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Mobile brands have recently achieved huge success with online only retailing in India. There are a host of other products that seem interested in trying this exclusive online only distribution road. The question is can this model get similar success in product categories other than mobile?

	Worked for mobiles, inspiring other Motorola’s second innings in India has been a huge success and a significant credit for this goes to its exclusive online only retailing strategy. The company has launched three models in the last six months Moto G, Moto X and Moto E, all exclusively on <keyword id="6354742" type="COMPANY" weightage="100" keywordseo="Flipkart">Flipkart</keyword> and no offline retailing. The brand is quite a hit among Indian consumers, so much so that it has dethroned Nokia from its number fourth position in the smartphone category in the country in the second quarter of this year (which April to June, 2014). Motorola shipped 955,650 smartphones as compared to Nokia that shipped 633,720 units of smartphones.

	China-based Xiaomi is another success as a result of exclusive <keyword id="681947" type="UNKNOWN" weightage="100" keywordseo="online-retailing">online retailing</keyword>. Inspired by this, products from other categories too are exploring exclusive online retailing. From apparels, video games, home appliances, even jewelleries, a whole new set of product categories are exploring this option.<o:p></o:p>

	Categories jumping the online only brandwagon 
	Global giant Amazon, which entered the Indian market last year has bagged exclusive rights to sell Microsoft’s Xbox gaming consoles. This includes the entire range of its Interactive Entertainment Business (IEB) portfolio including Xbox One, Xbox 360, Kinect, Xbox Live, Xbox Accessories and all Microsoft-published Xbox game titles. Commenting on this, Chakrapani Gollapali, Country General Manager - Consumer Channels Group, Microsoft Corporation India Pvt Ltd said in a press statement, “We believe this collaboration with Amazon gives us the platform to build scale at an unprecedented level for the gaming and entertainment category in India. This is the first time that we will be focusing on retailing our products through an ‘online only’ channel and we look forward to bringing the world’s most-loved gaming portfolio to Indian consumers through India’s largest and fastest growing online store Amazon.in."

	This is quite a significant step as Microsoft currently sells its Xbox 360 portfolio through offline retail channels. The company has said it will support the existing retail channels till 30th of August, 2014 and after that all Xbox sales will be exclusively through Amazon.in.

	Home appliances is another category which is exploring online only model. Whirlpool has made an exclusive deal with Amazon for its KitchenAid brand. Philips too is partnering with the online retailer for selling a lighting range.

	Even, jewellery brands are exploring exclusive online tie-ups. Online retailer Snapdeal has inked a deal with Satyug Gold for a designer jewellery collection range designed by popular actress Shilpa Shetty. Though, Satyug Gold will later launch this collection in its offline stores too.

	International apparel brands like Dorothy Perkins and Stanley Kane started this online only retail model by tying up with <keyword id="319719" type="COMPANY" weightage="100" keywordseo="Myntra">Myntra</keyword>.com and Jabong.com. Lingerie online retailer Zivame, too, has some international brands which are selling in India exclusively through it.

	Saving on the infrastructure cost 
	One of the biggest advantages that is driving various products and brands to opt for online only distribution strategy is the big saving in terms of money, time, and resources that otherwise goes in building and nurturing a physical infrastructure.

	Moreover, with no middlemen involved, the online supply chain becomes much more efficient in terms of costs as well as time. This gives the brands to pass on part of the cost benefits to the consumer, creating a win-win situation.

	Not relevant for mass products 
	The recent success of Motorola and Xiomi has indicated that this online-only distribution can work for some product categories. Products which have a strong appeal among a specific set of customers have a better chance to succeed with an online-only model like smartphones or gaming consoles.

	In contrast, mass products like appliances may not have good chance with online-only retail for the sheer reason of the limited reach of Internet in the country, with 12% penetration.

	Mix of online-offline 
	For mass products, a mix of online and offline distribution model will be the best, considering the reach factor. The online will help manage costs, while offline will ensure the product reaches to every nook and cranny of the country.

