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Online Grocery Business

By Abhishek Marwah on 16 Comments / 1602 views

Hi Friends,

Please help me with your veiws on Online Grocery Business.

My concerns are:

1. Supply Chain/Business Model – It’s very important to understand the complete value chain of the products and the margins involved at every level. It is extremely important to procure goods from the wholesalers and pass the margin to the consumers. Once the business achieves scale, once needs to further go down the supply chain and start procuring goods from the source from where the wholesalers procure. This will increase the margins going further.

2. Acceptability by the consumer – How has been the acceptability of the consumer regarding buying day to day grocery items on internet/phone and whats the motivation, is it the savings (if online is cheaper than normal grocery stores) or is it convenience. If its savings, are we really able to offer lower price to customers? If its convenience, does other grocery stores offer free home delivery in a professional way? I am just trying to understand the USP of the business model. This model may be preferred more by IT/BPO/Working class people in Noida/Gurgaon etc who likes using technology for the shopping and don’t want to spend time in these petty household chores.

 3. Scalability – The main driver for money making in this business is volumes as the margins in retail (especially grocery) is not more than 10%. It’s important to make a list of marketing actions, which you think is required to secure these many customers. Marketing will be a game changer for this business. 

 4. Competition – Need to take into account that once the customer has more options to buy from different online portals. His decision will be solely based on price. Leading to a strong price competition between different players which will eat the margins. Initially we can also find markets (geographically) which are not served by any of the competitors. Some research needs to be done in this regard as well. Over a long term marketing/branding/customer service/competitive pricing will decide the market share.

5. Understanding costs – One also need to understand the overheads of delivery/distribution and also packaging. I assume that we will need to spend on some sort of packaging/bags for Branding. How does that costs impacts the gross margins (Difference between buying and selling price of items). The net margins will come when we reduce these overheads (delivery/stationery/packaging/storage) costs from the gross margins.

6.  Miscellaneous issues – Other issues which needs to be looked into include – management of  inventories, varied SKUs with uneven pack sizes, loss from products which are highly perishable.

Thanks in advance for helping me out.

Best Regards,

Abhishek Marwah 

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16 Comments

  1. Hello Abhishek,

    First of all pros:

    The idea is great and has a great potential. There is no such reliable and fast player in this segment. Yes few are present like futurebazaar and ebay but dunno y they lack the spunk. Long term business.

    Few concerns on same:

    1. Grocery involves large quantity but less individual item cost and low margin on some products.

    2. One needs to have stock of nearly all brand options for all house hold products to come out as “one stop shop”

    3. Few items may perish.

    4. Delivery has to be quick if possible in minutes rather than days.

    5. Efficient IT infrastructure.

    Now, it is how you work and what you can offer on the platter to create your space. You can start small may be locally. I am a web developer and if you require any assistance I may be reached at contact@webdesigndeveloplearn.com.

    Best of luck for your venture,

    Ishan

  2. Thanks! Ishan for your views.. will contact you whenever your services required…

    Cheers!!

  3. abhishek,

    pls check out this post – though it’s about online veggie stores – a lot of the comments will give you valuable insights

    https://www.therodinhoods.com/forum/topics/my-thoughts-on-online-vegetable-selling-companies

  4. Ever heard of Nature’s Feast? https://naturesfeast.in

    They are just launching as we talk. 

    Similar biz

  5. Hi Jaisal, its a good point to be considered. Thanks 🙂

  6. Thanks Asha 🙂

  7. Hi Saurabh, there are already some player in the market who are operating on the same model…

  8. Abhishek,

    On a lighter side, online-grocery is the new ‘e-com’ these days. Every city worth it’s name has 2-3 online-grocery portals. The jury is still out on how many survive & scale up.

    This is a business, with strong local needs, and in my view, much more complex than the general e-com stories we have seen unfold so far. 

    At the same time, different players are trying to address this online grocery market in different ways. For example, bigbasket, zopnow are examples of inventory based approaches, aaramshop is trying to leverage the local retailers by giving them a platform to serve their local customers.

  9. Valid Points, Shahnawaz. Thanks 🙂

  10. Hello Abhishek, 

    Was browsing blogs and landed here. Do have a look at http://www.shopkirana.com

    We have started this e-grocery store for Indore just 15 days back. 

    I will be more than happy to help you. 🙂

  11. Abhishek ,
    Dont get into this business its Flawed, kindly find out why big players like flipcart,ebay etc are not in this game
    ((possibly they did not have brains 🙂 )you will get your answers kindly do some research.

  12. This is a great bussiness idea…

    But I have some queries:

    1 Will you maintain your own inventory ?

    2. If Yes then how much of each category?

     

  13. i think, It will be a better proposition for one who is already running a offline model….

  14. Hi Abhishek

    I have developed and helped in launching http://www.lorvenmegamart.com a Hyderabad based online grocery store. They are into business from around 1 year (mostly through phone / offline order taking) but the website was started 3 months back. Being with them for three months and the way I understood the whole business I can share few points on this kind of business.

    1. The targetable demographic is upper middle class and above classes.

    1. Not only geeks and techies but people from all walks of life (esp. doctors, lawyers etc.,) (from above demographic) interested to use this kind of convenient service. 

    2. Convenience / Service is the key factor than price, no body have that much of time to compare price of huge list of items. I have seen few people who simply asks for a repeat of last months cart.

    3. As the number of SKUs may reach more than 3000, its better not to keep stock initially, after some time based on your stats, keep monthly stock of fast moving products.

    4. Hardly you get 10% margin on packaged / branded items, and around 20%- 40% from non-branded grocery.

    5. Timely delivery (without missing products) is key to your success.

    6. Be ready to spend around 1lakh per month which you can use to hire premises/staff/packaging/delivery expenses. and remaining half you can spent on low cost viral marketing.

    7. This is completely volume game, the higher the sales, the lower the expenses i.e. more profits.

    Best Wishes,
    Mohan
    bvsmohan@santhra.com

  15. Valid points! Mohan

  16. Hi Mohan, you observed it very well. Thanks 🙂

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