Indian e-commerce major Flipkart has launched its first grocery store (Flipkart Supermart) in Bengaluru, with plans to expand to 5-6 cities by end-2018 amid competition with Amazon and other local players, according to Indian media reports.
”Customers who have tried it are absolutely delighted and have kept coming back,” said Manish Kumar, the Head of Groceries at Flipkart. Additionally, he disclosed plans to scale rapidly over the next few months due to the positive response this latest development has received.
11 years since inception, Flipkart’s first foray into the region’s grocery sector began in October 2015 with its own grocery delivery arm. Shortly after a grocery segment launch in Bengaluru last November, and follows the planned $16b acquisition of a 77 per cent majority stake in the e-commerce enterprise by US retailer Walmart.
Reflecting a shift in Walmart’s international growth strategy, the acquisition of a stake in Flipkart represented a more optimal way to compete with Amazon in what is currently the world’s sixth largest economy, according to data from the World Bank.
The deal will see the Flipkart brand remain distinct from Walmarts’, with Walmart CEO Doug McMillon reportedly saying at a town hall meeting to Flipkart’s employees: ”It is our intention to just empower you and let you run – speed matters, decisiveness matter.”
Flipkart piloted the grocery delivery service in Bengaluru in November 2017. Based on feedback received, it reviewed the programme six months ago and started offering staples, snacks and beverages, along with personal and baby care products.
Reflecting Walmart’s ‘Every Day Low Pricing’ strategy, the e-grocer service by Flipkart offers huge discounts and even goes to the extent of allowing selected customers to continue purchasing groceries, only to pay for them by the 10th of next month. This development comes at a time when a number of factors are driving competition in India’s online grocery space.
Like Amazon, Flipkart claims to maintain a focused supply chain that includes its own warehouses and last-mile delivery network. Expansion into this segment will see Flipkart compete with more established players such as Amazon and BigBasket, as well as Grofers.
Kumar explains: “Grocery is the largest retail category but it’s not a solved problem from an e-commerce perspective. We have done three main things to solve this. First, grocery is a high-repeat category so we will offer everyday discounts. Second, we have a strong proposition of delivering quality. We will display expiry dates on each product and guarantee fresh products to customers. Third, through preferred delivery slots for customers, we have tried to solve for convenience from a customer experience point of view.”
Amazon reportedly sells the largest number of grocery units sold in India, while a Goldman Sachs report indicates that BigBasket – which closed a $300m investment from the Alibaba Group earlier this year that valued it at $950m – maintains 85 per cent market share in India’s e-grocery space.
The total grocery market size in India is valued at $400b, with online retail only scratching the surface at a mere 0.5 per cent to date, making the market very attractive, offering huge space for growth for these players.
Research by global analytics firm Crisil suggests that over the next three years, e-retail in India is expected to grow over 2.5 times to $28 billion by fiscal 2020, with online grocery services the fastest-growing segment with a CAGR of 65-70 per cent between fiscals 2017 and 2020.
Hence, this fight for a larger slice of the market – something that is too big to lose for all these players, Amazon and Walmart’s Flipkart – is set to grow in intensity, as consumers in India look forward to better and more convenient services, at least for the near future.
Editor: Shiwen Yap
