convenience food alternative to the same will be an instant mix powder made of several pulses and cereals rather than just two. The nutritional values will be fortified, and it aids in holistic healthcare. This is exactly what the Yazas Nutricereals Instant Dosa Mix is, which is made using 10 different pulses and cereals. The whole portfolio of products of Yazas serves as natural and functional healthy convenience food products!

Thus, a healthy and natural food products company could communicate directly to its potential clients in a much more personalized manner and engage directly through the online B2C strategy as part of the overall online groceries’ revolution!

Furthermore, there is a significant change underway as far as a few primary level or raw food products are concerned. Over the last 15-20 years, tea, coffee, and edible oils have all become almost 100% branded products. Now, this change is currently underway for pulses. The pulses market of INR 2 lakh crore ($28 billion) has just 10% of it under branded or organized status. The expansion of the online grocery market will expedite the shift to branded products, significantly. Online customers will intuitively feel comfortable to order a branded product, especially one they are familiar with.

While this could happen with the overall pulses market, there is another interesting development underway as far as its variety mix is concerned. With increasing focus on holistic healthcare and healthy diet management, the affinity for otherwise fringe pulses and cereals such as Finger Millet and Foxtail Millet, to name a few, is increasing fast.

Thus, if a company offering natural, healthy, functional and convenient food products adopts Online B2C strategy and further expands its portfolio to offer high quality branded niche pulses and cereals, its business prospects will increase multi-fold!

 

A bright, promising and rewarding new world awaits groceries and especially niche food products companies that can adapt themselves to the online world.

Without a doubt, Groceries and Online is a match made in heaven, and it is here to stay!!



References:

https://www.livemint.com/industry/retail/india-e-commerce-to-grow-27-reliance-to-capture-half-of-online-grocery-sales-goldman-11595332258387.html

Several other online sources

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