What Does Amazon & Flipkart's Entry Mean For the Indian E-grocery Segment?
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The growth trajectory of the Indian grocery sector is a fast-rising upward graph. According to reports the online grocery market is projected to grow at a CAGR of 55% during 2016 – 2021. Meanwhile a study done by CRISIL said that the online retail market is expected to reach $1.8 trillion by 2020 and leading the segment would be e-grocery.
There’s a lot that has been said about the sector with also failures seen by many companies which couldn’t live up to the demands and the costs of operating in the e-grocery market. But now things are changing. Bigwigs like Amazon and Flipkart are entering the grocery market and are setting new trends.
Amazon and Flipkart’s Entry Into Grocery Market
With Indians changing the way they shop from kirana stores to the easy convenience of online, it wasn’t long before the bigwigs would take notice. Recently, Amazon has announced its foray into the grocery market in India with Amazon Pantry and now Flipkart too is out with Supermart. The entry of these companies is also marked as direct competition to existing players like Grofers and BigBasket.
While according to reports Amazon has already expanded its presence to 21 cities, Flipkart is currently present in Bengaluru only.
How Will it Change Things?
It’s going to be an interesting phase in the Indian e-grocery segment, one to definitely watch out for. With bigger players in the segment backed with heavy funding, they are going to play the discount card which could be a difficult game for smaller players in the segment. Sateesh Nukala, CEO & Co-Founder, BigHaat said that is going to be a very competitive space with big players entering into this space and going to wage the discount war as they did with horizontal space. But there is one upside. “Consumer will be ultimate winners with more choices, better prices & services,” he said.
However, when you move from the Tier I cities to the Tier II and III cities, the dependence is still on the kiraana stores. For years now, families have stores that they have been going to for their monthly groceries and in these smaller cities, it will definitely take longer to get hold of the audience.
Rajneesh Kumar Chadha, a digital transformation expert said that with the advent of future and technology, the ball is in the corporate’s court and all they need to do is take it to an e-marketplace. But that’s not going to very easily change the way we shop. “The old stores will continue to exist but the share of the pie is now going to be distributed,” said Chadha.
Will This Lead to Consolidation?
What it all boils down to is giving the right customer service. Chadha rightly points out that Indians have peculiar food habits and want quality products and that is what e-retailers have to match up to.
Nukala meanwhile believes that margins are vapor thin in this space and with more competition it is even going to be tougher. “Therefore bringing private labels and building the trust with the customers on those private labels is the key to sustain in this space,” he said.
However, this could also mean that the smaller players with their established network could soon join forces with the bigger players. Nukala too believes that bigger players will acquire the smaller ones to make faster footprints in this space. “This may also help brick and mortar retail stores as well as I strongly believe they would be part of the grocery online market ecosystem given the nature of grocery business,” he said.