The grocery business in India is distinctive in many ways, primarily due to the diversity of consumers and the unique distribution models of the retail sector. From mom and pop stores to giant supermarkets to online grocery stores, the grocery business in India has come a long way. If we talk about purchasing habits of grocery items, Indians have long history of relaying on local grocery shops. As per the industry data, there are over 12 million small stores in India which accounts over 90% share of the Indian F&G market, which is predicted to reach USD 810 Billion by 2020.
However, offlate online grocery is generating a lot of traction, mainly due to high disposable income and internet penetration. As per the report shared by RedSeer Consulting & Bigbasket, online retail contributes 3% (CY2018) share and reflecting, expectantly, robust CAGR of 35% will increase to 4.6% and 7% penetration in CY2020 and CY2023 respectively. However, if we look at online eGrocery market, this market is projected to grow to 16 billion by 2020; translating to a staggering of 148% CAGR.
Lets shed light on the few emerging trends in this segment..
Growing share of evolved customers
As per the report, the evolved customer purchases grocery via online channel six times in a year, whereas, the frequency for evolving customers is two times in a year. There is a growing share of buddy shoppers who are regular at purchasing grocery from local kirana shops and have been introduced to modern retail and online grocery in the last one year. These buddy consumers have started spending a significant portion of their FMCG spends from the online channel.
Following are the categories which generates maximum traction…..
Snacks and Branded Foods
If we look at category Index based on factors including online growth, category size, Snacks and Namkeen emerges as the pivotal category with overall growth of 10.4 USD mn. Snacks and Namkeen is driven by high growth of the category and the success enjoyed by niche brands like Too Yumm and Pringles in the segment.
As the report data, Biscuits and Cookies is the largest sub-category in Snacks and Branded Foods and recorded a growth rate of 14.5%. (CQGR - Compounded Quarterly Growth rate). Chocolates and Candies recorded the highest growth rate followed by Snacks and namkeen.
Cookies emerged as the fastest growing sub-category in Biscuits and Cookies recording a 16.5% (CQGR - Compounded Quarterly Growth rate). The growth was fuelled by introduction of niche brands and brand extensions by incumbent brands.
Detergent is the largest category in home utilities. Surf Excel is the market leader in Detergents with ~44% market share. Detergents are dominated by premium category with 60% share due to the highest number of offerings in that segment.
Following are the categories which generate less traction…..
Lack of trust is a barrier to shop Personal Care products online, followed by concerns related to product quality. Beside this, delivery related issues are other concerns which is common across all categories. Evolved consumers mirror the behaviour from other categories with product availability being the largest challenge, and delivery related concerns being prominent as well.
In the case of Beverages, online reviews are important to Metro and Mini Metro consumers, but not for Tier 1 consumers, who are also evolving users. While the evolving users do not place much importance on convenience and deliveries, the evolved customers stated promotions and convenience as major drivers to purchase Beverages online.