Huge Growth in Online Grocery Expected as Sales Jump by Over 100%



Vigorous growth in the online grocery business in India is expected in a post COVID world. Currently valued at USD 1.2 billion, the market will expand rapidly, as wider changes in consumer behaviour are visible.
Image Source: DNA India

Massive growth in online grocery business in India is expected in a post COVID world, where physical interactions will be curtailed & self-imposed social distancing will be largely maintained. Growth in online grocery business in India was already visible on the back of the rise in e-commerce adoption, higher smartphone penetration, changing consumer preference, young demographics, & institutional capital inflow. The current COVID crisis has further injected fresh impetus into the industry.

Currently, there are emergent big players such as Grofers & Big Basket alongside other e-commerce giants such as Flip Kart & Amazon operational in the space. Reliance through its digital platform Jio has also recently ventured into the lucrative market of online grocery in India. Besides specialist players such as Licious, Milk Basket, Doodhwala, Country Delight, etc. are gradually cementing their position. Global tech giants like Google & Facebook has bought stake in Reliance Jio, which further underscores the potential growth in online grocery business in India.

Potential for Huge Growth in Online Grocery Business

Online grocery has tremendous potential to take off in India underpinned by a host of factors such as demographic divided, evolving consumer preferences, and wider proliferation & adoption of technology. The lockdown following the COVID outbreak has also brought in a buying boost.  

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 Currently valued at around USD 1.2 billion, it holds a minuscule share (~ 0.2%) when compared to the total size of Indian grocery markets, which is estimated to be over USD 500 billion. At the onset of the year, there were roughly 2 million Indians who used to buy groceries online. Nevertheless, the mandatory lockdown resulted in a steep rise in online grocery sales forcing major players such as Grofers & Big Basket to further hire.

The momentous hike seen during the lockdown will gradually ease-out, but will create an anchor for future growth in online grocery in the country.

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A Top Heavy Market

Currently, it is top-heavy, as more than 70% of the market is dominated by Grofers (Backed by Softbank) & Big Basket (backed by Alibaba). While Groffers is leading the market in the Delhi NCR, Big Basket dominates southern cities such as Bangalore & Hyderabad. However, as the market has tremendous potential to grow, numerous players are entering.

Big e-commerce giants such as Amazon & Flipkart have entered the space, lured by the expected growth in online grocery business in the country. Food delivery enterprise Swiggy has also entered the marketplace of online grocery & medicines. Offline supermarket chains such as Godrej Nature Fresh & Spencers are also ramping up their online delivery channels. Besides, the €œfresh category€ that includes milk & meat is also seeing densification of competition with numerous players such as Licious, Milk Basket, Country Delight, & many more.

India's richest man Mukesh Ambani owned Reliance has also recently ventured into the space to capitalize on the steep rise in demand for online grocery items. Titled as JioMart, it has partnered with Whatsapp, owned by Facebook, to receive orders. Earlier Facebook has gained around 10% stake in Reliance's Digital platform Jio, following an investment of around USD 5.7 billion. Google has also made huge investments in the venture.

Besides larger players are looking confident on the market. Players such as Housejoy mart, Storse, Near.store witnessed around three to five-fold growth in grocery demand.

Future Prospect

Indian retail is currently estimated to be around USD 1 trillion. Out of which only 12% of the market is organized. However, as the customer metrics in India is aggressively growing & evolving, organized retail will grow fast with a sizable part of the distribution facilitated through online channels.

This also implies there is a huge space for growth in online grocery business in the country. This is one of the reasons, why large e-commerce brands like Flipkart and Amazon are venturing into the grocery segment. Similarly, Reliance has also stepped in to leverage the rapid growth of e-commerce in the country.

However, as the industry will be marked by intensifying competition, the success would be pinned on a host of factors ranging from having the financial muscles to the right distribution channel (warehousing/demand aggregation/ partnership) to the access to robust consumer behaviour analytics.

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