The November demonetisation has given a shot in the arm to the online grocery industry. The cash problem is directing consumers to online stores where they can pay with cards or mobile wallets. The industry is doing fairly well, with leading players BigBasket and Grofers seeing a surge in their fortunes. They admit that the inventory model is helping them as against the marketplace model.
“Over the past three years, we have created an ecosystem of sophisticated suppliers and best-in-class technology to provide 25,000 products, including fresh fruits, vegetables, staples along with general merchandise, to our customers, which should easily get us to our target.”
He also plans to introduce common household products such as coffee makers and bed sheets to the arsenal. ZopNow is also working towards increasing the average order from Rs. 1,100 to Rs. 1,500, and the daily transactions from 5,000 to one lakh. Pandey says,
“We introduced a new shipping policy in October where we upped minimum order for free shipping from ₹300 to ₹750, which has increased average order value by 20 per cent in the past two months.”
Average order value still low
While the number of customers has gone up, the average order still remains at Rs. 550, notes Kantar IMRB, a market research company.
“While reach and sales went up 40 per cent from September to November, the per-ticket size remained the same as new customers were not exactly spending more on e-groceries. Besides, availability of some of the items was also impacted due to supply chain and vendor issues,” explains Akhil Almeida, head of Digital Practice, Kantar IMRB, “hyper locals have been the biggest beneficiaries, having taken advantage of shorter delivery time and availability of stocked goods with local outlets.”
Grocery firms are also putting their hopes on private brands to push up their profit margins. The industry’s challenges so far include competition from biggies like Amazon and Flipkart, low order size, and reach. On the bright side, the government approved 100% FDI in the grocery industry, giving some reason to cheer. Investors are also active, with Dragoneer, Qualcomm (ZopNow) and Softbank (Grofers) putting their money and trust in the companies. Perhaps this will lead to a good growth.