Online grocers contributing to India's eCommerce boom

As more and more Indians are shopping for groceries online, helping e-tailers like Bigbasket.com, Localbanya.com are turning in profits while supermarkets are struggling.
E-grocers contributing to India's eCommerce boom

As more and more Indians are shopping for groceries online, helping e-tailers like Bigbasket.com, Localbanya.com are turning in profits while supermarkets are struggling, says a Reuters report.

Besides, the e-grocers benefit from low overheads, as they store goods in warehouses outside big cities where commercial rents are sky-high. 

The report cited an example of websites like Bigbasket.com, which can also charge more for certain items than traditional supermarkets. Further, this indicates that more profits, as compared to other food retailers who enjoy margins as high as 20 percent on rice and other staples.

Commenting on the matter, Director of Bigbasket.com, Ganesh Krishnan said, "The company would turn a profit this year, just three years after it was set up. By contrast, analysts say supermarkets like More, owned by the Aditya Birla Group, and Reliance Industries Ltd's Reliance Fresh are struggling to attract enough customers to make a profit as they compete with the small neighbourhood stores where most people buy food. Both conglomerates declined to give figures for their supermarket operations."

"You can go shop at a Walmart or Tesco in the US and UK and they have parking. You can take the shopping carts right up to your car, so it's smooth," Krishnan told Reuters. "In India, none of this exists."

Besides, the densely populated cities have proved attractive for web grocers in Asia. However, analysts estimate online sales of fresh produce in China could quadruple to 40 billion yuan ($6.5 billion) in five years from about 11.5 billion yuan in 2013.

Overall, eCommerce is rapidly growing in India, fuelled by an expanding middle class and better web access, and the potential for online grocers in particular is huge.

Most food shopping in India is done in cramped groceries that offer limited variety. Urbanites also frequent supermarkets, but e-grocers are becoming more popular as more shoppers are willing to pay extra for the convenience of not dealing with traffic and parking problems.

By running their own delivery networks, and warehousing outside the city, e-grocers are better able to control costs: analysts say the operating costs of traditional supermarkets are higher when you factor in rent and utility bills, according to the report.

"Where brick and mortar grocery in India fails to muster scale, online can do it very, very quickly just by the sheer opportunity of reaching a number of people with much less investment," Harminder Sahni, Managing Director, Wazir Advisors told Reuters.

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