The service is currently available in Delhi, Mumbai, Bengaluru and Hyderabad, where the company has setup 15 specialised fulfilment centres for ‘Prime Now’. While two-hour deliveries will be available only to Prime subscribers, other customers will be able to avail next-day scheduled deliveries. As compared to Amazon, Flipkart’s online grocery service is only available in select parts of Bengaluru on a pilot basis.
“We've expanded our selection to carry fruits and vegetables, dairy and frozen products. But this isn't just about groceries, we've built the largest multi-category store that exists in India. We've also made 1,500 of the bestselling products on Amazon available to our customers for delivery within two hours," said Sameer Khetarpal, Director of Category Management at Amazon India.
According to Khetarpal, the online grocery delivery business in the country can be huge, rivalling other large e-commerce categories, given that Indian consumers on average spend a much bigger chunk of their earnings on groceries when compared to people in the US or other advanced nations.
Eyeing this opportunity, Amazon is heavily investing in the category and is willing to burn money to get customers to switch from buying groceries offline to buying them online. It has a well chalked out plan for offering discounts and cashbacks on Prime Now, which it calls passing on value to its customers.
“We continue to work with third-party sellers who have been very successful on our platform. There's the large supermarket chains, we work with local merchants such as Licious which sells meat products and so on. We're always trying to figure out what new products customers want and which sellers have a good reputation in this so that we can bring them to our platform,” said Siddharth Nambiar, Head of Prime Now at Amazon India.
While Amazon is bringing its global knowhow to serve the fresh fruits and vegetables, and grocery market in India, the clubbing up of Walmart and Flipkart is potentially the biggest thorn the company is likely to face going forward. US retail giant Walmart is among the few firms in the world that competes at scale with Amazon globally in the grocery space.
Walmart’s investment of $16 billion to pick up 77 per cent stake in Flipkart earlier this month opens up the potential for the Indian e-commerce giant to tap into the US company’s streamlined sourcing operations. Through its small wholesale business in India, Walmart already works directly with farmers, and experts say the duo could tap the country’s grocery market with private label products.
Moreover, Amazon and Flipkart aren’t the only two big players eyeing this space. In February, Chinese Internet giant Alibaba led a $300 million investment in BigBasket which claims to be the country’s largest online grocer. Then in March, Japanese investment behemoth Softbank led a $62 million investment in rival Grofers which was seen floundering last year but once again found investors’ interest as the space began heating up.
Both Flipkart and Amazon are also looking at groceries as a way to get customers to shop more often on their platform. While estimates suggest that India has upwards of 100 million online shoppers, only a small fraction of this number shop repetitively through e-commerce in a single year.
Khetarpal said that Prime Now is beginning to see some customers shopping 4-5 times a month on the platform, replicating their offline grocery buying behaviour online. Moreover, in the last four months, the average ticket size of each transaction on the platform has grown by over 50 per cent as customers begin seeing value in using the service.