Soon after its USD 16 billion acquisition by the retail giant Walmart, the homegrown online marketplace Flipkart has forayed into the grocery segment to take on its rival Amazon.
Flipkart that is trying its hand at the USD 400 billion grocery segment for the second time, has partnered with Bangalore-based logistics delivery startup Shadowfax to fulfil its last mile delivery, two people with direct knowledge of the development said.
Flipkart had abandoned its first attempt at grocery delivery and shut down Nearby, its delivery app after a brief pilot run in 2016.
Meanwhile, Shadowfax that also delivers groceries for BigBasket, Amazon Now and Grofers, has deployed 40 vehicles alone for Flipkart. “Shadowfax has been delivering groceries in partnership with Flipkart for two months in Bangalore and has started Delhi operations as well from the beginning of this month,” one of the persons cited above revealed.
Shadowfax is delivering 300-400 orders a day for Flipkart in Bangalore and Delhi combined, the source claimed. It’s not clear if Flipkart has deployed Ekart, its own logistics partner to deliver groceries as well.
Under the brand name of ‘Supermart’, Flipkart will deliver staples, FMCG and dairy products, which users can access through Flipkart’s mobile apps, as well as its desktop and mobile websites.
In a statement, Flipkart said it will deliver groceries “in all major pin codes of Bangalore with plans to expand to five to six major cities by the end of 2018.” According to the Supermart website, users will have to order groceries worth minimum of Rs.600 and will be eligible for a free delivery if the cart is worth more than Rs.1,200.
“Despite its outsized impact on a household’s budget, grocery shopping is a mundane chore in any home. It remains an unsolved e-commerce market, despite its importance to consumers and to the economy,” said Manish Kumar, head of groceries at Flipkart.
Grocery—the toughest nut to crack
Analysts believe grocery is one of the toughest verticals to crack in the e-commerce sector.
“Unlike other online verticals, grocery is the toughest one to succeed in. The nature of grocery business is such that you have to practically check each and every product by hand. Then there are items that particularly have short shelf lives, so one has to learn how to manage that. A lot of these things have to be managed before one could even think of selling groceries online,” said Harish HV, Partner, Grant Thornton India.
In November last year, Flipkart started its pilot program once more offering groceries to select customers. The response during the soft-launch encouraged Flipkart to finally open it for the larger public in August.
“The feedback has been phenomenal. Customers who have tried it are absolutely delighted and have kept coming back. We’re now taking it wider and plan to expand our reach and scale rapidly over the coming months,” Kumar said.
Harish said Big Basket and Amazon Now will be Flipkart’s biggest competitor in India in the grocery segment. Founded in 2011, BigBasket is one of the oldest grocery delivery startups to survive the mass-shutdown that the sector witnessed in 2016. The year saw Local Banya, PepperTap and GrocShop wrapping up their grocery business. Even Grofers, that attracted USD 120 million in 2015 from Japan’s SoftBank, Russian entrepreneur Yuri Milner, Tiger Global and Sequoia, shut operation in nine cities that year.
To be sure, Grofers is still operational and is one of the two leading players along with BigBasket. According to media reports Grofers clocks 30,000 orders a day. It has raised USD 61.6 million led by SoftBank in March this year making its total raised money to USD 226.5 million up until now.
Once again, hopeful
BigBasket recently raised USD 300 million in an investment round led by Chinese e-tailer Alibaba, including The Abraaj Group, International Finance Corporation (IFC), and Sands Capital Ventures. Altogether, it has raised almost USD 600 million till now.
“After a challenging year in 2016, the online grocery market in India is on track to reach USD 1 billion in sales in 2017,” a RedSeer Consulting report said. In 2017, the report said, the annual transactions of online grocery players had increased by 30-35%, from 35 million in 2016 to 46 million in 2017.
To up its grocery game in India—the world’s third largest grocery market according to Forrester—Amazon India has launched 56 fulfilment centres across 13 Indian states to provide ultra-fast delivery. It recently started delivering fresh vegetables and fruits.
According to a research by Boston Consulting Group, most shoppers in India buy dairy, fruits, and vegetables daily or at an interval of 2-3 days. “Flipkart’s foray into groceries comes at a time when online retail is just 0.5% of the total grocery market in India, which is pegged at USD 400 billion, or 70% of all retail,” Flipkart in its statement said.
With four big players, it will be interesting to see how it affects the market, grocery pricing and more importantly, on whom customers put their trust on.
“Grocery is not a standardised product, so customers are going to trust the company that has been selling it for long. The segment is such that once customer's trust has been won it will be difficult to steer them to a new platform,” Harish said.