Worth-first clients of BigBasket, Grofers, JioMart, others to drive e-grocery market to $24B by 2025

The e-commerce in India is slated to be dominated by value-first or value-conscious buyers in the new decade and a majority of these buyers are apparently based in Tier-II cities and beyond. The strong prediction is layered across sections of e-commerce including low margin ones such as grocery. In fact, it is the value-first customers who are likely to accelerate the growth of the online grocery segment, which has players including BigBasket, Grofers, JioMart, Amazon Pantry, and Flipkart Supermart primarily, faster than the overall online grocery market that also includes convenience-first households.

While India’s e-grocery market is forecasted to scale up at 48 per cent CAGR over the next five years, the value-first segment, which accounts for 60 per cent of around $300 billion addressable market, is projected to grow at 53 per cent CAGR, according to a RedSeer analysis. “Accounting for almost two-thirds of the 130 million e-grocery addressable households, value-first households account for a large opportunity in the grocery space, but are quite different in the way they go about purchasing groceries,” said Kushal Bhatnagar, Engagement Manager RedSeer.

The overall digital grocery buying market will grow from $3.3 billion in 2020 to $24 billion by 2025. Around 55 per cent of the market size, which is around $13 billion, will belong to value-first households and the rest to convenience-first customers. “Recently, as a result of Covid, hygiene has become a second consideration driver after affordability for these households – such differentiated purchase behaviour, would require e-grocery platforms to serve this opportunity through specific tailored offerings,” said Bhatnagar.

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Even as digital grocery was among the few segments that saw high growth due to Covid tailwinds, e-grocery platforms still penetrate less than 1 per cent of the grocery space in India. Nonetheless, value-first customers focus mainly on basic categories such as fresh and staples. The remaining 40 per cent of the customers in the e-grocery market are based in the top 60 metro and Tier-I cities.

Amid Covid, most of the e-commerce platforms had clung to selling groceries online to stay afloat in the business including food delivery companies Zomato and Swiggy. However, within few months both platforms took a U-turn. While Zomato began moving away from its grocery initiative Zomato Market, Swiggy too had moved away from its grocery delivery service. On the other hand, the potent market disruptor JioMart, which was launched last year, was able to rapidly scale up its deliveries. “Within a few weeks of launch, JioMart has already delivered over 400,000 orders on a single day, which is significantly higher than any other grocery home delivery company,” the company had said in a statement in July announcing its Q1 results. Others including Grofers and BigBasket are preparing for their IPOs. “We would like to go public. There are exits needed, people have to exit businesses and the best form of doing it is through an IPO,” BigBasket co-founder & CEO Hari Menon had said at the Start-up India International Summit earlier this month without sharing any timeline.