	Challenge of touch, feel and trust 
	While the Indian consumers have slowly started to bring down their apprehensions against online purchases, the challenge is not gone completely, especially for certain categories. The problem of touch and feel remains a big deterrent for online buyers especially for products like clothes, jewellery, appliances, etc. Establishing the trust factor with consumers is another challenge, especially in tier 2 towns. That is where the challenge will lie for the online only retail model in the times to come, apart from the challenge of low Internet penetration.

Exclusive Online Retailing In India: Will It Work Beyond Technology Products?

<ul><li>In a post-pandemic world, <keyword id="6357762" type="UNKNOWN" weightage="20" keywordseo="online-shopping">online shopping</keyword> will account for over half (51%) of <keyword id="6354851" type="UNKNOWN" weightage="20" keywordseo="retail">retail</keyword> sales globally with 72% of global shoppers saying that online shopping came to their rescue in 2020, according to <keyword id="11587758" type="UNKNOWN" weightage="20" keywordseo="wunderman-thompson-commerce">Wunderman Thompson Commerce</keyword>’s <keyword id="11587759" type="UNKNOWN" weightage="20" keywordseo="future-shopper-report">Future Shopper Report</keyword> 2021.</li><li>In India, 86% shoppers are less prepared to put up with mediocre or even ‘satisfactory’ shopping experiences and demand excellence from brands and retailers.</li><li>Moreover, <keyword id="18635" type="CITY" weightage="20" keywordseo="Amazon">Amazon</keyword> has emerged as the leading source of inspiration for Indian online shoppers and ranked highest in terms of the service and experience they provide to consumers.</li></ul>Wunderman Thompson Commerce’s Future Shopper Report 2021 – which surveyed over 28,000 consumers across 17 countries on their current and future shopping habits – has uncovered how the global online shopper is shaping the future of commerce and how businesses need to respond to win online. The report reveals that in a post-pandemic world, online shopping will account for over half (51%) of retail sales globally with 72% of global shoppers saying that online shopping came to their rescue in 2020 and nearly three-quarters (73%) saying <keyword id="436047" type="COMPANY" weightage="20" keywordseo="Ecommerce">eCommerce</keyword> would be more important to them in 2021. Another contributing factor for 60% of global shoppers was being more comfortable using digital technology in the wake of the pandemic. Across Asia, consumers reported that digital commerce has been more important to them during the pandemic than anywhere else and it is shoppers in this region who are also now demanding the most from digital retailers. The report reveals that 86% of Indian shoppers are less prepared to put up with mediocre or even ‘satisfactory’ shopping experiences and demand excellence from brands and retailers. Amazon emerged as the leading source of inspiration for Indian online shoppers and ranked highest in terms of the service and experience they provide to consumers. Hugh Fletcher, Global Head of Consultancy and Innovation at Wunderman Thompson Commerce, said, “eCommerce can no longer be treated as the supplementary sales channel. Global shoppers have clearly stated that, in the future, it will be their primary channel for retail purchasing. For some organisations, and particularly marketplaces, they are reaping the rewards of investing in a strong online presence, while the news has been littered with stories of businesses who have not identified these changing demands going bust. “Amazon continues to be the leader of the retail pack in the West, alongside Mercado Libre in LATAM and a number of marketplaces in APAC, but they are facing increasing pressure from consumers to be more ethical and from competitors who are investing in their own direct-to-consumer offerings, digital marketplaces, innovations and social media platforms. Couple this with the fact that COVID-19 has weakened brand loyalty, and serious challenges remain in the sector – it’s no longer enough to just have an online offering that reaches customers on one or two channels and to expect long-term ROI.” Despite the unabated rise of eCommerce and the fear to physically shop – 72% of Indians are the most frightened about shopping in-store as compared with their global counterparts in the wake of COVID-19. Consumers on the whole are demanding integrated <keyword id="2535292" type="PERSON" weightage="20" keywordseo="Omni-channel">omni-channel</keyword> offerings from retailers and brands. What’s more, two-thirds (64%) of global shoppers say that they prefer to shop with brands that have both an online and offline presence, while 59% of consumers said they wished brands would communicate seamlessly with them across all channels, digital and physical. And their expectations need to be met, with close to three-quarters (73%) saying retailers need to get better at giving them the products, service and experience they expect. This means that retailers must operate across multiple channels including social commerce which is going to be a massive aspect of eCommerce. In fact, 44% of global consumers have already bought from a social platform and over half (56%) intend to increase this in the future. “2021 and beyond will usher in an era of more diverse online offerings, with marketplaces, direct-to-consumer brand sites and social commerce all having a key role to play. Businesses must ensure that this more complex online landscape complements their overall retail offering which needs to span digital and physical,” Fletcher concluded.

