Online grocery stores take offline route, limit service, to push growth trajectory

The online grocery industry has a good scope in India. However, the margins are extremely low, forcing many to close. In the light of this paradox, smarter companies are choosing to limit their operations and wait for growth before they expand.

Grofers trying to capture three metros

One of India’s top two grocery leaders Grofers is planning to limit its operations to Delhi NCR, Bangalore and Mumbai. CEO Albinder Dhindsa had said in July that the company was planning to break even before it targeted growth.

Dhindsa said on the company’s latest plan,

“We are looking at an aggressive growth in top three cities which includes our home market of Delhi-NCR, Mumbai and Bengaluru, our third largest market. In Mumbai, we are seeing good traction in customer orders and want to achieve 12,000 orders per day. In Bengaluru, we are a couple of months away from expanding our operations in a big way,” he continued, “We want to set up supply chain for high quality fruits and vegetables in Bengaluru, which will be ready by end of May. Our aim is to achieve an order size of 10,000 per day.”

‘We prefer southern India’, says Godrej

Godrej’s gourmet food venture Nature’s Basket echoes Grofers’ faith in the southern market. CEO Avani Davda says that south and west are their fastest growing markets with ‘highest potential for penetration and growth’. Nature’s Basket will be introducing physical stores in south and west of India. However, the online stores will function across the country. Davda says about the combination growth plan,

“Convenience is absolutely imperative, and between these two channels (online and offline), which are now integrated, it accounts for 22% of our business.”

The Executive Director and Chief Brand Officer of Godrej Industries Tanya Dubash announced that it would be difficult to speak about the company’s plans for Nature’s Basket currently due to the business reorganization of the latter. Dubash says the company will be abel to give a clear picture on Nature’s Basket by the end of the year.

However, experts are skeptical about the company’s ambitions. An analyst said citing anonymity,

“Nature’s Basket is probably still trying to figure out their model, because the space they are in – gourmet food and beverages – is a concept that is yet to be completely picked up.”

Financial viability

Davda is optimistic about Nature’s Basket’s ability to bring in the money,

“Revenue has been growing at upwards of 25%. The like-to-like store comparative growth is at 21%. The company will maintain a similar growth trajectory to end the year with revenues of approximately Rs350 crore this financial year.”

Sustainable growth is an important factor for everyone. Grocery is a tough sector, but with proper planning the companies can establish themselves with time.