Virtual Grocery – A profitable business proposition for small time vendors
Groceries sell irrespective of the state of economy. You can stop having entertainment like going to movies or to a pub. However you cannot live without a toothpaste, soap or vegetables. Caught in the hustle and bustle of city traffic, tedious commuting and long working hours, many consumers don’t have time to buy groceries in the shops.
Improved internet connectivity and comfort with online payments made life easier for buyers to shop for groceries, who were earlier used to purchase apparel, books and electronic gadgets. Another important factor is introduction of pocket friendly smartphone where buyers can order online without the help of desktops. The cost of owning a domain and hosting for an online store is very negligible when compared with the investment for infra structure.
Sensing this opportunity, few entrepreneurs, seen this potential and started online portal for groceries. If you understand with knowledge of retail market and good customer service can develop a great business.
Online retailers like BigBasket.com, AaramShop.com and Zopnow.com have developed good client base with innovative thinking and better positioning of products. Most of the existing etailers offer their services in metros and major urban centers.
Spending on groceries and daily essentials is the largest and most consistent share of the wallet for any household. This presents a huge opportunity to online shopping, as per Vijay Singh, CMD of Aaramshop.com, who operates in 30 Indian cities with more than 3,000 retail partner.
A good example of innovative thinking can be given in terms of SeaToHome.com. A Delhi based entrepreneur Priya Solomon with help of her brother in law Mathew Joseph started the venture.
They started catering to consumers who want their fish without any preservatives since most of them are treated before reaching the market. Fish might have been caught few days and refrigerated earlier by trawlers.
Integrating their online portal, with their existing fish business was easy. However they had to invest in development of back end systems, office and staff. They are catering to the taste of Bangalore, Delhi, Kochi, Thiruvananthapruam and Coimbatore. Fish are sourced from fishermen along the coast of Karnataka, Tamil Nadu and Kerala.
Frequent Buyers are important source and e-tailing is challenging. Once the customer is satisfied, you can have more orders. Lots of households procuring all their groceries through e-tailers will generate good volume of sales.
However grocery e-stores do face challenge in terms of catering in other cities apart from their base city. It is easy to send a mobile or a book thru courier in another city, however it is not possible to send a sack of rice considering the lower retailer margin. Earlier too attempts were to cater grocery thru online grocery which failed due to complex and expensive supply chain, presence of brick and mortar stores.
Another challenge is of perishable products like vegetables, dairy products like milk or cheese cannot be stored for a long time. Many e-tailers stick on to packaged food items.
Online retailing in India has gained success with robust offline operations. Buyers still relate groceries with stores and malls. Prospective customers can be educated about the opportunity and benefit the ordering of groceries online.
To be successful online grocer, one has to have robust understanding of supply chain management from procurement to distribution to the last mile will be helpful.
Understanding competition would be better, new players are entering the market, which is yet to saturate. Most of ventures cater to selective metros and many cities, which has the potential for multiple players.
In case of AaramShop.com, they tied up with local grocery stores. Customer has to select the store and place an order for grocery which will be delivered within 45 minutes. The success of hybrid model compounded with re-invention of supply chain at no additional costs.
Eliminating many intermediaries you can improve margins will help in better deals to the consumers and optimizing supply chain also.
Starting up in several cities will put finances in undue strain. Focus should be systemically starting in each city, one after another. The business will take time to break even, to sustain till that time one should have sufficient cash reserves and patience.