Thursday, January 29, 2015

The new breed of hawkers of groceries -The e-commerce retailers

Shopping for the daily needs of a typical household is a chore increasingly being shunned by many present day house wives who do not have either the time or the energy to wade through the busy streets of cities like Mumbai, Delhi, Bangalore etc. Imagine the old times when the nearby grocery stores served as a convenient place to shop for materials wanted by many families with least hassle. There are supposed to be over 8 million so called "mom and pop" stores in India catering to the needs of the 1.25 billion population in the country meeting every need of the families within their "captive" areas. One does not need any transportation facility to access these outlets as they are omnipotent every where in a city, often more than one operating from the same area.Many old timers have nostalgic memories about their childhood when the friendly "grocer" could satisfy every need of the family and to top it, materials can be got on credit of about 30 days because most salaried people get money in their hands on first of every month. Look at the transformation taking place in India at the market place with giant retailer chains trying to out pace the "kirana" stores in providing better products and service. Are they succeeding?

Though super market culture was introduced around the year 2000 with some of the industry houses like Reliance, Tata etc getting into retail business, their growth is some what limited and according to market experts they are not even able to capture 10% of the country's retail market in a decade and a half. Some of them have not been able to break even even to day while a few others have folded up their business. Then came the much hyped FDI foray into Indian retail landscape recently and the new policy of allowing 100% foreign investment in single brand retailing has not been able to attract many significant international companies. Collaboration with Indian investors for multi brand retailing also did not bring in much investment in this sector. Why this has happened in spite of all predictions to the contrary?

One of the lessons to be drawn from this fiasco is that hundreds of years of culture in a conservative country like India cannot be expected to change in a short time and very high expectations were placed on the development of super market culture in the country without realizing that such super markets would never be able to compete with the "kirana' stores in terms of giving credit and personalized services to which Indian consumer has been used to. Of course with credit card use becoming very common in many urban areas, purchases made using them is based on a deferred payment mode. But the mechanical nature of vending in super markets manned by impersonal workers can be the big dampener in the adoption of this format in the country. Also of concern is the "guided" buying or "forced" buying of goods stocked by the super market in stead of the brands preferred by the consumer which is not liked by many consumers. In contrast the kirana shops know what their clients want and offer the same readily.

Having made not much progress with organized super market strategy, an alternate approach is being tried in India using the vast internet route to sell groceries to net-savvy families which may be numbering in millions across the metropolitan regions in the country. Popularly called as e-retailers or e-grocers, a few players have succeeded beyond expectation in cities like Mumbai, Delhi and Bangalore. Though this sector is in its infancy, the growth rate seems to be very impressive.and their potential business by the year 2020 is estimated to be Rs 1000 crore but it may exceed this target if the present going is any indication. May be the conservative image associated with Indian consumer is getting an image make over for which the new younger generational IT professionals are to be thanked. What is of concern is the sustainability of this trend if government does not support these ventures and starts imposing excessive regulatory controls on their working. Already some of these players are being hauled up by state governments on taxation issues, imposing punitive damages. However this nascent sector is confident of surviving these teething troubles through dialog with the governments.

Groceries can include perishables as well as durables which are in demand on a regular basis. While perishables like fruits, vegetables and other commodities are risky items to be handled because of their tendency to lose quality with lapse of time, others like detergents, soap bars, hygiene products, cleaning paraphernalia are easier to store and distribute. How do the e-grocers manage the procurement and delivery of these items without losing the quality and freshness associated with them? These items require scientific handling and temperature controlled storage systems to reduce quality deterioration between procurement and delivery. There are about a dozen serious players in the e-grocery sector including Bigbasket, Localbanya, Ekstop, Aaramshop, naturebasket and Greencart  sharing the market and only a couple of them have the minimum necessary infrastructure to manage perishable commodities. Fortunately for them the consumer complaints have been insignificant as their delivery efficiency is invariably above 98%. Some of them deliver the orders within a few hours, in spite of the traffic chaos that is the hall mark of cities like Bangalore and Hyderabad.

Another imponderable factor is the trust of the on-line buyer on the quality of fruits and vegetables ordered as in India there is no established quality overseeing of farm products and regular washing and grading systems. Indian consumers, at least most of them are fussy in choosing their food items and "seeing" and "feeling" the product is a national trait embedded in their psyche! If so how do they trust the supplier to deliver the products as per their expectations? Answer to this perplexing question lies in the fact that many youngsters of to day are different from their earlier generation in that they have very little inkling about the common quality attributes of fresh produce and have to depend on the supplier to do the job. After all they know that the dynamics of marketing depends on the customer satisfaction and they can always switch over to other suppliers under a competitive regime.     

Looking at the entrepreneurs who jumped into e-retailing we have to admire their courage of conviction as doing any business in India is fraught with risks of freaking out because of the difficult environment they have to work in. Unlike big international e-marketeers such as Amazon who work very successfully in countries with high quality infrastructure, manufacturing discipline and unimaginable honesty, in India all these three virtues are on a premium. Extraordinary courage, incurable optimism and unparalleled determination and perseverance are needed to succeed in India and since most of them have survived at least for the last 2-3 years they can rightly be called the pioneers showing the way to others. 


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