The Indian online grocery space is seeing massive traction. After Amazon looking to buy out BigBasket to take a larger pie of this space, Indiaâ€™s largest business conglomerate Tata Group is eyeing this space too.
According to a report in the Economic Times, the Tata Group is buying out GrocerMax to enter the online grocery market. It will be buying out the management team and technology infrastructure of Gurgaon-based online grocer.
Post the acquisition, GrocerMax will shut down operations in Gurgaon and the new team will help set up the online platform for Tata Groupâ€™s retail arm Trent Hypermarket. Trent is an equal joint venture between Tata and British retailer Tesco. This will rival Amazon and Bigbasket in the nascent yet rapidly growing segment.
GrocerMax will shut down its business in Gurgaon because the Tata Group's grocery business is not present in North India.
GrocerMax was founded by Gaurav Juneja and K Radhakrishnan about two years ago. It is a hybrid platform for grocery that keeps only 10% inventory, sourcing the rest from supermarkets and provisional stores in real time.
The Tata group runs three formats under the Star bannerâ€”Dailies, Market and Hyperâ€”and has around 42 stores.
ET reports that Tescoâ€™s online business earns roughly Â£3 billion in sales and is one of the rare such ventures that's profitable. However, the Indian business is minuscule. But the opportunity offered by the $500-billion retail market is attractive for any player, foreign or local.
Food and grocery account for almost 50% of the overall retail basket in India, although general merchandise, personal and home products fill up a bulk of the retailer's profit pool.
Experts feel omnichannel retail offers consumers more ways to shop and interact with a retailer. Having an established physical retail formats and expanding a digital presence would certainly help the retailer have the best of both worlds.
The online grocery space in India has seen a minor shakeout over the past year. Some players like LocalBanya and Pepper-Tap failed to survive the market. Grofers too, shut in multiple cities.
Offline players such as Reliance Fresh and Godrej Nature's Basket have launched omnichannel initiatives, though the scale may not be too big right now.
ET reports that online food and grocery penetration is still less than 1%, suggesting the infancy of the category and its potential opportunity.
Morgan Stanley expects the food and grocery segment to become the fastest-growing segment, expanding at 141% CAGR by 2020 and contributing $15 billion, or 12.5%, of overall retail sales.