Author: Nitin Gupta, Co-Founder & CEO, PayU (India)
As the popular saying goes – “Everyone loves to eat, but no one likes to clean the dishes.” Urban India however is putting an interesting spin on this phrase where it now reads– “Everyone loves to eat, but no one likes to shop for groceries.”
Why online grocery shopping is getting popular
Living alone, away from family, is a tough ask. Add to that the myriad everyday domestic hassles one has to take care of, tiring 12 hour shifts in the office and transportation woes that leave you feeling so drained that the prospect of cooking seems like torture and one’s bed seems like heaven on earth. In such a scenario, who would want to shop for grocery? Certainly not the young Indian professionals!
Where E Wallets can Bolster the Business
Thankfully for such time-crunched denizens, online grocery shopping portals have come as a God-sent aid, allowing them to have their grocery needs fulfilled within a couple of hours replete with doorstep delivery. While presently the number of daily transactions lies within a range of about 25-30, it can soon be expected to rise to about 5 lakh transactions over the next 12 months. Naturally, as with any online product-based business, there is a possibility that some of the items delivered might be returned by the buyer. This would require a fool-proof system to initiate quick refunds. This brings us to the role of mobile wallets in the online grocery business. Mobile wallets have become instrumental in recent times because of the ease of access they provide. However, Indian users often also utilise several other payment options such as credit/debit cards and net banking etc. for their online transactions. Therefore, a checkout option which can integrate different payment options would be extremely crucial to such systems by providing consumers with a seamless user experience.
Is this business model sustainable?
With the current mushrooming of online grocery portals on the digital medium, one might wonder upon the feasibility of these ventures. The main problem that the public sees is the “losses” incurred by these online grocery shopping portals. Presently, online shopping portals provide goods and services at purchase rates, all the while accruing cost of manpower, transportation, and in some cases, even storage. This results in a considerable burden on their expenditure, while their income remains the same. The net inflow being less than the outflow in a crowded market segment may not sound like a solid business model, but generating profit is not an immediate priority for these entrepreneurs. Right now, it is all about grabbing the eyeballs and getting investors on board and the truth is, these start-ups have been attracting copious investments from venture capitalists and equity firms. These funds help the online grocery enterprises meet their cost of operation as well as ramp-up their operational outlay.
He who scales fast, comes first!
When it comes to start-ups, scalability and long-term vision is the name of the game; profits take a backseat in the shorter run. Even several established start-ups which have been rivalling multinational eCommerce giants are still running into losses. The operations are being diversified and business strategies are put into place to ensure long-term success of these organisations. In time, the less influential players would be side-lined, whereas those with a higher funding, better operational model and more user visibility will survive. The market will be then left free to be consolidated by two or three major online grocery portals, much like the online taxi saga.
Ultimately, the future of online grocery shopping seems extremely secure. Like any good business idea, a need had been identified and amplified. Indian online grocery shoppers have found buying grocery online convenient, comfortable and hassle-free. Given the pace of life, smartphone penetration and ease of use they offer, it will be a long time before these online grocery platforms can call it a day.
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