Mehak Sharma, Indiaretailing.com
New Delhi , 28 May 2015
Grocery e-tailing — once not an in-favour category with Indian e-tailers — is gunning for growth with startups and existing players eyeing an online shot. For some though, it’s an exploration of the genesis of what really matters in retail.
Several startups are currently focusing on pulling in the unique advantages of neighbourhood pop-and-mom stores into a technology-driven delivery model. These are structured around linking kirana stores with customers through mobile apps and online portals, creating an online marketplace for these stores at a time when traditional retailers are finding the online retail model difficult to comprehend.
Enter the ‘hyperlocal’. The aim is to provide consumers convenient access to their favourite kirana stores, and for these stores to become more technologically organised.
"The hyperlocal model is really the culmination of 50-60 years of learning," explains Devangshu Dutta, CEO, Third Eyesight. "After years of large chains offering fairly standarised merchandise mixes to customers across geographies, we are now at a stage when startups are aggregating the mom-n-pop experience through technology."
Last year, e-commerce giant Amazon launched a similar service, called KiranaNow, to ensure quicker and faster delivery of everyday-need consumer products through neighbourhood kirana stores. Some others, including Grofers, LocalBanya and PepperTap, are also working on the same format.
"Our market research showed that consumers in large numbers buy a lot of basics from stores in their neighbourhood. But fulfilment of a requirement within a timeframe as desired by the customer is a gap area in online retail, and we decided to address this issue by developing an app to meet this need," says Saurabh Singla, a young IIT-graduate, who is also the CEO of Gurgaon-based hyperlocal startup, LazyLad.
Lazy Lad, which started operations in four Indian cities about a month ago, is banking on online technology, especially mobile applications, to bring smaller brick-and-mortar grocery stores under their fold with the objective of expanding and streamlining the grocery market in the country.
Where most startups see a huge potential in this model, some grocers are skeptic on the deliverables of the online hyperlocal. Manoj Satia, MD, Direrect2u Retail, a Mumbai-based grocery retailer, says, "There is no sustainable model by which a grocery e-tailer can monitor the deliveries by kirana stores. How will they determine if the deliveries are made on time? This could pose the biggest challenge in the success of hyperlocal format."
The market opportunity for the hyperlocal model in the food and
grocery business is huge, which is attracting many fresh start
ups. Groceries account for 65% of the consumer’s wallet spending,
and if this category takes off online, there could be an upside
to the growth of e-commerce, which is expected to touch anywhere
between $48 billion and $60 billion by 2020 from $4.47 billion
last year, UBS Securities said in a report on e-commerce released
earlier in April.
Dutta points out that neighbourhood stores have a clearer and sustained understanding of local tastes and shopping preferences, which large scale chains — with their centralised systems and ‘distance’ from local customers — do not possess. "The hyperlocal is really how businesses were run decades ago; albeit in new packaging, it is really a back-to-the-basics model."
And how sustainable is this model? According to Dutta, the growth of new hyperlocal-centric ventures will depend on two factors: the robustness and scalability of the technology infrastructure, and the success it achieves with both consumers and retailers. "If the model is not successful in neighbourhood A — from both consumer and seller point of views — it is unlikely to scale to somewhere else."
Interviews by Sanjay Kumar and Nupur Chakraborty
(Published in Indiaretailing.com.)