 "Amazon poised to win big as India launches annual festive shopping spree")
Amazon has set the cat among the pigeons by deciding to get into the already crowded hyperlocal grocery delivery market. Currently cornered by BigBasket, Grofers and Peppertap, this segment is flush with investor money but these companies have been struggling to push into the black.
Amazon has a similar service in the US, called Amazon Fresh, which promises next day or early morning delivery, with special mention of dairy products. A tab labelled groceries exists on Amazon.co.uk as well, where most branded products are sold through a service called Amazon Pantry, a premium service.
With the online grocery market in India valued at $200 million annually, the attraction is natural. Currently, these start-ups generate only 60,000-70,000 orders a day, with an average size of Rs 700. The market, however, sources say, is growing at 30-50 per cent, month-on-month. The online grocery delivery market in the US is valued at $16-20 bn and at $40 bn in China, according to a Morgan Stanley report.
“Groceries are an extension of online shopping. It is a very click-to-buy product. One has to look at this segment from an e-commerce angle, where the input costs have to be low, as the cost of deliveries will stay the same for everyone,” said Shreedhar Prasad, partner e-commerce, KPMG India.
Amazon already has a massive user base and will not need to spend more on customer acquisition. Experts said it would be able to leverage its global learning and standardised practices to find more traction in the market. Amazon’s entry means its competition not only has to fight slim margins and urgent customer needs but also the US-based company’s massive brand.
“Amazon is just another competitor in the market and we had seen it coming,” said Navneet Singh, co-founder and chief executive at Peppertap. Amazon had been running the service in Bengaluru for about six months and this was the first serious rollout. Singh says Amazon will not be able to turn the grocery delivery market into a discount war.
“The stores they source from have physical outlets. These stores won’t set one price for walk-ins and another for its online customers,” he said. Just like Peppertap, reports said, Amazon will also be guaranteeing delivery in a few hours. However, says Singh, “Amazon isn’t using its existing logistics services to make grocery deliveries and the learning curve is steep in this business.”
Flipkart, too, delivers groceries but only to certain neighbourhoods in Bengaluru via an app called Nearby. Sources said the traction it got was not much to boast about.
The market, however, will be cracked by those which give the best customer experience and innovate on how deliveries happen. “Customers don’t want to be seen at the office with bags of groceries. If someone can, say, set up a delivery straight to a car park of a corporate office or in inconspicuous packaging, it could give those companies an edge,” said Prasad from KPMG. Amazon could also replicate the idea of the ‘smart bins’ it uses in the US, where groceries are deposited and need a PIN to open.
Hyperlocal grocery delivery apps have been fighting an uphill battle over the past six months. Grofers curtailed services in nine cities after it could not generate enough demand in smaller towns such as Bhopal and Coimbatore. Peppertap had announced it would not be expanding anytime soon and wanted to focus on “customer experience”.
In September, LocalBanya had frozen operations after it couldn’t find any more investors and the money had run out. The Mumbai-based company has been in the process of finding investors and sources said talks were "progressing in the right direction”.
Amazon has a similar service in the US, called Amazon Fresh, which promises next day or early morning delivery, with special mention of dairy products. A tab labelled groceries exists on Amazon.co.uk as well, where most branded products are sold through a service called Amazon Pantry, a premium service.
With the online grocery market in India valued at $200 million annually, the attraction is natural. Currently, these start-ups generate only 60,000-70,000 orders a day, with an average size of Rs 700. The market, however, sources say, is growing at 30-50 per cent, month-on-month. The online grocery delivery market in the US is valued at $16-20 bn and at $40 bn in China, according to a Morgan Stanley report.
“Groceries are an extension of online shopping. It is a very click-to-buy product. One has to look at this segment from an e-commerce angle, where the input costs have to be low, as the cost of deliveries will stay the same for everyone,” said Shreedhar Prasad, partner e-commerce, KPMG India.
Amazon already has a massive user base and will not need to spend more on customer acquisition. Experts said it would be able to leverage its global learning and standardised practices to find more traction in the market. Amazon’s entry means its competition not only has to fight slim margins and urgent customer needs but also the US-based company’s massive brand.
“Amazon is just another competitor in the market and we had seen it coming,” said Navneet Singh, co-founder and chief executive at Peppertap. Amazon had been running the service in Bengaluru for about six months and this was the first serious rollout. Singh says Amazon will not be able to turn the grocery delivery market into a discount war.
“The stores they source from have physical outlets. These stores won’t set one price for walk-ins and another for its online customers,” he said. Just like Peppertap, reports said, Amazon will also be guaranteeing delivery in a few hours. However, says Singh, “Amazon isn’t using its existing logistics services to make grocery deliveries and the learning curve is steep in this business.”
Flipkart, too, delivers groceries but only to certain neighbourhoods in Bengaluru via an app called Nearby. Sources said the traction it got was not much to boast about.
The market, however, will be cracked by those which give the best customer experience and innovate on how deliveries happen. “Customers don’t want to be seen at the office with bags of groceries. If someone can, say, set up a delivery straight to a car park of a corporate office or in inconspicuous packaging, it could give those companies an edge,” said Prasad from KPMG. Amazon could also replicate the idea of the ‘smart bins’ it uses in the US, where groceries are deposited and need a PIN to open.
Hyperlocal grocery delivery apps have been fighting an uphill battle over the past six months. Grofers curtailed services in nine cities after it could not generate enough demand in smaller towns such as Bhopal and Coimbatore. Peppertap had announced it would not be expanding anytime soon and wanted to focus on “customer experience”.
In September, LocalBanya had frozen operations after it couldn’t find any more investors and the money had run out. The Mumbai-based company has been in the process of finding investors and sources said talks were "progressing in the right direction”.
