Starting with Bengaluru, Flipkart to foray into grocery biz with Supermart

To tackle grocery deliveries, the Bengaluru-based 'firm has set up a dedicated supply chain, including a 150,000 sq foot centre in the city and a delivery fleet separate from Flipkart's logistics arm

It has taken a long time in the coming, but India's largest e-commerce marketplace Flipkart is finally sinking its teeth into the online grocery segment with the launch of 'Supermart' on Thursday. The company said it would begin delivering groceries across Bengaluru at first, and subsequently expand the services across other metro cities by the end of the year.  

Flipkart had piloted its grocery delivery service in Bengaluru last November and reinvigorated its programme around six months ago, offering staples, snacks and beverages, along with personal and baby care products. Despite rivals Amazon and BigBasket making big strides in the segment all this while, Flipkart chose to perfect its model before launch. “Grocery is the biggest category in the overall retail market and also a major part of the consumer wallet. Consumer interaction in the category happens every week and transactions per customer are also very high. So this is a pretty big opportunity and we want to imagine grocery for e-commerce,” said Manish Kumar, head of grocery at Flipkart.

To tackle grocery deliveries, the Bengaluru-based ‘firm has set up a dedicated supply chain, including a 150,000 square foot centre in the city and a delivery fleet separate from Flipkart’s logistics arm.

This is similar to rival Amazon, which has so far set up 15 fulfilment centres across four major metros, specifically to cater to sale of groceries.

Flipkart had reportedly set aside $400 million to set up infrastructure such as local warehouses and cold chain, specifically for its grocery operations.

According to market research company Forrester, food and grocery make up over 55 per cent of India's retail market and is expected to grow over the next few years. Of this, the online grocery market stood at just $750 million in 2017, with dedicated online grocer BigBasket accounting for a big part of the sales. While Amazon has been active in the online grocery space for a while now, it has not just been able to catch the leader.

But Flipkart's Kumar says he does not think the company is late to the market. With just 0.5 per cent of the overall grocery market in India being serviced by the online channel, he says there is a lot of room to grow and become a leader here. Moreover, taking time to build the product has ensured that Flipkart offers a more unique and well-rounded service, he adds.

"This category required multiple innovations for different aspects of customers' shopping journey and what we have done is understood what are all the requirements for a seamless grocery shopping experience. Only then did we decide to launch our grocery piece, and we've done this with other categories as well," added Kumar.

One such innovation will be open-box deliveries, where customers will be able to inspect grocery items delivered to them and return them immediately if they are not satisfied with the product. This will also solve the issue of returns of groceries, which is a very hard task to solve given the low-ticket size of individual items, which make up a basket.

Flipkart will have its own private label 'Flipkart Supermart Select' from day One in the staples category. It will also extend its 'buy now, pay later' credit service to customers for their grocery purchases.

Amazon India, which started its grocery journey with Amazon Now by partnering with third party stores two years ago, is also planning to bring in its US-based fresh grocery delivery service AmazonFresh to India. "I would not speculate on when we would launch AmazonFresh but, absolutely, if you ask me the next five years of vision, from your avocados to your potatoes, and your meat to your ice cream, we'll deliver everything to you in two hours," Amit Agarwal, Amazon India head had told Reuters in April this year. 

Flipkart, for now, will only deliver packaged items, personal care items and other goods, but will not enter the fresh food market. Kumar says this continues to remain a focus for Flipkart but also requires more innovation in the model to be able to ensure that customers always receive the freshest fruits and vegetables. 

BigBasket and Grofers, the two original online grocers of India, owing to being in the market for a few years have already figured out how to deliver fresh goods to customers. This has made the two companies attractive targets for investors. Grofers raised Rs 4 billion from Tiger Global and Softbank in March, while BigBasket raised $300 million from Alibaba.

There are also a few upcoming players such as MilkLane and DailyNinja in this space, who focus on small portions of the daily-need-items market and are seeing some sort of traction.