Though big retailers such as Reliance Retail and Future Group have announced plans to go online in the food and grocery space, existing e-commerce grocery players are not very much concerned about the imminent competition.
The top three players in the online grocery space— Local Banya, Ek Stop and Big Basket—are even considering tying up with some of the retail biggies.
“It’s going to take a long time for retailers to get successful in the online space,” says Sumat Chopra, CEO and Co-founder, Ek Stop. “While our sourcing strategies may overlap with the big retailers, the backend operations are totally different. That’s where online retailers have the expertise when it comes to reaching out to Tier 2 cities.’’
Chopra adds a tie-up with big retailers was not ruled out entirely, and that he did not view them as an imminent competition. “We are talking to a couple of big retailers, in terms of having some form of collaboration, as offline retail is still 90 per cent of the retail market.”.
Another grocery portal, Local Banya, is also not threatened by the entry of the retailers into its turf. “There is ample demand for food and grocery items. We have the capacity to take orders and deliver in the turnaround time, which big retailers may not be able to do as they face challenges in terms of logistics and manpower,” says Amit Naik, Co-founder, Local Banya. The firm would be open to partnering with a big retailer only if it helped in giving a better value proposition to consumers. “We could partner a big retailer only if there are benefits of pricing and logistics, leading to a better value proposition to the consumers,” he adds.
Pricing is also set to play a crucial role for online retailers. “When onion prices shot up, we had bought enough stocks from the APMC (agriculture market produce committee) market to offer the right prices. Today, we are making sure we keep fluctuation in prices to a minimum, and make two trips a day to the wholesale market,” says Naik.
Different modelsThe business model of online and offline players is very different. While online players are mostly aggregators, offline players use the buy and sell model, and would extend the same to their online venture.
“The market for food and grocery is huge. It will take a very long time before e-tailers in the food and grocery space actually start competing. Food and grocery may be 70 per cent of retail, but in modern trade, it’s currently only at 3 per cent,” says Ankur Bisen, Senior Vice-President, Technopak, a research organisation.
Incidentally, sales in the food and grocery online segment have not been very successful in other markets. Even retail giants such as Tesco and Amazon have been struggling, as wafer thin margins and supply chain issues have bogged down the segment.