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,