India’s online grocery market could top $3 billion in sales this year, a 76% increase over last year, as the spike in demand for home delivery of fresh produce and staples seen during the nationwide lockdown is expected to sustain through the rest of the year, analysts and industry executives said.
India’s e-commerce industry is pegged to grow by 6%, equating to about $35.5 billion this year, according to the Forrester Research.
“While the demand seen over the last six weeks may not sustain, a lot of households have tried ordering groceries online and that should remain in the longer term,” said Satish Meena, senior forecast analyst at Forrester Research.
A similar trend is unfolding in the United States and other global markets, he added.
BigBasket continues to fulfil over 300,000 orders a day, compared to 150,000 orders before the crisis, Hari Menon, CEO of BigBasket told ET.
“Demand continues to be very strong. In May, we are growing by around 35% over April. We have scaled up on our people availability because of which, in most cities, slots are available,” Menon said.
SoftBank-backed Grofers also said orders are at elevated levels.
“We continue to see a surge in demand with a daily gross merchandise value (GMV) that is 60% higher than pre-Covid-19 levels. This is lower than the 2X jump that we witnessed in the first week of the lockdown as consumers are now buying what they really need, instead of stocking up excessively,” said Albinder Dhindsa, CEO and cofounder of Grofers.
The company is projecting Ebdita-level profitability in May, ET reported earlier this month. Ebidta refers to a company’s earnings before interest, depreciation, tax and amortisation, and is a widely used measure of profitability.
The two main horizontal e-commerce players, Flipkart and Amazon, have also strengthened their grocery delivery capabilities over the last six weeks.
Both companies could pose a threat to BigBasket and Grofers in metros, on better availability of products and wider choice on their platforms, Meena said.
“There has certainly been a reduction in demand since the start of May, but recoveries in our supply chain mean delivery slots are more readily available to consumers. We are still fulfilling more grocery and fresh orders today than before the lockdown,” said an Amazon executive on the condition of anonymity.
Still, a lot more work is required to sustain growth. Amazon Fresh, the service to deliver fresh fruits and vegetables, is available only in a handful of cities, while Flipkart has relied heavily on third parties such as Spencer’s Retail and Vishal Megamart to drive grocery sales.
“Our grocery delivery volumes have grown by a few hundred percent in the last two months, but we had a very small base to begin with,” said an executive of a large e-commerce marketplace. “We will be able to sustain this and grow it further only if we can make available a full basket of products for consumers, and work for this is already on right now.”
Going by the example of the US online grocery market, India could see demand tapering to a large extent but order volumes remaining higher than prior to the lockdown.
Amazon and rival Walmart, which reported 29% and 74% growth in online sales respectively during the first quarter, said sales grew abnormally due to hoarding by consumers and restrictions on going out.
However, both firms hinted at e-commerce will emerge stronger from the pandemic as consumers continue to avoid public spaces such as shopping malls and crowded convenience stores.