September 28 2020: The Indian online grocery market is expected to be worth over US$ 18 billion by 2024, up from around $ 3 billion today, finds a market survey by analysts at RedSeer.
During COVID, consumers have shown increased prospensity to order online. A lot of this behaviour is likely to stick. Therefore, a lot of players, even traditional ones, figure that hyperlocal is the way to go.
Among the most significant among such players is Reliance. With its latest fundraise from strategic partners like Facebook, its own physical assets pan-India and acquisition of Future Retail, Jio’s intentions to expand and capture the eGrocery space is clear. Not to be left behind, large online players like Flipkart, Amazon, Swiggy, Zomato, Dunzo.
The report titled Online Grocery: What Brands Need To Know?, prepared for , BigBasket Brand Intelligence says grocery has traditionally has been a primarily unorganized market, wherein more than 90% of the market is driven by traditional ‘kirana stores. However, in the past decade or so, organized brick & mortar and online channels have gained prominence. Online grocery has been boosted by covid-19 related tailwinds, with the GMV run-rates of major players growing by 70%+ during the period. This has led to an increased focus on the sector by large conglomerates as well as mature online players. The report covers categories such as Snacks & Packaged Foods, Beverages, Personal Care and Home Utilities, we present the quarterly growth in sales in the past 5 quarters with various subcategory splits.
Food & Grocery Market Overview
During Covid, while there were some challenges in the initial days of the lockdown, thesegment has grown significantly. Most notably, fresh vegetables and fruits have seen 144% growth, while FMCG products grew 150%. While a lot of this growth will normalize to some extent as the COVID situation subsides, a significant portion of new users will persist and drive growth.
With the increasing demand and competition, it becomes imperative for brands to stay ahead by making data-driven decisions. In order to equip the brands to win in the online space .
There is a clear trend of grocery moving towards organised channels – organised brick & mortar and online. While Covid has driven adoption for online, there are systemic factors that lead to the increasing prominence of organised B&M.
One of the more significant factors is the FDI guideline allowing 100% FDI in food and retail items produced, processed or manufactured in India. This in turn, has brought in capital into the sector, and players have started expanding their presence into smaller towns.
These, among other factors, have led the growth of organised B&M and will continue to do so.
Evolution of Online Grocery Market
eGrocery had started in the early 2010s but the models were still evolving. Most players workedon an on-demand model (fulfilling orders through local retailers) and provided high discounts.But this model soon gave way to the warehouse model, with some players like PepperTap exiting.
The last 5 years have witnessed significant interest in the space with a lot of large players,
including eCommerce horizontals entering this space. Another innovation in this space was the overnight delivery model, introduced by players like Milkbasket.
Covid-19 has provided significant tailwinds to the sector with a lot of users ordering online. It isexpected that a significant proportion of them will stick post the pandemic as well. This has led to interest from large players like the Jio platforms, which solidifies the growth prospects of thechannel.
During COVID, consumers have shown increased prospensity to order online. A lot of this
behaviour is likely to stick. Therefore, a lot of players, even traditional ones, figure that hyperlocal is the way to go.
Entry of Reliance
Among the most significant among such players is Reliance. With its latest fundraise from
strategic partners like Facebook, its own physical assets pan-India and acquisition of Future Retail, Jio’s intentions to expand and capture the eGrocery space is clear. Not to be left behind, large online players like Flipkart, Amazon, Swiggy, Zomato, Dunzo etc. have all offered eGrocery services.
With supply ramping up in time to match the surging demand, the online grocery delivery market in India is on its way of reaching to the tune of $18.2 billion in 2024, a six-fold increase from an estimated $3 billion in 2020.
The report highlights that the online grocery market in India will account for 2.3% of the overall food & grocery market, which is projected to scale a staggering size of $790 billion in 2024.
The landscape of the food and beverage industry in India is still heavily skewed in favour of the roadside Kirana stores and local grocery shops, which is enamoured by an efficient and time tested supply chain. If the reports are anything to go by, prominent players like BigBasket, Grofers, Reliance Mart and others are set to make huge inroads in the sector.
Some of the key findings which provide a comprehensive measure of the online grocery market in India:
The gross merchandise volume (GMV) on e-grocer platforms increased by 72%, from $179.9 million in January to $311 million in June this year.
Fresh food categories were the cause of the exponential jump of 144% between June and January.
Estimates suggest the GMV rising to $3 billion by the end of 2020 itself.
Demand for comfort food like noodles and cookies, immunity boosters like lemon and hygiene products like sanitizers has soared.
The sales of Snacks and branded foods jumped to 75% in the June quarter, as compared to 5% pre Covid19.
Biscuits and cookies were the largest sub-category and grew the most in Q2.
Beverages grew by 2% quarterly pre-Covid19, growth jumped to 50 per cent in Q2.
Personal Care grew by 5% quarterly pre-Covid19 but jumped to 24 per cent in Q2 due to Covid19.
Covid-19 has pushed the fast forward button for the sector and online commerce, and e-grocery have reaped the most out of it. Digitisation has been the key to driving such growth, while on the other hand, it augurs a toll on the traditional retailers, with them seeing bleak increments at 5%.
With 100% FDI pumping huge capital in the food processing sector, the online food and grocery market in India has seen new heightened levels of activity, with Amazon, Flipkart, Milkbasket etc. joining in the slew of newer recruits. Undoubtedly, such developments have given a massive boost to online and retail food and beverages business. Coupled with other factors around investment in the supply chain and expansion into smaller cities, the signs are all promising.
Reliance is leaving no stone unturned to expand and capture the eGrocery market in India. RIL’s retail arm Reliance Retail has raised Rs 13,050 crore in September besides acquiring the retail giant Future Group – one of the largest retail acquisitions in India. The company recently launched JioMart app top tap the growing online grocery market in India and within a short span of 3 months the app clocked 5 million downloads, thanks to the pandemic.
Not to be left behind, large online players like Zomato and Swiggy have also dabbled their fair bit in the sector during the pandemic, all with an eye on making future moves for eGrocery services.
Changing consumer consumption preference, with an increasing affinity towards online services because of Covid19, has served these services well. Specifically, consumer segments who find value in online grocery include working couples who use these services to save time and for comfort, bachelors living in shared accommodation, working urban mothers who have shown a strong preference for online shopping because of saving time, and Tier II consumers who have found varied choices.
With the panic and the apprehension, calls of maintaining social distancing wherever we set foot, it looks likely that the online grocery market will be one exception which will continue to make hay even beyond this time of crisis. Stay tuned to this space for more updates.