Flipkart readies to take on Amazon and BigBasket in the Bengaluru grocery space with Supermart; e-tailer aims to enter 5-6 major cities by the end of 2018.
Post its acquisition by US retailer Walmart, India’s online commerce leader Flipkart has launched its grocery store: Flipkart Supermart. Currently covering Bengaluru, it aims to expand to 5-6 cities by the end of 2018.
The 11-year-old company has been building on the grocery category for a long time. In November 2017, it launched the grocery segment in Bengaluru with the service available only to its employees, under the same tag (Supermart).
But this was not Flipkart’s first foray into grocery. In October 2015, Flipkart launched its own grocery delivery arm, Nearby, only to shut it down in February the following year. At that time, the company claimed that Flipkart Nearby was piloted in select areas of Bengaluru as a test for understanding efficiencies and operations of the hyperlocal business. The company had then said that the project had run its course and learnings from that pilot would be used for future operations.
Manish Kumar, Head of Groceries at Flipkart, said the feedback had been phenomenal. “Customers who have tried it are absolutely delighted and have kept coming back. We’re now taking it wider and plan to expand our reach and scale rapidly over the coming months,” he said in a press release.
The discount factor
The press release added that Flipkart Supermart offered bigger discounts as compared to any store. Notably, just last week a draft ecommerce policy by the Central Government stated that the online marketplaces are not to, directly or indirectly, influence sale prices.
The Competition Commission of India has been asked to look into mergers or/and acquisitions that will induce unfair/anti-competitive pricing. This decision comes in the wake of online sellers protesting Walmart's acquisition of Flipkart.
(Walmart’s success all over the world has been built on offering low prices to the customers with their ‘Every Day Low Pricing’ (EDLP) strategy. Retailers who sell on online marketplaces have been complaining that this merger will hurt their business, as the alliance will offer cheaper prices.)
Flipkart Supermart will also provide doorstep delivery at a preferred time slot. It guarantees product freshness and Best Before Date for each product on the display page.
In e-grocery, going beyond branded FMCG is essential for creating differentiation and earning better margins. Hence fresh produce and private labels are a necessity.
Flipkart Supermart Select is the company's private label in the staples categories (pulses, spices, dry fruits) to fill gaps of selection, quality, and pricing. Flipkart claims that these items are sourced directly from farms, and packed under supervision after rigorous quality checks.
It has also set up a dedicated supply chain that includes building a new warehouse and last-mile delivery network. Additionally, it provides open-box slotted deliveries for easy doorstep returns. Selected customers can access Flipkart Buy Now Pay Later, where they can keep buying groceries and pay by the 10th of next month.
Currently, online retail is just 0.5 percent of the total grocery market in India, which is pegged at $400 billion - 70 percent of all retail. The scope for growth ensures repeat business and customer retention – something Flipkart have to fight for, as online grocery vertical players BigBasket and Grofers and horizontal ecommerce titan Amazon have established themselves in the sector. While the per-basket size may be low compared with a category like mobile phones, volumes are quite high in grocery.
Since 100 percent FDI has been allowed in food retail, Flipkart, which has over 100,000 registered sellers, can work with an inventory model like Big Basket and Grofers.
According to a Goldman Sachs report, BigBasket has 85 percent market share in e-grocery, with 50,000 orders per day in Bengaluru alone. For Amazon India, grocery is number one in terms of units sold. With multiple models, Amazon has succesfully created customer loyalty in grocery. In fact, its grocery delivery service AmazonNow was rebranded as Prime Now recently, to provide two-hour delivery to Amazon Prime members between 6 am and midnight.