The already hot online grocery market is set to become even hotter if one goes by the aggressive posturing by Flipkart with plans to launch the grocery business in five major cities by July.
The company already has a running grocery line in Bengaluru and will now add Hyderabad, Delhi-NCR, Mumbai, Chennai and Pune. Flipkart claims to have done some research on the consumer behaviour and will model its business on those lines to take maximum advantage of the still largely unexplored category. One typical statistic cited is that more than 60% of the grocery ordering public do it in the first week of the month. This large chunk of the consumer base is what Flipkart wants to target first.
Groceries will come first and then the perishables like fruits and vegetables will be added. Once the Walmart takeover becomes formal and the US giant moves in, one can expect another round of aggressive moves and activities surrounding the online grocery segment, since Walmart has a very rich experience which it can replicate here.
Flipkart is also aware that price discount is the name of the game and that is what most players, including the early birds in this space, BigBasket and Grofers, have adopted. These discounts could be linked to the peak periods within the month when the grocery orders are received in maximum numbers. It could range anywhere between 25% and 50%.
The challenge for Flipkart will however remain the same as it is for the others in the Indian context; how to convert the buying habits of customers. Online retailers can keep poaching customers from each other by offering better discounts or improved services. But, getting more people to switch to ordering grocery and fresh goods from them in preference to their established practice of buying from the local kirana stores, could take some time and a lot of effort.
Flipkart has tried to use the large amounts it raised in funding to create the infrastructure to handle the stocking and delivery of these items. The first operational warehouse in Whitefield, Bengaluru, is capable of making 3,000 deliveries a day. Having kicked off the grocery segment for Bengaluru in November last, it is reported that Flipkart receives about 2,000 orders a day during those peak days and around 200-300 on the rest of the days of the month. Other warehouses are also being readied to expand the service. One has to keep in mind that these orders are typically high-volume-low-value ones and precise work on logistics, can save them some money.
The others in the business, like Amazon, BigBasket and Grofers, are also having their own plans to expand their activities using the online order and delivery model, pertaining to grocery and fresh produce. And each one of them has allocated funds for this purpose as well. Amazon has set aside $500 million for the Amazon Now business which will handle this division. BigBasket has joined hands with Paytm Mall (the common investor, Alibaba acting as the catalyst) and has received $220 million in funding. Grofers has SoftBank from Japan to tap into and has already got a corpus of $60 million.
With Flipkart set to join the race, the Indian consumer should reap the ultimate benefit.