Online grocery may become a $10 billion industry by 2023 but even then only one in 100 Indians will be buying

• Online grocery segment will grow by 55% to reach 1.2% of the market by 2023, said a report by RedSeer and BigBasket.
• Today online grocery startups account for 40% of total e-commerce funding in India.
• Startups in the online grocery sector have raised $665.70 million in funding in 2019 so far.

The Indian online grocery segment is growing fast and how. Currently the online food and grocery retail holds a miniscule part of online retail with only 0.2% penetration. But it is predicted to grow by 55% to reach 1.2% of the market by 2023, said a report by RedSeer and BigBasket.

The market size of this segment will also expand to $10.5 billion, the report predicts.

The customers’ trust on online shopping along with the growing presence of e-grocery players will drive this growth in the sector, added the report.

“The online grocery segment has been one of the fastest-growing e-commerce verticals in India and will continue to flourish in both metro and non-metro cities in the years to come,” said Hari Menon, Co-Founder and CEO, bigbasket.

Online grocery vs E-commerce in India

As Indians are used to visiting the kirana store in the next lane, online grocery has been growing slowly since onset in 2010. In the past few years however it picked up speed. As the number of e-commerce users grew it had a slow but steady effect on online grocery purchases.

From a barely any presence in 2010, today online grocery startups account for 40% of total e-commerce funding in India.


So, what led to this growth?

“The online grocery space in India has accelerated due to the increasing penetration of internet in millions of households across the country, rise in smartphone usage, enhanced customer comfort and trust in e-tailing and a better value for money for customers in online vs offline stores. Besides, availability of value for money products, better savings vs offline stores and cashback led by subscription-based programmes further ensure affordable pricing and scheduled delivery to make this space exciting,” said Albinder Dhindsa, Co-founder, Grofers.

Startups in the online grocery sector have raised $665.7 million in funding in 2019 so far, with Bigbasket turning a unicorn. Grofers, a soonicorn (soon to turn unicorn) made a comeback with a $200 million funding led by Softbank.

Here are the top 20 funded startups in the e-grocery segment.


Tier 2 & 3 cities to lead the next phase of e-grocery

Online grocery’s dream to reach $10.5 billion by 2023 will not be fuelled solely by urban growth. A big share of this will come from Tier 2 and 3 cities. Grofers co-founder Dhindsa believes that the next big thing in e-grocery is increasing penetration of e-commerce in tier-2 markets and amongst lower SECs (socio-economic classification) in metros.

“E-grocery will bring more shoppers into e-commerce as a whole and already 15% of our new users every month are first time online shoppers. Growing disposable income of the consumers in Tier II markets and the adoption of 4G has already laid a strong foundation for the next wave of growth for e-commerce,” he said.