Online grocers are back in business in India with billions more to burn – and that may be good for consumers

Online grocery startups in India are a hot favourite again
  • After a couple of dull years and a few failures, online grocery in India is back with a bang.
  • SoftBank has put in fresh funds in Grofers while Reliance Industries Limited is reportedly looking to buy a majority stake in Grab.
  • Swiggy had recently announced its foray into online grocery delivery with Swiggy stores.

There was a time when the online grocery vertical had become the hot favourite with major players trying their luck in the game. But soon with failures piling up one over the other, exits were announced.

Come 2019 and it seems like it’s going to be the year hyperlocal grocery delivery again.

Sector leader BigBasket may become the first unicorn – clock a valuation of $1 billion – of 2019, and food delivery startup Swiggy threw in its hat into groceries with Swiggy Stores.

Swiggy, which raised a whopping $1 billion in funding in December, has already piloted the operations in Gurugram and has tied up with 3,500 local stores.

However, these startups will be battling the deep pockets of Mukesh Ambani and the Japanese Softbank.

Reliance Industries Limited is reportedly in talks to buy a majority stake in Grab, a hyperlocal delivery startup for groceries, medicines and food based out of Mumbai.

Grofers has raised fresh funds from SoftBank Vision Fund (the Japanese firm had earlier too invested in the e-grocery company) which takes its valuation to $425 million.

This excitement was missing in the space the last few years. E-grocery startup PepperTap had to shut its operations in 2016. In a blog on YourStory, Navneet Singh, founder of PepperTap, wrote about the problem they faced. “The integration of our app with our partner stores was not great. In the race to pepper the whole country with PepperTap, we had brought too many stores online far too quickly,” he wrote.

Another unicorn startup Paytm too had explored the e-grocery space with Paytm Zip, only to shut shop in 2015.

So, even with clear failures in the past, what makes today’s unicorns still find their way into the space? A simple answer - the demand still exists. Grocery stores aren’t called convenience stores for nothing. For today’s millennial who is busy with work to order groceries on a tap is an easy, convenient way out.

A report on the online grocery space in India by Red Seer consulting states, “Inspite of all these disruptions and changes, one thing that did not change was the massive potential for online grocery- as indicated by India’s USD 500+ Bn grocery market out of which a mere 0.2% is online (~USD 1.2 bn overall and ~USD 1 Bn considering only hyperlocal grocery).”

The proof that it still works is seen in BigBasket’s revenue report. In the year 2017-18, BigBasket saw its revenue grow by 35% while losses dropped by 53%. In FY19, the company expects the revenue to grow by 75%.

Grofers which had posted a net loss of ₹268 crore in FY 17, managed to post a loss of ₹258 crore in FY18. The company has also added 2.5 lakh new customers in January, while also aiming for a revenue of over ₹2500 crore.

And with big backers like Mukesh Ambani and Softbank entering the fray, the competition, too, will be intense. The battle for dominance may mean more discounts and cashbacks for consumers.

See Also:
Swiggy wants more on its plate, in talks to acquire Ubereats India
For Indian startups, 2018 has been a year of bouncing back as venture capital funding doubles
These are the 25 most sought after startups in India: Report
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