Online grocery segment to touch $3 billion by year-end: Report

COVID-19 induced tailwinds, coupled with participation from large conglomerates like Reliance are expected to drive growth in the online grocery segment in India, expanding the market to USD 3 billion by year-end, according to a report.

With supply ramping up in time to match the surging demand, eGrocery will grow very fast to be USD 18.2 billion by 2024 from USD 1.9 billion in 2019 - growing at a CAGR of 57 per cent, the report by consulting firm RedSeer and online grocery player BigBasket said.

"During COVID-19, consumers have shown increased propensity to order online. A lot of this behaviour is likely to stick...Entry of large players like Jio will drive adoption among tier II + cities (a large, relatively untapped market). Renewed interest from large horizontals like Flipkart/Amazon, among other online players will further boost penetration," the report said.

It added that while the growth in eGrocery in the lockdown has been impressive, the segment is expected to see about 2.6X growth in GMV (gross merchandise value) run-rate by the end of the year.

"For all of 2020, the GMV will be over 70 per cent higher than 2019, which would indicate a fundamental shift in how eGrocery is perceived as a business. With traditional players increasingly leveraging the local ecosystem in their offerings, that could be the preferred way for players to scale beyond the top cities," it said.

This, and more such innovation and partnerships, will be the way forward for Indian eGrocery, the report added.

It said while there were some challenges in the initial days of lockdown, the eGocery category grew 73 per cent during that period.

Fresh vegetables and fruits saw 144 per cent growth, while FMCG products grew 150 per cent.

"We expect the growth of online to be steady for the rest of the year (2020) to reach USD 3 billion plus," it added.