Thursday 9 April 2015

After Amazon's Kirana Now, Flipkart to enter online grocery market

In tandem with the recent focus of online retailers on the difficult but lucrative sector of grocery e-tailing, e-commerce major Flipkart is also now planning to sell groceries from the second half of this year. 

Flipkart reportedly will launch the service as an in-house offering rather than through an acquisition. "We already have the technology, warehousing and the brand, so most likely we will do this in-house in the second half of this year," an unnamed source was quoted as saying.

Grocery – given the perishable nature of some products and logistics bottlenecks – is not an in-favour category with Indian e-tailers so far due to high capex requirements. However, in recent months, several companies -- large and small -- have launched e-grocery start-ups, indicating that e-commerce businesses clearly foresee some benefits in the segment. 

By launching the online grocery retail format, Flipkart will be following in the steps of rivals Amazon and Snapdeal, which have a head start in the segment. Recently, Amazon India said it is working to take neighbourhood kirana stores online, through an express delivery platform in partnership with mom-and-pop stores, calling it Kirana Now. The company is currently running a pilot programme in Bengaluru.

While Amazon already has a robust gourmet food section on its India portal, Snapdeal is believed to be entering the food and grocery segment shortly. 

At present, several national and regional formats, including Bigbasket, Localbanya, Godrej Nature's Basket,, aramshop and, among others, are the few visible specialist online grocery retailers. The move by e-commerce giants will put them in direct competition with these specialist portals. 

The number of online food and grocery retail outlets rose to 44 in 2014 from just 14 in 2013 on the back of growing Internet users in the country, according to a USDA report.

Experts are of the view that the Indian online grocery market is set to hit 10 billion USD by 2020, and 50 per cent of that is set to be centred around Mumbai, Bengaluru, Pune, Hyderabad, Chennai, NCR-Delhi and Kolkata, given that these cities account for nearly 60 per cent of the total internet penetration in the country. 

At present, Flipkart offers over 80 categories of products through sellers on its marketplace, with fashion being the largest product line. The company reportedly sold gross merchandise worth $3 billion last year and aims at closing this year with $8 billion in sales.

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