86% of Indians are now less prepared to put up with mediocre or ‘satisfactory’ shopping experiences, demand excellence from brands and retailers: Report

<ul><li>The <keyword id="6387077" type="UNKNOWN" weightage="20" keywordseo="narendra-modi-government">Narendra Modi government</keyword> has eased the norms for 30% local sourcing rule for FDI in single-brand retail trading.</li><li>The government has now allowed online sales even before a company sets up a brick and mortar presence in India.</li><li>This will invite major single brand retailers who want to enter the Indian market.</li></ul>Indians will now be able to enjoy more stores of Swedish furniture giant <keyword id="6371031" type="UNKNOWN" weightage="20" keywordseo="IKEA">IKEA</keyword>, or Spanish brand <keyword id="6377147" type="PERSON" weightage="20" keywordseo="zara">Zara</keyword>, <keyword id="150626" type="COMPANY" weightage="20" keywordseo="HM">H&amp;M</keyword> and many more, all thanks to government’s move to relax laws. They will also be able to buy more foreign brands online, even those which have no stores in the country yet. Yesterday, the government in its Foreign Direct Investment (FDI) policy changes, eased the norms that had earlier held them back – like 30% local sourcing rule for single-brand retailers. "H&amp;M has been sourcing from India since the last 30 years for its international markets, its great to see global sourcing is now part of the 30% local sourcing norms. We see this supporting the ease of doing business in India and driving in larger investments from global companies," said Janne Einola, Country Manager H&amp;M India. The Narendra Modi-led government has been chasing growth at a time when the country’s corporate sector is saddling debt coupled with slow demand. To supplant this gap, the government is trying to attract foreign investors who are keen on the India growth story. “This will lead to greater flexibility and ease of operations for single brand retail trading (SBRT) entities, besides creating a level playing field for companies with higher exports in a base year,” said the government said. As a part of the eased norms, the government decided that all procurements made from India by the single brand retail entity shall be recognised as local sourcing. This is irrespective of whether the goods procured are either sold in India or exported. Green signal to global corporations The relaxation of the FDI norms will send the green signal to global corporations who want their share of the growing Indian retail market. “Many foreign brands have been in a wait-and-watch mode on account of the difficulties so far perceived in meeting the mandated sourcing norms. With more clarity, many such players can now make their foray into India to tap into India’s consumption story - and to boost investments here,” said Shobhit Agarwal, MD and CEO, ANAROCK Capital. Online before brick The government also allows online sales even before a company sets up a brick-and-mortar presence. “Online sales will also lead to creation of jobs in logistics, digital payments, customer care, training and product skilling,” said the government said. This will invite major single brand retailers who want to enter the Indian market, without necessarily having to invest in the required physical infrastructure. “Massive capital is required for setting up a physical store vis-à-vis online platforms. Now retailers can start online sales without having to open physical stores. This will significantly ease capital pressure on small retailers who are looking to start afresh,” said Agarwal.

