Challenges to the online grocery model

One of the most interesting sectors of the retail market today is the grocery segment, and even in the grocery segment it is online grocery or e-grocers which is most happening. Growing interest by consumers to click and point their way through nearly all aspects of daily life has fuelled the Internet economy and has impelled the development of online services and selling of products online even in areas that were once the sole preserve of traditional businesses, such as grocery stores and pharmacies. 


Some of the reasons why increasing numbers of consumers are likely to turn to online grocery are the same as those driving other Internet purchases - better prices, larger selection, convenience, and time savings. Home delivery of items purchased online is appealing to those for whom going out to shop is difficult for various reasons, such as paucity of time, the need to care for young children, the lack of adequate or convenient transportation, and/or a busy lifestyle. Buying groceries and other products online unchains consumers from physically driving to and shopping in traditional stores, particularly when parking is such a pain. Besides storing weekly orders on the website offers predictability and makes repeat orders simpler.


However, despite its obvious advantages online grocery has been slow in coming to India. There have been sporadic attempts, but none very successful. Only part of the reason has been unwillingness of urban Indians to adopt e-grocery. Lack of viable options too plays a big part.


From consumers' point of view, having to plan and think about the delivery schedule is a major deterrence for customers wanting to try online grocery shopping. Most consumers are used to going to the grocery store on the spur-of-the-moment, and often combine grocery shopping with other activities including watching a movie or eating out. Sometimes grocery shopping may also be combined with apparel or electronics shopping, and may serve as a family outing.

Other factors negatively influencing consumers' decisions to purchase groceries or other goods online include delivery charges, credit card security, the need or want for immediate delivery of products, and the social aspects of the shopping experience. Considering the high proportion of family income spent on grocery shopping, families tend to accept a little inconvenience for lower costs. If a supermarket offer grocery at substantially lower rates, consumers would tend to flock to that supermarket disregarding the cost of transportation, parking and the time spent.

The threat of credit card theft remains a real issue in the minds of many consumers, although incidents of fraudulent credit card use on e-grocers' websites are few and far between. Some consumers are also concerned about the freshness of the products they buy from e-grocers, particularly if it's fruits or vegetables or dairy items they are purchasing. Some may simply want to squeeze and smell the products before purchasing - the need to touch and feel products remains a significant barrier for the online sale of groceries. This need, though, can be largely obviated by selling packaged stuff with clear quality indicators, list of ingredients and expiry dates.


Although many customers do not think that ordering groceries online is something they would be interested in, once some try it, they become captivated by the convenience. While low penetrativity of Internet is an impediment to large scale adoption of e-grocery in India, urban India has been able to reach a critical mass in terms of connectivity. While rural India is driving the growth in every other segment including two wheelers, mobile phones and white goods, online grocery is a segment where most of the growth for the foreseeable future will be driven by urban India. A lot depends on how e-grocers plan to alleviate the problems highlighted above. In my next post I will touch upon some possible solutions, along with the solutions adopted by EasyDukaan.