Buying grocery now has a tech edge

Basically, it operates in the same way as you do railway or air bookings. But what takes the cake is there are no extra costs involved and the products get delivered right at your doorstep.What augurs well for the consumer is the competition is building up as more and more players try to wean away customers by lining up hefty discounts and other promotional features in an attempt to corner a bigger chunk of market share. Shailaja Sharmatakes a closer look.

When Vikrant Joshi, an advertising professional in Mumbai, stopped by the kirana store in his locality for a loaf of bread and some eggs, he was in for a pleasant surprise — the shopkeeper informed him that he could order his supplies online which would be home delivered. On top of it, the shopkeeper followed up his chat by offering his business card which carried the website address to place such orders.

Joshi’s neighbourhood fuddy-duddy kirana store is part of about 1,600 others across the country that are now delivering groceries at consumer door-steps through orders placed on AaramShop.com, a company that partners with local kirana and medical stores to sell food and grocery online. With a footprint across 24 cities, AaramShop is now looking to bring in 20,000 shops under its coverage to become the largest e-grocer in the country.

The modus operandi is like this. When a consumer makes an order on the website, he can select the shop nearest to his home for delivery. The shopkeeper is alerted about the order through an e-mail followed by an SMS and a call from AaramShop’s call centre. The waiting time is around 3-4 hours before the order can be delivered.

Unlike a typical e-commerce transaction, the company does not charge anything from the kirana stores or even from customers. Instead, it is looking to make money directly from brands by providing them with analytics of consumer behaviour so that they can figure out buyers’ brand preference.

AaramShop is not sitting on its laurels, which is launching Aaram TV, a concept for in-store advertising of brands where product companies can pay for advertisements to be run on screens at mom-n-pop stores so as to attract consumers. Up next are mobile apps for kirana store owners which will alert them about orders on their mobile screens. Vijay Singh, chief executive officer and MD, an entrepreneur for 15 years, started AaramShop last year, along with a team of friends.

The funds are flowing, with Bangalore-based grocery e-tailer bigbasket.com recently securing some venture capital funding. A host of other websites like mygrahak.com and easyration.com in Delhi NCR, kiranawalla.com in Bangalore, freshndaily.com in Mumbai and chennaionlinegrocery.com in Chennai are already selling food, grocery and fresh supplies with free delivery within 24-48 hours of order, cash on delivery facility and discounts.

On an average, a city household spends Rs4,000-5,000 a month on groceries. Retailers believe the top 20 towns offer huge growth potential as spends on FMCG products are seen going up.

According to KPMG’s calculations, food and grocery retail in India is currently estimated to be $250 billion in size and expected to grow at rate of 6-8% on real term basis. Of this market, share of organised retail is estimated to be only 3% currently, but likely to double to 6% by 2015-16.

But the point is why would consumers use the web instead of making a call to their local kirana store. Ashutosh Malik, director and chief operating officer, AaramShop, points to the hectic schedule of the working class which finds ordering its weekly supplies online an easier option. For the traditional retailers, this is an opportunity to bolster sales. “The neighbourhood has over the years seen a slump in orders. They understand the competition from modern trade and are embracing the technology to stay ahead,” adds Malik.

He points to the format’s convenience factor when he says even FMCG companies are excited by a model like AaramShop as it provides them with last mile connect with consumers. Companies can communicate to buyers directly at the point where the purchase is being made. AaramShop is banking on these consumer brands to advertise on its site and buy into the data it collates from the cities it caters to.

When consumers order for products with a call to their kirana store, the average order size is at about Rs200. But while buying online, consumers are able to do impulse purchases, with as many as 30 product categories, Malik says. “An average order on our site is Rs570,” he says.

The road ahead is not without some sticking points though. “Online retail becomes popular in categories that can offer convenience, comparison and price advantage. Although online retail presents a significant potential, food and grocery online retailing has significant challenges related to managing the supply chain, low margins and limited shelf-life of fresh produce,” said Mohit Bahl, partner, KPMG, transactions services. In Bahl’s view, penetration of online food and grocery formats in mature markets has been limited, with major hurdles being supply chain-related issues.

Some experts say even as Indian consumers have comfortably adopted online stores for their apparel and electronics purchases, grocery is a different ballgame as consumers prefer to handpick their food and items of daily necessities, whether it’s scurrying across store aisles or ordering weekly supplies over the phone.
Malik of AaramShop admits that a majority of online grocery formats have failed to take off in a big way in many markets — these have stumbled in the US even. Unlike books which come with higher margins, grocery retailing fetches margins below 15% and usually in single digits. That, coupled with challenges in setting up an orderly supply chain, makes the model unviable.

What consumers seek from their mom-n-pop shop is convenience of home delivery and option of credit, and from hypermarkets, an option to have all products under one roof, lower prices, and of course, a wide variety. Their demand from from e-commerce grocers will be a mix of all these.