Brick & mortar retail outfits go online to sell food and groceries

Despite facing profitability challenges in their food and grocery business, brick-and-mortar retailers are now going further, by stepping into the e-commerce space. These companies, including Reliance Retail and the Future Group, are targeting online sales on the strength of their physical stores, technology and sourcing capabilities.

While Reliance Retail has been running an e-commerce pilot among its employees, the Future Group is ready to go online with its convenience-store formats, such as KB’s Fair Price, and the soon-to-be-acquired Nilgiris chain of supermarkets.

Food and grocery is a low-margin, low-investment business. But it is the largest category in the consumption basket, accounting for about 60 per cent of consumer spending. Making money from online sales will be a long haul, but these companies do not want to let go of an opportunity in a segment that is fast being occupied by a host of food and grocery e-commerce outfits, including Big Basket, Localbanya and Ek Stop.

They may be lacking funding from PE players, but some offline companies, like the Future Group, are investing in technology to give their e-commerce business a fillip. And like the existing online sellers, they are willing to absorb initial losses.

“We will use technology to … provide seamless convergence of our digital and physical formats. There is a cost but we cannot ignore the medium and are putting up large warehouses across the country,’’ said Kishore Biyani, CEO, Future Group.

Elaborating further, Biyani said: “There will also be cash on delivery for food and grocery sales. Besides we will also set up kiosks outside convenience stores, manned by franchises who will deliver at home. Or it can be ordered online and then collected from the stores.’’

On its part, Reliance Retail has been running an e-commerce pilot for a year at its corporate office in Navi Mumbai for its 15,000-odd employees. Food and grocery already contributes 56 per cent of its ₹15,000 crore sales turnover and its first e-commerce vertical is likely to commence in the same category.

The company’s value formats, such as Reliance Fresh, Reliance Mart and Reliance Super, across 700outlets, will serve as distribution centres for the e-commerce venture later this year. “Unlike the pure-play e-commerce players, we have the advantage of our existing brick-and-mortar stores and a robust sourcing model from farmers and APMC markets,’’ said a company official.

Fresh fruit and vegetable retailer, Freskins, started by ex-Reliance retail and Future Group employees, is also planning online deliveries.

Anjaney Bhutada, CEO of the new entrant, said: “Fresh food and grocery … has high returns as long as wastage is under control. We already have 15 stores in Mumbai and plan to start e-commerce next month with our hybrid model.’’