Major Challenges in Online Grocery Business in India
Lallabi Admin   22.May.2017

Major Challenges in Online Grocery Business in India

In these days technology has made our life so easy. Different startups in different sectors are utilizing the latent of technology to provide us luxury. Most of us do not like to go to supermarket to buy our weekly grocery items due to heavy traffic, parking hassle, long stand in line in our busy life. In this situation we should thankful to these startups -Our weekly grocery order is just a click away. Nice!!! Of course there will be no free lunches in this world, and there must be a cost for this opportunity. Are we ready to accept that cost? And is this going to be with us evermore in the same plan as it is accessible today? Let’s explain the major challenges in Online Grocery Business in India.

1. Freshness of fruits and vegetables

The quality & the freshness of fruits and vegetables is the main anxiety in online grocery shopping.

Customers are becoming more and more health conscious (always keeping health in their mind). Inorganic ways of cultivating vegetables and fruits- Use of carbides and calcium sulphate to grow banana and mangoes, wax apples, oxytocin used in bottle gourd will keep the consumers with a doubtful attitude towards fruits and vegetables. Once the customers are getting aware of ground realities they wish to shop fruits & vegetables personally.

Guiding the staff for buying (trading) good vegetables and fruits is a big challenge, since something may be good for one person and might be not good for others. What is more, buying vegetable is itself a skill, which will take time to learn and with high attrition rate it is not easy for companies to train their new employees.

2. Home Delivery

Home delivery in its place sometimes becomes point of worry, when delivery slots are too lengthy for someone to wait at home. Many times same day delivery will not possible due to unavailability of vehicles to delivery in time, due to this customer will be more frustrated. Confirming the order and then not revolving up, leaving the customer waiting is the worst situation.

3. Thin Gross Margins

Online Grocery business operates a very less margin of 6-8%, if you issue in the delivery charges than you will be end up selling at a loss. On an average a corporation can make Rs. 25 on order of cost Rs 500 and if delivery charges (Rs.40-50) are included than it will be a loss of Rs 25 (leave the fixed cost). It is just for orders above 1000 that the company can pay off the delivery charges (Rs 50) with the profit earned (Rs 50), without having a profit. That is the reason most of the companies are charging a minimum amount of delivery charges on orders under Rs.500.

If you think about the fixed cost of workers, skill, logistics, inventory then it is predictable for the companies to charge delivery best.

4. Are the customers ready to pay delivery charges?

Most of the online grocery companies are not only using investment capital to meet their operations but also for the delivery charges. On an average the delivery cost to the corporation is around Rs. 40-50 per delivery and almost all companies are offering free delivery on the orders above Rs.500 order (except Big Basket, Top Tomato, and My Grahak). Companies like Veggie Bazaar are offering free delivery on orders as low as Rs.150.

So people are enjoying free grocery deliveries at home. But when these companies start charging, there will be very less changes that people will be willing to pay. Otherwise they might switch to other companies whoever charging less, or they may depend on local provisional shops for free delivery. In such a situation, online grocery companies will have to divide their premium and regular customers and aim them. This will be a big challenge.

5. Does not match the buyer behavior:

Many of us are quiet particular about our grocery. We want a biscuit of our favorite brand, if that is not obtainable then we will choose second favorite brand from the shops. But this alternative not available in online grocery shopping- if you not found your favorite brand in the catalogue or if it may be out of stock, then in both the situations you will run to the market.

Reliability is a very big factor, which will take time and consistency of services to build. Only reliability also not enough, online grocery business needs to maintain a huge variety of all products with standard promotional updates to attract consumers.

6. Are Online Grocery Companies offering a Complete Solution?

With vast number of products and their brands, it becomes very complex to maintain stock of all the products at the same time. Some items will be out of stock, whereas some brands will be not available and there will be no choice in the online grocery stores. In both the cases, the customers run to the nearest local markets (or provisions). Customers will never prefer to wait in this situation, because the same product can easily available near to their place.

7. Competition/ Substitutes:

There are many online grocery companies giving competition to each other for customer base. There are more than 100 big and small companies in this market still this market is not saturated as and there is huge chance in tier 2 cities which is on the cards of companies.

Substitutes are the local provisions who offer free delivery at doorsteps. Online grocery companies can travel around the Point of difference between provisions and themselves- provisions doesn’t deliver fruits and vegetable & secondly one provisions shop may not have such a diverse product collection. Though roping in local provisions would be a win-win situation for both- the provisions and the online grocery business.

8. Infrastructure:

There are various business models in online grocery delivery, some companies have their own stores, and some companies tie up with local mom and pop stores. Having company’s own dark store allow the company to have a full control on their business. Such companies can control and provide the quality of fresh products, conference high demand, achieving economies of scale but at the same time maintenance cost is more, logistics, wastage in transport are the two issues associated with owning the infrastructure.

9. Customer Loyalty

Customer loyalty is a major challenge in online grocery business. Companies are trying to spout new customers by offering them good and attractive offers and better knowledge. Since the companies will be in their initial stage and the consumers are also will be in the trial stage, a lot of hopping from one company to another might be seen. The same may happen later also if the customer has a bad incident with his company even for once.

10. Challenges in Operations and Training

Recruiting and training of delivery boys, cash handling joined with logistical issues, along with handling of unpreserved products, wastage and product returns add to the woes of online grocery startups. These issues add to the cost of order completion and further increase the cash burn. The online grocery startups depend heavily on the feet-on-the-street.

After going with the above factors, it is obvious that running an online grocery startup is a difficult task. One fact that can’t be denied that many resort to online shopping of groceries and it made their life more comfortable and luxurious, while some prefer the conservative way. India’s online grocery startups are sure to bring more innovation and set up themselves as a globally satisfactory platform.