Flipkart plans an aggressive grocery foray

Grocery bills are set to shrink in India’s top metros as Flipkart prepares to take on well-entrenched rivals in the high-stakes category including Amazon India, BigBasket and Grofers within days of its $16-billion acquisition by Walmart.

The online retailer aims to launch grocery services in five cities by July, according to two people familiar with its plans, beginning with Hyderabad and followed by Chennai, Mumbai, Delhi-NCR and Pune.

In Bengaluru, where Flipkart launched grocery services in November, the company is looking to venture into the so-called ‘fresh’ category comprising fruits and vegetables.

“Flipkart wants to capture the customers that shop for groceries in the first 10 days (of a month), who make up 60% of the customer base,” one of them said. “It wants to expand its customer base through these low-ticket yet high-frequency purchases.”

Flipkart is expected to offer steep price cuts on groceries at the beginning and end of each month, taking on similar offerings by Amazon India and BigBasket with discounts of 25-50% on groceries.

“We are looking to solve consumer needs in (the grocery) category. That’s the first step, and we will build the category through the course of the year,” a Flipkart spokeswoman told.

Flipkart CEO Kalyan Krishnamurthy had said in an interview earlier this year that Flipkart was focused on increasing its monthly active transacting customers as its key metric.

“Grocery is 95% unorganised retail and no player has really been able to crack the online grocery model in a sustainable fashion that explodes the market,” said Anup Jain, managing partner of retail consulting firm Redback Advisory Services. “The challenge for any new player is to make the unpenetrated users shift their habit to ordering online versus grabbing market share from existing e-grocery players.”

Flipkart quietly rolled out its grocery category, under a tab called Supermart, in Bengaluru in November. As per industry estimates, it handles 200-300 orders daily in Bengaluru on normal days, and up to 2,000 a day when it ran special offers.

Flipkart plans an aggressive grocery foray
Flipkart has set up a warehouse near Whitefield in Bengaluru and has a capacity to handle 3,000 orders a day in the city.

Amazon Now, the company’s hyper-local model operational in four cities, registers more than 2,000 daily orders in Bengaluru, according to industry estimates.

On the other hand, BigBasket and Grofers, the country’s two largest online grocers, recently raised capital, intensifying competition. While Grofers raised $60 million in funding led by SoftBank in March, BigBasket secured about $220 million in a round led by Alibaba. BigBasket is also working closely with Paytm Mall, which also counts Alibaba as a strategic investor.

Amazon, which has committed $500 million to its food retail venture in India, has been investing heavily in its grocery business. The company added 15 new fulfilment centres, or warehouses, in February to create a specialised network for its Amazon Now hyper-local grocery delivery business.

However, with Walmart stepping in with its expertise in grocery and fast-moving consumer goods, Flipkart, which hopes to garner more customers and stickiness, will push this category forward. But this is likely to take time as the transaction could take a few more months to close.

Source : https://tech.economictimes.indiatimes.com/news/internet/flipkart-plans-an-aggressive-grocery-foray/64362965

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