India gives green signal to global majors like IKEA, Zara, H&M and more

<ul><li>Competition heats up after <keyword id="80487" type="COMPANY" weightage="20" keywordseo="walmart">Walmart</keyword> closes its $16 billion acquisition of <keyword id="6354742" type="COMPANY" weightage="20" keywordseo="Flipkart">Flipkart</keyword>.</li><li>Alibaba and <keyword id="18635" type="CITY" weightage="20" keywordseo="Amazon">Amazon</keyword> are said to be eyeing large investments of their own.</li><li>Conventional retail and <keyword id="35621" type="PERSON" weightage="20" keywordseo="e-commerce">e-commerce</keyword> players are coming together for a hybrid online-offline business model.</li></ul>A turf war is about to break out among Walmart, Amazon Inc. and <keyword id="163405" type="COMPANY" weightage="20" keywordseo="Alibaba-Group">Alibaba Group</keyword> as the retail giants make aggressive moves to expand into <keyword id="3658" type="COUNTRY" weightage="20" keywordseo="India">India</keyword>. And it is highly likely that this will lead to a massive shakeup of the Indian retail space. Last week, Walmart said it had <a href="https://www.businessinsider.in/indias-competition-regulator-has-given-the-walmart-flipkart-deal-a-greenlight/articleshow/65337242.cms">closed</a> the $16 billion (₹1,118 billion) deal to buy the majority (77%) of Flipkart, India’s largest e-commerce company, following regulatory approval. This is Walmart’s biggest acquisition till date. In its aftermath, Alibaba and Amazon are said to be eyeing large investments of their own, according to media reports. Alibaba is said to be <a href="https://www.livemint.com/Companies/1mvbhDUjZd9khrSUroW5MM/Alibaba-may-invest-5-billion-in-JV-with-Reliance-Retail.html">considering</a> a $5 billion (₹350 billion) investment into a joint venture with <keyword id="58448" type="COMPANY" weightage="20" keywordseo="Reliance-Retail">Reliance Retail</keyword>, India’s largest retailer in terms of sales, in part to take on competition from Amazon and Flipkart. While Amazon, along with co-investors, is mulling an investment in the Aditya Birla Group-owned grocery chain, More, for an enterprise valuation between ₹45 billion and ₹50 billion. Alibaba has reportedly also held talks with other Indian retail chains including Future Retail. In the past few years, Amazon has pumped in over $5 billion into India, its fastest growing market. Amazon and Walmart have been in fierce competition in their home market, the US, for quite some time, while Alibaba and Amazon are head-to-head in China. Some fear that Walmart’s push into India could potentially have an adverse impact on the larger Indian retail space in the long term, particularly on the small brick and mortar retailers in the country. A nation-wide trade lobby group plans to protest the Flipkart acquisition by going on a nationwide strike in the coming months. Currently, over 95% of India’s consumer retail market remains unorganised, representing a huge untapped opportunity for organised retail chains. India has long restricted <keyword id="44749" type="ORGANIZATION" weightage="20" keywordseo="Foreign-Direct-Investment">foreign direct investment</keyword> in multi-brand retail to protect local grocers but allows 100% foreign direct investment in e-commerce companies that use the “marketplace” model. It is currently considering bringing in regulation for the e-commerce space and according to a recent draft proposal, may allow 49% foreign investment in e-commerce companies that use the inventory model. Walmart in its recent statement said its future investments into India will be directed at supporting farmers, supply chain development and reducing food waste. Strategy shift: Going hybrid Walmart’s acquisition of Flipkart and Amazon’s interest in More are the latest examples of large retailers adopting a hybrid business model of offline and online after years of experts predicting the disruption of traditional retail by e-commerce companies. Alibaba and Amazon have recently been focusing heavily on offline and online in their home markets – Amazon with its acquisition of grocery chain Whole Foods and Alibaba’s ‘New Retail’ strategy, which combines e-commerce and conventional retail in China. That rationale appears to be flowing down into their India strategy as well, points out Mrigank Gutgutia, engagement manager with RedSeer Management Consulting. Amazon also owns a 5% stake in Indian brick and mortar retail chain Shoppers Stop. While the Walmart-Flipkart deal is certainly encouraging for e-commerce players, even after 10 years and 100 million shoppers, Indian e-tailers have thus far managed to penetrate only about 2.7% of the overall Indian retail market, indicating the pressure to diversify their reach, notes Gutgutia. “While e-tailers have got their growth mojo back, everyone is starting to realise that pure online models will only let them capture limited pie,” said Gutgutia. “There is a need for change,” he added. Overall, as Indian e-commerce market matures further, e-tailers are realising that pure discount-driven models are no longer going to work. “What is needed is genuine innovation to cater to specific traits and needs of Indian buyers -- especially in offline-heavy categories like fashion and grocery,” said Gutgutia. According to RedSeer, this multi-channel approach will become dominant among organised retail players in the coming years, particularly for e-commerce players. Other e-tailers who have ventured into offline include furniture retailer Pepperfry with its studios and fashion retailer Myntra's Roadster stores. Regardless of how the investment landscape pans out and who buys whom, and as competition gets more intense for existing e-commerce and offline retailers, ultimately shoppers and customers are expected to win. As for small retailers, Gutgutia says they could see a positive impact if they work on a partnership model with organised retailers.

