The online hyper-local and grocery business is booming and it is appealing to entrepreneurs and investors alike. The most enticing fact about online grocery is that it is a basic human necessity to shop for vegetables and daily needs. So why do we see so many online grocery start-ups shutting down? Is it due to the low profit margin they operate on? Yes, that for sure is one of the major challenges, but not the only challenge. A major road block in this business is the delivery system and operations process which has taken down many start-ups and forced many start-ups to pull out operations from major cities.
Nevertheless, this business is still to penetrate the market with full potential. This year is going to be the most competitive year with other start-ups coming up, while the existing portals will come up with a stable business model. The constant debate between having an inventory model or a hybrid inventory-hyper local model has been the topic of debate since the inception of this business. The struggle will continue and companies will still experiment with their existing models and diversify into a better model.
The Current Euphoria
The online grocery market is supposed to hit the 2.7 billion mark by FY 2019, and many players will emerge. This competition itself will lead to emergence of a better sustainable business for some and also pose a threat to many. Uncertainty is an alias of the online grocery market. With surge in rates of veggies or drop in the prices, every day is a new challenge and there is no predefined method to handle it. Every company works its own way out and attempts to come up with one unique concept. That uniqueness is a major reason for these businesses to pivot and scale.
Delivery, or timely delivery, to be precise, of the products is the backbone of this business. With the advent of delivery and logistics start-ups, many online grocery portals outsource their logistics to save some money and decrease the overhead cost, but the face of your company are the delivery boys and it is important to have control over logistics. However this has decreased considerably, and eventually the current players have learnt from closed businesses. Today there might not be a definite model or nobody knows what action will lead where, to brief it up nobody knows what to do, but everyone knows what not to do. The learning curve as it is said has been established. Over time it will improve.
This year is a gamble, with existing players modifying their current modes and new start-ups exploring the markets with a fresh perspective. In this year we saw many start-ups failing to receive a SERIES B funding, but with the current scenario the market will change, provided the burn rate and customer acquisition rate is kept at bare minimum.
What does the future hold?
With most of the major league players operational in metro cities, tier II and tier III cities are yet to be tapped. How can a market that serves the daily needs of customers not be as big as the fashion retail market? This is a question that boggles the mind of every investor and entrepreneur. Something is not being done right, something is still missing, with 90 minutes delivery and discounts and millions invested in marketing, there is still something amiss. With a year to pass by, people will understand the benefits of this, companies will discover the lost pieces of the big puzzle- The online grocery Market. When operational at full scale, the market will be home to many more big and small players before it saturates.
Authored By: Parvez Siddiqui, Founder, Zapmart