Thursday, Oct 23, 2014

Buy & large, online grocers a sellout with consumers

Bangalore | Posted: May 25, 2014 1:18 am

By Sayan Chakraborty

For the urban Indian saddled with time constraints, online supermarkets are turning out to be the new messengers of effective e-commerce. What makes them click among many consumers, especially office-going couples in metros and big cities, is the convenience they offer in terms of hassle-free shopping and savings on time and money commuting to malls and kirana stores.

The past two years alone have witnessed the emergence of a number of such websites looking to grab a spot in the consumer’s daily basket. Players such as LocalBanya, Greencart, BigBasket, EkStop, ZopNow, Eazygrocery and Onekirana promise to make grocery shopping quick and convenient for e-consumers, and, in turn, are recording a month-on-month topline growth in the range of 15-30% as per estimates. Customer retention, too, stands at an encouraging 70-80%.

It’s no wonder then that investor interest in the sector has remained intact. While Accel Partners, Qualcomm Ventures and Unilazer Ventures have already infused considerable funds into the segment, their initial success has prompted the businesses to seek more funds. LocalBanya, for instance, is on the verge of raising another round of funds to scale up operations; BigBasket, too, is in talks with investors to raise an additional R250-300 crore.

While consumers are offered the luxury of choosing from an assortment of over 10,000 products — anything from staples and imported food products to kitchenware — delivered at their doorstep, the online supermarkets see value in remaining online, despite a meagre net margin of 8-15%. This is because of the money saved on rent for physical stores and multiple warehouses, which otherwise gobbles up over one-tenth of the sales turnover.

While these businesses are weaving success stories, their biggest challenge remains in stitching together an efficient procurement and distribution network and ensuring time-bound delivery. Since the businesses thrive on ‘enhancing customers’ shopping experiences’ more than anything else, this becomes all the more important. Every store works with about 20-300 suppliers, depending on their offerings.

“We are looking at a gradual scale-up. We are cracking the logistics problem and that is where the money is going. Last-mile delivery becomes complicated, as you are dealing with perishables,” says Amit Naik, co-founder of Mumbai-based online grocery store LocalBanya.com.

Launched in June 2012, LocalBanya clocks over 500 daily transactions, with an average ticket size of R1,400. The company has recorded a month-on-month topline growth of 30% and plans to launch private label products in the staples’ segment soon.

Most of these online stores maintain an inventory of non-perishable and fast-moving wares, while perishable goods are mostly just-in-time purchases. Consequently, businesses are not required to invest too much in warehouses. “We require one or two warehouses in a city and not necessarily in commercial areas. The cost of such properties is lower. We invest around

R6-7 crore in a warehouse,” says Vipul Parekh, co-founder of Bangalore-based BigBasket.com.

The online store, which expanded its operations to Hyderabad and Mumbai in December 2012, delivers around 80,000 orders a month and has recorded a 15% month-on-month growth. Besides, it plans to reach 10 cities in the continued…

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