Clash of the titans: Amazon, Walmart and Alibaba to battle it out in India

Offline retailers want a level playing field. They want 100% FDI in place of the current 51%. They reason that the current rate was fixed to only save small retailers. However, these sellers are anyway facing competition from e-commerce sites. 
 
The Retailers Association of India (RAI), the apex body for offline retailers has recently filed a petition in the Delhi High Court asking for uniform FDI provisions for online retailers. 
 
The current FDI policy for offline retailers comes with strings attached. They need minimum $100 million backend investment and 30% sourcing from small enterprises. State-by-State approvals are required, and FDI is only permitted in cities with a population of over 1 million. Most retail experts feel India needs less regulations, not more. 
 
“There has been the wrong discussion for far too long in India– the ownership of retail. It should be on how to make retail distribution more efficient so that transaction costs are reduced. The government should attract global investment to promote made in India products in the global market”, says Mr. Arvind Singhal, Chairperson of Management Consulting Firm Technopak. 
 
The Indian retail scenario is rapidly changing. E-commerce is biting into revenues of traditional retailers both in urban and rural sectors. This has been fuelled by increased consumer spending due to economic growth and lower inflation. Is it going to be that way? 
 
“Technology allows you to disintermediate. The prospect of having a physical store in rural India is not viable due to the limited number of customers. The only way there is e-commerce”, Singhal observes. 
 
So is this the end of offline retail? Not quite. Most experts feel competition is one of the hallmarks of any healthy market, and with growing competition, both online and offline retailers would have to evolve. It’s true. Most e-commerce companies want physical footprint, either for sales or support. Brick-and-mortar retailers are online as well. 
 
Would large scale foreign investment do away with smaller Indian retailers? Experts beg to differ. 
 
“There is no competitive advantage foreign companies enjoy over Indian sellers. They buy from the same vendors. There shouldn’t be fear in inviting international retailers who would ‘destroy’ manufacturers in India”, Singhal reminds. 
 
So what’s the USP of Brand India now that Modi is desperately pushing the ‘Make in India’ campaign across the globe? Well, India is one of the larger economies in terms of consumer spending. It has a fairly large youth population willing to spend big moolah. If the economy grows at 7-8%, the Indian market will double in the next decade; the country will remain a reasonably attractive country to invest in. 
 
To sum up, it’s party time both for investors and consumers. The former has buyers lined up, the later has a plethora of options on the table to choose from. 
 
