According to a recent report by worldmart.in,
online grocery excluding fresh products shall grow 47% and hit USD 36 billion
globally by 2016, with a high growth in Asian markets.
Globally, grocery
retail chains are doing a great job online, by providing seamless omni-channel
experience to customers with price advantage and convenience. And needless to
say the opportunity is very large in Indian market, also provided grocery
retailers, both online and omni-channel, look for a long term opportunity and
not a short term play.Unlike other ecommerce categories, online grocery stores
require large investments, deeper technology and complex supply chain. Hence it
does not pose a wide startup opportunity. India has still seen an advent of
many online grocers, though largely localized.
Image Courtesy: Tradus
But what makes this category a strong opportunity?
It is easy for everyone to relate with this category. Buying
grocery is like a necessary repetitive task we do over and over again. Buying
almost the same things over and over again, like a step before filling gas at
gas station. Sometimes we experiment with new brands, interesting products,
etc. However a large component of our purchase is what we know we have to buy.
Grocery brands also
enjoy a high degree of brand loyalty. We do not often change the brands we
consume.
Key experience of buying grocery
It is a list based purchase with mostly identified brands, items
and even packaging.
Grocery buying is a clear list. We know what we need, how much
we need, which brand or ‘if not that then that’. It is though an unorganized
list, mostly residing in the brilliant mind of the lady of the house and seldom
finding its way onto a small tiny piece of paper.
It is a repetitive purchase with weekly/monthly cycles
And the list goes on and on for months, only to be impacted by
our growth, both in age and/or in lifestyle (includes the wallet). Rarely we
change a brand or packaging, and for most of the items we never do.
It is boring, tiring and ‘inconvenient’ process
Let us undisputed agree on this point. Be it a kirana shop or a
large format store, grocery buying is a boring process. At least most of my
half of the world would agree totally.
Buying grocery offline is a complete turn off for following
reasons:
§
Large queues at
payment counters with only a few payment counters operating even though there
are several rows of them.
§
Very slow staff,
technical glitches, bar code not matching, wrong discount, and what not. Why
should we be a part of these issues, when we have selected what we want and
just need to pay and fly out.
§
Common shelf outages.
Most of us work in ‘working hours’ and shop for grocery when everyone else is
also shopping for grocery. Hence common, fast moving products and brands do get
shelf out very fast.
§
Dealing with the
attitude of un-friendly ground staff, they seriously look at your like you are
going to eat the chocolate and wouldn’t pay for it. Then may be people do that
too.
§
Most importantly, the
offline grocer decides what and how much they put on shelf, which brand they
keep or not keep, sell or not sell, etc. and for us the moment of discovery
happens right when we reach the aisle. Imaging getting out of this store and going
to the next one.
§
Bring your own Bag
(BYOB) – is a killer. To save the environment, the onus of bringing carry bag
is on us. Or we pay an extra few bucks, every time we buy.
And many other problems like parking, etc are universal.
Why grocery retail is a great online opportunity for consumers
1) We are saved from the big list of issues right above
2) In grocery purchase, little tiny discounts are a good drivers of shift. Online can play with this better and provide wide savings to the consumer.
3) Online can provide a very fast, easy, proactive, and engaging experience of buying online. It can actually be fun!
Searching, browsing, sharing lists, making lists, doing all the maths for tiny little discounts, changing the mix, all can be easy and fun online.
4) Repetitive purchase can be a heaven. One click order of monthly refills, right from his/her mobile which driving home and suddenly catching up with the moment of truth of buying grocery. The dude becomes a superman for the lady of the house.
5) Home Deliveries, no BYOB, no nothing.
6) Cash on Delivery – anyone can pay.
2) In grocery purchase, little tiny discounts are a good drivers of shift. Online can play with this better and provide wide savings to the consumer.
3) Online can provide a very fast, easy, proactive, and engaging experience of buying online. It can actually be fun!
Searching, browsing, sharing lists, making lists, doing all the maths for tiny little discounts, changing the mix, all can be easy and fun online.
4) Repetitive purchase can be a heaven. One click order of monthly refills, right from his/her mobile which driving home and suddenly catching up with the moment of truth of buying grocery. The dude becomes a superman for the lady of the house.
5) Home Deliveries, no BYOB, no nothing.
6) Cash on Delivery – anyone can pay.
and the list goes on.
Why Grocery retail is great opportunity for retailers
1) Happier consumers
2) Technology tells you all about consumers, you can even
predict which household is going to be needing a cardiologist very soon based
on volume of consumption of fatty oils.
3) Making them more happier by understanding their needs,
providing them personalized offers.
4) Controlling shift – changing shelf mix is an important aspect
for profitability of a retailer. This can be done more proactively and easily
using online communication, by displaying aggregated offers, intelligent
product combos (products not always need to be physically tied together)
5) Saving on cost of operation, large real estate rentals,
salaries of unproductive staff.
6) High long term relationship with customer, enhanced loyalty,
with continued purchase. Easy to implement reward system, more convenient for
consumers, no carrying cards, remembering number etc.
7) Lack of retail penetration – one of the strong points for
eCommerce in India is an opportunity for quick penetration.
8) Consumers are eventually going to adopt this medium, hence
the market shall grow bigger, it is important for retailers to be prepared for
same.
Why is online grocery still nascent in India?
For this we need to build on core characteristics on grocery
retail
§
Grocery deals in large
number of products, items, variants, brands, etc
§
Most of these products
have an expiry date. For fresh products the expiry is a few days
§
Above all making
stocking, inventory is a complicated and resource intensive work
§
On the other side,
consumers need the goods at almost same time, day or may be next day
§
Hence the distribution
needs to be closer to the customers, requires high investment, time and
resources
Over all, the business
requires higher investment, requires near customer touch point, and deals in
time sensitive inventory.
As a consequence of
same, the online grocery businesses is an unlike eCommerce model.
§
Businesses have grown
city specific
§
A lot of these
businesses are riding on local grocery retail shop as end point of delivery
§
The deliveries are
done in milk-run cycles schedule within 3-4 slot
§
Delivery
transportation is in high controlled environment of on-line grocers
Above model makes this business less scalable, requires high
patience at start, and needs organic growth for a long period until the player
has cracked following templates
§
How to launch a new
distribution hub
§
How to setup
transportation milk run in new city
§
How to Launch in a new
city
When this template is
ready, executed successful a few times, the on-line grocer is ready to scale.
Indian On-line Grocers
are still in the build up phase, hence the industry poses a significant
opportunity but is still nascent.
Below is a table by Money Control that has aggregated around some of the
different online grocery stores available in India, showing the limited reach
of online grocers.
Why the opportunity is bigger for offline retailers?
As highlighted above,
the online grocery business operates close to local touch points, it is one of
the unique eCommerce opportunity that resonates greatly with offline, both in
terms of growth and maturity.
Hence offline players
have a very strong edge over this business, they just need to think fast and
create online layers over and above their existing retail business.
