USDA Gain Report
The rise of online grocery retail in India
Target audience for online grocery retail trending upwards
With an estimated population of 1.2 billion and an emerging retail market, India’s online retail sector is showing fast changes. According to the Internet and Mobile Association (IAMI) of India, there were 213 million internet users at the end of 2013; including mobile and broadband users. With mobile handset prices falling steeply and a rise in smartphone penetration among younger audiences, online retailing has emerged as a primary retail channel.
Benefits help consumers overcome biases against online retail
Indian consumers are overcoming biases against purchasing items without prior inspection and the safety of automated/online transactions. This shifting tendency is brought about by competitive pricing and the convenience of shopping for groceries from the comfort of one’s own home.
Consumers are seeing that online retail provides some benefits over going to kirana stores (independent small grocers) or store-based retailers’ outlets.
The availability of multiple payment methodologies such as online banking, credit cards, debit cards, and cash-on-delivery have meant that it is convenient for urban Indian consumers to shop online while saving both time and money.
Opportunities and challenges for continued growth in online grocery retailing
Several internet grocery retailers have been launched over the past few years (see Table 1, below). Bigger online retailers, including Amazon.IN, are reportedly getting into the online grocery space. Domestic products dominate the product categories, but most online retailers carry some imported food items.
Note: Given the complexity of importing food products into India, online retailers currently rely on local distributors for supplies.
India opened its market to imported food products just ten years ago and distribution of imported foods tends to be limited to major cities. However, importers are expanding their traditional distribution to smaller cities and online sales could be a way to reach consumers that are even farther from major population centres.
Presently, most online retailers limit their distribution to a particular city, but operations may expand quickly if some business models prove successful.
As Indians go abroad for school, vacation, or business and return home, many develop a fondness for particular foreign foods or brands that are not available in some of the more isolated cities and regions. As such, supplying these consumers from online outlets could present an opportunity in the marketplace.
Online retailers are competing with kirana stores that provide quick (often within an hour) home delivery and credit to neighbourhood consumers. Compared to these stores, online retailers will need to overcome delivery challenges (e.g., traffic, poor roads, and greater distance/cost). Nevertheless, online retailers enable consumers to similarly bypass parking and traffic congestion in most Indian cities while
providing better selection than a neighbourhood store.
Please click here to read the full report from the USDA.