(Image credit: SunrisePOS and pfsweb)

Allow entry to WalMart and let Flipkart and Amazon fight it
out with Reliance Retail and Big Bazaar

<ul><li><keyword id="12297640" type="General" weightage="20" keywordseo="shopify-india" source="Orion">Shopify India</keyword> launches Festive Shopping Outlook Report 2021. </li><li>The Indian Retail Sector can expect to cater to smarter, savvier shoppers this Diwali.</li></ul>Shopify India has released an exclusive industry trend report based on their 2021 Consumer Insights Survey. The Festive Shopping Outlook Report 2021 has been put together against the background of the pandemic, even as the Indian retail sector continues to witness radical changes when it comes to consumer behavior and buying patterns. The survey, conducted between September 15, 2021 to October 20, 2021 amongst 800 metro and non-metro Indian shoppers, reveals changing consumer shopping preferences heading into the <keyword id="36208" type="General" weightage="20" keywordseo="festive-season" source="Orion">festive season</keyword>. These trends will ultimately determine the course that the Indian retail sector will follow, by elevating consumer strategies and aligning themselves to the new order. The survey by Shopify India has been released to decode changing consumer trends and sentiments in the run-up to Diwali – one of India’s most important annual festivals, that also results in the largest shopping period in the country. At its core, the report is aimed at studying the impact that multiple lockdowns, shifting retail landscapes and a struggling economy have had on consumer pockets and mindsets. The Festive Shopping Outlook Report 2021 published nine major trends that emerged from the Consumer Insights Survey. Heightened confidence in e-tailers waters down traditional advance festive shopping The pull of last-minute discount deals along with short-lead/express delivery advantages offered by e-retailers have been instrumental in gaining consumer confidence. According to the report by Shopify India, 2 in 3 Indian shoppers had not started shopping for the festive season at the time of taking this survey. This is in sharp contrast to pre-pandemic traditional behaviors where festive shopping in India would kick off in full swing nearly a month in advance. Smaller Indian cities emerge as key e-shopping growth hubs Multiple factors such as India’s nationwide mobile penetration, brands opting to shift to a D2C model, enhanced last-mile delivery and customer-friendly return policies have been instrumental in bringing the millennial, non-metro shopper to opt for the digital medium. While online shopping – in the last decade – has largely been prevalent amongst consumers in tier-I Indian metropolitan cities, the pandemic has accelerated and driven this growth up the charts in tier-II cities and non-metros as well. According to Shopify’s Festive Shopping Outlook Report, 53.5% millennial shoppers from non-metros have displayed a strong preference to shop online. Health &amp; safety concerns push customers to adopt tech-enabled, family shopping experiences Even with increased vaccinations, consumers are wary of offline/physical shopping and in-person interactions. Convenience, value for money and personalization offered by online players has enhanced e-purchasing’s appeal. However, one thing remains the same – Indian shopping still continues to be a family affair! Half the respondents of the survey indicated that they will prefer involving their families even when shopping online during the festive season. Local businesses to win big as consumers wake up to the advantages of shopping locally Close to 58% respondents stated that they would prefer to support and shop from small online businesses during this year’s festive season. This is in sharp contrast to the usual skew towards high-end brands when it comes to gifting and festive shopping. Smaller retailers have managed to capture consumer attention and loyalty by offering a range of value for money options, along with individual attention and personalized experiences. These benefits, combined with the emotional pull that consumers feel towards extending support and encouragement to businesses that are fighting to survive, have been instrumental in driving e-sales at these small, local establishments. Festive gifting gets utility-focused Consumers are now leaning towards gifts with high functionality and utility value, as opposed to standard festive sweets or dry fruit tokens. Home confinements have led to consumers realizing the need to constantly upgrade or enhance their abodes. It comes as no surprise that home décor and furnishings topped this year’s festive shopping lists with over 50% respondents displaying preference to spend on gifts under this category. Big budgets parked for electronics, dimming the spotlight on jewellery Despite being considered auspicious as well as status symbols, gold and precious metal jewellery which have been traditional festive gifting favorites seem to have fallen out of favor with Indian shoppers this year. The pandemic has inspired consumers to put their money where major dependencies lie; in tech gadgets. This festive season, electronic gadgets are all set to command maximum consumer gifting budgets with close to 42% respondents to Shopify’s survey showcasing increased propensity towards it. High-speed internet connections and a heightened need to stay connected have increased consumer reliance on gadgets. This has translated onwards onto a large proportion of downsized festive budgets being allocated to electronic products this year. Consumer sentiment confirms that the online shopping boom is here to stay According to Shopify India’s Festive Shopping Report 2021, 76.9% Indian consumers show deep inclination towards online shopping this festive season because of the convenience it offers. While traditionally festive shopping has been an offline retail activity, pandemic-induced restrictions put in place to contain the virus forced most retail activity to move online. A practice that many consumers have got familiar with and also appreciate for the bouquet of benefits it has to offer. However, this year, even with the lifting of most restrictions, high vaccinations rates and a lower covid caseload in India, Shopify India has witnessed a continued preference for virtual retail. Contactless spending set to dominate the future of payments in India and in ‘Bharat’ With the pandemic necessitating contactless payments and boosting cashless transactions, cash is no longer king in an economy which was previously heavily reliant on cash. Armed with the second-largest mobile-user base globally, India has transitioned into the e-payments era on the back of easy, convenient and accessible UPI payment options. Nearly 50% respondents surveyed by Shopify stated that they preferred to process payments via UPI as opposed to any other form of transaction. Interestingly, the preference remains consistent across both, online and offline shopping experiences. Conclusion Diwali 2021 is set to witness the rise of a smarter, savvier Indian consumer generation which is highly dependent on technology and mobile connectivity. They now seek convenience and value over all else and have broken away from traditional token gifting. It can safely be said that this year, Indian consumers are planning their Diwali shopping with an eye on the future. A future which they are already scripting; one Rupee at a time.

