Online food & grocery retail business spreading wings in India

According to the latest United States Department of Agriculture (USDA) report, the number of online food and grocery retail outlets has increased to 44 so far this year from 14 in 2013 on the back of growing Internet users in India. The report says that online retailers are competing with kirana stores that provide quick (often within an hour) home delivery and credit to neighbourhood consumers. Compared to these stores, online retailers will need to overcome delivery challenges, it said.

The report has found out that maximum of these online grocery retail outlets are operating in Delhi, followed by Bangalore, Mumbai, Hyderabad, Chennai, Pune, Kolkata, Chandigarh, Thiruvananthapuram and Coimbatore and others. "Online food and grocery retailing outlets have increased from 14 in 2013 to 44 as of September 2014. Growth in online retail use has been greatest among younger and professional population segments”, says the USDA report. The number of online grocery retail outlets is expected to rise in future with total Internet users increasing from 120 million to 213 million in the past year as well as a fall in mobile handset prices and a rise in smartphone penetration, it said.

Highlighting fast changing trends in the India's online retail sector, the USDA report said: "Indian consumers are overcoming biases against purchasing items without prior inspection and safety of automated and online transactions. This shifting tendency is brought about by competitive pricing and the convenience of shopping for groceries from the comfort of one's own home.” Consumers are seeing that online retail provides some benefits over going to kirana stores (independent small grocers) or store-based retailers' outlets, it said. The availability of multiple payment methodologies such as online banking, cash-on-delivery, credit cards and debit cards have meant that it is convenient for urban consumers to shop online while saving both time and money, it added.

Emphasizing the opportunities for continued growth in online grocery retailing, the report said, "Presently, most online retailers limit their distribution to a particular city, but operations may expand quickly if some business models prove successful.” Domestic products dominate the product categories, but most online retailers carry some imported food items. Given the complexity of importing food products into India, online retailers currently rely on local distributors, it said.