Size and structure of India’s online grocery space
Published on: Mar 2019
India’s online grocery space has gone through a significant evolution in last few years- from explosive growth and funding in CY15 to growth challenges and funding winter in CY16 and then kickstart and accelerated growth 2018 onwards. In this stop-start journey, many new business models have evolved, and many themes have been proven and disproven.
Inspite of all these disruptions and changes, one thing that did not change was the massive potential for online grocery- as indicated by India’s USD 500+ Bn grocery market out of which a mere 0.2% is online (~USD 1.2 bn overall and ~USD 1 Bn considering only hyperlocal grocery). Given this massive potential, we expect the online market to continue chugging along at 50% growth rate for the next few years, which will be served by various models, including category specialists and narrow and wide supermarkets.
Some key observations from the above chart:
- Market is very top heavy, challenging for new entrants – The likes of Grofers and Bigbasket have an outsize share of the market, while the omnichannel players and smaller verticals have a long way to go to gain scale. This also points to the challenges like Swiggy may face in making a dent in the market
- Meat players have grown rapidly but their share remains small. Horizontals are trying out multiple players (e.g. Amazon Pantry and Now) but their scale remains small.
How are players positioned in online grocery in terms of their front and back-end?
As India’s online grocery space has growth exponentially recently, it has become harder to keep track of the various players in the space. As a result, we decided to publish who are the players and how are they positioned. The key success metrics for any grocery player are typically selection width, delivery speed and quality. To map these three metrics for various players, we have taken the below proxies –
- # Categories sold for selection width
- % Scheduled vs Express Orders for delivery speed
- % Inventory model share for quality
From the chart above, we get a clearer idea of the positioning of the players in India’s online grocery space. Below are some of the salient observations from this chart:
- Many players have pivoted to a hybrid of scheduled and express orders-Likely to enable a better balance of width and speed. Players like Grofers are a clear example of this pivot, having shifted to this hybrid model from being largely 100% express in its original avatar in 2015
- Differentiation of the emerging vertical players is unclear – Players like Satvacart operate in the medium selection, express delivery market but the clear differentiation vs the horizontals and larger verticals is missing
Considering Swiggy’s entry into the space, it will be interesting to see how they carve out a large opportunity for themselves given the above market structure. Swiggy certainly has the right consumer satisfaction to bank on for building their business, as our last month’s report and this week’s featured story on the FLI (Foodtech Leadership Index) shows.
Over two-third consumers across platforms tend to buy online grocery once or twice a month
Published on: Jun 2018
The online grocery market is picking up fast. But over two-third of the online grocery consumers use these services just once or twice a month. This means there a huge headroom of online grocery growth within the current consumer base. The players need to focus more on the ‘Fresh’ category as it is an anchor category for the consumers and it is the only category which will increase the frequency of usage.