Any business model with an "e" in front is considered to be gold standard by investors in the PE/angel investors/ VC space. More so, if the model is to bring in "supply chain"efficiences in the huge Indian grocery market.
On on end you have pureplay e-grocers, dominated by bigbasket.com, localbanya.com, etc. On the other end, you have hyperlocal kirana (mom and pop stores) aggregators like grofers.com The latter have a mobile app and a customer can order through the app and then one of the nearby stores pick packs the order and sends it across to your house.
The pot of gold for any grocery retailer is the monthly shopping basket for the customer. My parents used to make a shopping list and then hand it over to the local provision store at the beginning of the month. With the advent of "organised/modern" retailers, SEC A customers have now moved to these stores for their monthly shopping basket. During the month, any top ups are done through the local retailer. Top ups typically happen for vegetables, dairy products, and sometimes for personal care products as well.
The challenge for e grocers is to be in the consideration set for the monthly shopping mission for the shoppers. The current business model of e grocers prevents this as the monthly shopping basket requires deep expertise in understanding the commodities basket of the shopper and in building the logistics to source commodities- both extremely difficult tasks. The latter requires deep investment in building the logistics infrastructure which will completely turn the business model of the e grocers upside down; the former requires deep local understanding of customers which no algorithim can help in understanding.
The e-aggregators value proposition is currently a question mark. Unlike the e grocers, the customer service experience is largely with the local kirana store. His inventory determines how fast and efficiently customers are served. Again, such models have no play in the monthly shopping basket.
The e-aggregators' business model looks attractive in the beginning; no inventory, minimal working capital, low fixed costs. But the model inherently has challenges of scaling up. The pureplay e grocers grew to a point with low investments in back end by depending on cash and carry players but now have started investing in their own back end infrastructure. This coupled with front end delivery costs will drive up operating costs for the e grocers. I will not be surprised if the cost to serve for e grocers becomes higher than brick and mortar models in the near future.
What is certain is that business models in e retail in particular and retail in general will keep evolving at a fast pace and hence it is too early to call any particular model a successful one or one doomed to fail!
On on end you have pureplay e-grocers, dominated by bigbasket.com, localbanya.com, etc. On the other end, you have hyperlocal kirana (mom and pop stores) aggregators like grofers.com The latter have a mobile app and a customer can order through the app and then one of the nearby stores pick packs the order and sends it across to your house.
The pot of gold for any grocery retailer is the monthly shopping basket for the customer. My parents used to make a shopping list and then hand it over to the local provision store at the beginning of the month. With the advent of "organised/modern" retailers, SEC A customers have now moved to these stores for their monthly shopping basket. During the month, any top ups are done through the local retailer. Top ups typically happen for vegetables, dairy products, and sometimes for personal care products as well.
The challenge for e grocers is to be in the consideration set for the monthly shopping mission for the shoppers. The current business model of e grocers prevents this as the monthly shopping basket requires deep expertise in understanding the commodities basket of the shopper and in building the logistics to source commodities- both extremely difficult tasks. The latter requires deep investment in building the logistics infrastructure which will completely turn the business model of the e grocers upside down; the former requires deep local understanding of customers which no algorithim can help in understanding.
The e-aggregators value proposition is currently a question mark. Unlike the e grocers, the customer service experience is largely with the local kirana store. His inventory determines how fast and efficiently customers are served. Again, such models have no play in the monthly shopping basket.
The e-aggregators' business model looks attractive in the beginning; no inventory, minimal working capital, low fixed costs. But the model inherently has challenges of scaling up. The pureplay e grocers grew to a point with low investments in back end by depending on cash and carry players but now have started investing in their own back end infrastructure. This coupled with front end delivery costs will drive up operating costs for the e grocers. I will not be surprised if the cost to serve for e grocers becomes higher than brick and mortar models in the near future.
What is certain is that business models in e retail in particular and retail in general will keep evolving at a fast pace and hence it is too early to call any particular model a successful one or one doomed to fail!
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