Flipkart is poised to begin selling groceries from the second half of this year, sources said, entering a line of business which is crowded but also regarded as an attractive one for online retailers.
The service, most likely to be launched as an in-house offering rather than through an acquisition, will put the Bengaluru firm in direct competition with specialist portals such as Big-Basket, ZopNow and Local Baniya as grocery retail emerges as the latest front in the battle for leadership in India’s fast-growing online retail industry.
“We already have the technology, warehousing and the brand, so most likely we will do this in-house in the second half of this year,” a person with knowledge of the firm’s plan told ET.
Flipkart declined comment for this report.
When it launches a grocery retail service, Flipkart will be following in the wake of rivals Amazon and Snapdeal, which have a head start in the segment. Last week, Amazon India said it is launching an express delivery platform in partnership with mom-and-pop stores, calling it Kirana Now. The company is currently running a pilot programme in Bengaluru.
However, some packaged foods and beverages have been available on the Amazon India portal since October 2014.
Snapdeal tied up with gourmet food retailer Godrej Nature’s Basket in January to sell about 400 of its products online, with orders delivered the next day. The Delhibased company does not, as yet, offer on-demand grocery.
Experts are of the view that online grocery will become one of the top three most attractive segments for online retailers, after electronics and apparel.
“It (grocery) is too large a space for someone to miss,” said Arvind Singhal, chairman of retail advisory firm Technopak.
“In the next six months, we will see online vertical players, horizontal players as well as offline players coming online to sell groceries,” he predicted. The India Brand Equity Foundation estimates that food and grocery accounted for 69% of India’s $490-billion (Rs 300-lakh crore) retail sector in 2013, followed by apparel at 8%.
Entering newer categories
According to people familiar with Flipkart’s expansion plans, the addition of groceries on its portal is part of a larger strategy to include newer categories and business lines that will help boost revenue and chalk up profits.
All these moves are seen as a runup to an eventual public listing of the shares of the Bengaluru company within the next two years. “We will try and launch as many categories as possible and FMCG will be one of those categories,” said Ankit Nagori, senior vicepresident in-charge of Flipkart’s commerce platform. Other categories of interest would be home furnishing and furniture, he said.
At present, Flipkart offers over 80 categories of products through sellers on its marketplace, with fashion being the largest product line. The company said it sold gross merchandise worth $3 billion last year and aims at closing this year with $8 billion in sales.
There are already specialist grocery portals operating in India’s ecommerce market, which is projected to reach $43 billion in value by 2019, according to Nomura.
BigBasket, the category leader, last week announced that it had carved out three new revenue streams in collaboration with local kirana stores, including on-demand express delivery, sale of private label staples to offline stores, and co-branded kirana pickup points. The entry of Flipkart and Amazon into this space will only validate the attractiveness of online grocery retail, according to investors.
“Groceries is a natural category for anyone to lust after, but the supply chain for groceries is very complex and has to be built city by city,” said Sanjeev Aggarwal, cofounder of Helion Ventures, which has backed BigBasket.
