Online retailers moving their business offline has been a common trend offlate and the latest to join the bandwagon is the online grocery startup Grofers. The company is converting existing grocery outlets into Grofers branded stores. It has started this with the National Capital Region (NCR) and wants to do it in Bengaluru as well, as per an Economic Times report.
This is in a way an extension of the association Grofers has already developed with the retail outlets since as partner stores they source some inventories and now, with this new arrangement, the Grofers grocery stores will be managing their back-end sourcing, inventories, and offer technology support, on a revenue sharing model.
“The move helps in having bigger purchasing power. Also, it will be a subset of our offline delivery system since we already deal with nearly 6,000 partner stores,” ET quotes Albinder Dhindsa, co-founder of Grofers as saying.
This would mean a much larger volume for ordering etc. giving benefit of economies of scale. The numbers that Grofers is looking at now are 200 stores in all, in the coming months. The company had tried the offline earlier too, but shut them down and concentrated on the online business.
However, the grocery market itself is as big as $500 billion and the turnover being chased by the online retailers is quite small by comparison, say around $30 million.
It is not as if they don’t have competition either. BigBasket is the other big player already entrenched in the space with giants like Amazon, Flipkart and even Swiggy are present and expanding their footprint slowly but steadily.
The key to the grocery business is the private labels as almost all of them have found out. It gives them the leverage in terms of the pricing and profitability.