Amazon, Flipkart, Alibaba get ready to slug it out over bread and butter

Representational image
Representational image
Amazon, Flipkart and Alibaba are primed to pour billions of dollars into revolutionising the way one shops for fruits, vegetables, bread, eggs and cereal apart from other assorted trappings of daily life. And right through 2018, the e-commerce giants will fill up the digital aisles with grocery items that they hope will transform the several parameters of consumer engagement: loyalty, frequency of purchase and trust. However, unlike in other categories where discounts drove customers online, the biggest challenge all the players face here would be changing the customer’s mindset.

Getting one to buy a smartphone online once in a year or two was easy, turning on the charm for clothes and home decor products a couple of times a year was pretty straightforward as well. But now, all the major e-commerce players in the country want consumers to shop with them every week, if not every day, because that’s where the real money is..

Over 50 per cent of India’s per capita spend is on food and groceries, and online players now want in. BigBasket is the country’s biggest online grocer and has been working at brand building and market deepening strategies for several years now. Recently it announced that it wanted to open hundreds of tiny kiosks at residential apartments and office buildings where customers could purchase fresh produce, bread and eggs. The move it says is not directed at tapping offline customers and bringing them online, but just servicing existing customers better. If offline customers begin using the BigBasket app after shopping at one of its offline stores, that’s just a bonus.

“What we are replicating is how people buy,” says Hari Menon, co-founder and CEO of BigBasket. “The idea is to give our existing user base additional features. Going into these stores is even faster than a 90 minute delivery. You want something urgently, you just go downstairs and pick it up.”

Offline kiosks are just one of a few new areas BigBasket is looking at. It’s targeting subscriptions on milk, bread and eggs which a large number of Indians already do through offline providers. Building a wholesome service for customers is where BigBasket will invest a lot of money in the coming years, for which the company recently raised $300 million led by Chinese e-commerce giant Alibaba.

“Subscriptions don’t work in India because people want fresh food every day. Bread, dairy, eggs to some extent, and fresh produce, that’s all we’re going to focus on for our subscription programme. It’s not like people are going to subscribe to getting bhindi every day, the idea is that you can subscribe to things like milk but in addition get a few other items on that day,” adds Menon.

While Menon says his company isn’t really experimenting with new services and use cases, experts believe the industry will go through a lot of quick iterating before hitting upon the perfect model. BigBasket and its erstwhile rival Grofers have already proven the basic premise of shopping for groceries online. It’s also what has drawn in giants like Amazon, but unlike in the West and China, India’s market is far more complex.

For Amazon and Flipkart, the two largest e-commerce players in the country heavily investing in groceries, while a large portion of their spending will undoubtedly go towards offering discounts, money will also flow into their logistics and technology arms. The teams now have to consider how to handle 90 minute deliveries as opposed to one and two day deliveries for other products, for instance.

Amazon has created four different programmes, casting as wide a net as possible for consumers. Amazon Now offers grocery deliveries within two hours and taps large format offline retailers to service these orders. Pantry, on the other hand targets the bulk grocery purchases customers make at the start of a month or weekly. Then there’s ‘Subscribe and Save’ which customers can opt for and save 10 per cent on a product if they buy them at fixed intervals. Lastly, the company is using discounts to try and hook customers to do their monthly grocery shopping by offering special prices on the first three days of the month.

“India spends more than 50 per cent of its money on food and groceries so it’s a very large market. So everyone wants to invest heavily in serving this market. The challenge will be that this market is already served, not by e-commerce players or large retail chains such as Reliance which still make up a small percentage of these sales, but by small mom and pop stores,” says Harminder Sahni, founder and MD of Wazir Advisors.

Sahni says that the biggest challenge e-commerce players will face is breaking the customer mindset. Today things are readily available from stores around the corner and while discounts drive sales of smartphones online, in food and groceries that doesn’t seem to be the driving force, convenience is. Waiting 90 minutes for a delivery is still far too long and it’s why all players are experimenting with different models for now.

Flipkart is currently running a pilot for its grocery business in Bengaluru. However, when contacted, a Flipkart spokesperson said that the company was not willing to divulge any details on its offering since it could give its rivals a peek at what it was building. Either way, Kalyan Krishnamurthy, CEO of Flipkart, has already made it quite clear that grocery will be the way the company converts customers from buying products on its platform a few times a year to many times a month.

“Retention has been low, but we have made it a big agenda for this year. Once categories such as groceries and low-cost fashion are able to establish themselves with a proven business model, that’s when retention will increase,” Krishnamurthy had said in a past interview with Business Standard.

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