'Organised grocery sector has opportunity of Rs 3.4 lakh cr'

Grocery accounts for about half of the country's retail consumption, but is the least organised, a report said, pegging the size of the market for organised players at Rs 3.4 lakh crore.
"We peg the size of opportunity for organised (including online) grocery retailers at Rs 3.4 trillion based on requirements in urban metropolitan areas (cities having population of more than 1 million)," the report from Kotak Institutional Equities (KIE) said.
"Despite the large size, this market has remained predominantly unorganised due to ubiquitous local stores/ vendors and the late emergence of organised brick-and-mortar retailers."
The report predicted a further increase in urban grocery consumption as urban population and purchasing power grow.

"Despite urbanisation trends and higher consumption seen for a few years now, organised grocery retail is a mere 2 per cent of the total pie," it said.
"This implies that local grocery (kirana) stores still control a whopping 98 per cent of the grocery retail market."

The report, citing NSSO consumption data, put India's total grocery market size at Rs 19.9 lakh crore, accounting for 48 per cent of retail consumption.
On hyper-local grocery delivery startups, the KIE report said inventory-led models like that of BigBasket would be better-off burning less cash than inventory-less ones.
According to the report, inventory-less models could become more profitable through expansion by scaling up operations, but achieving that will be the real challenge due to stiff competition, high churn rates and customer behaviour.

While the inventory-led model maintains its own stocks and supply chain, the aggregator or inventory-less one ties up with existing shops for supply to the end-consumer.