Local businesses to win big as consumers wake up to the advantages of shopping locally: Shopify report

Believe it or not, <keyword id="1640900" type="UNKNOWN" weightage="20" keywordseo="Online-grocery">online grocery</keyword> shopping is a fad. In a country where department stores are still booming and people working with <a href="http://www.businessinsider.in/government-defines-the-word-start-up/articleshow/51089062.cms">MNC</a>s considering grocery shopping as their dose of weekend fun, online grocery isn’t something that Indians are really very serious about, unlike cab aggregators and movie ticket booking apps. 
 
Indians are jugaad-friendly. In a market crowded with <a href="http://www.businessinsider.in/government-defines-the-word-start-up/articleshow/51089062.cms">online grocery apps</a>, people tend to download apps, get their first order at maximum discount by using coupons and then simply uninstall the app from the device. They would install other apps for their next use. Unlike cab aggregation, app based grocery shopping is never a necessity to <a href="http://www.businessinsider.in/government-defines-the-word-start-up/articleshow/51089062.cms">urban Indians</a>. In each lane and bylane of any Indian city and suburb there is a grocery store selling the basic needs of bread, rice, pulses, milk and eggs. 
 
The online boom of grocery shopping started in the US some 15 years back and faded out by early 2000. One of the giants in the market Webvan that started in San Francisco met the same fate as their expenses got out of limit. 
 In last few months, there have been numerous deaths of online grocery providers. <keyword id="2809732" type="UNKNOWN" weightage="20" keywordseo="PepperTap">Peppertap</keyword> that raised USD 51 Million shut down after one and a half year of operation citing similar reason. 
 
Prem Kumar, Founder and CEO, SnapBizz has a point to make. “The consumer behaviour in the grocery online space is fairly different from other consumer goods spaces. The driving forces are merchandise and convenience, while the pillars are technology, merchandise and fulfilment.” 
 
“Since the grocery industry runs on a tight value chain, establishing unit metrics and profitability becomes a challenge,” Kumar said. 
There are two basic models in online grocery- a full service model and hyper local model. Full service models are the ones where they control the end to end value chain and deliver a good customer experience. The hyper local model depends on getting goods from local retailer and delivering it. The unit metrics does not stack up in this model. 
 
“The retailer has to pay 5 to 6%, when he hardly makes 8 to 10 % margin. In spite of doing this, the online grocers do not deliver the same customer experience as delivered by the retailer. Hence, the business model may look attractive in the beginning, but unable to sustain and fold,” Kumar added. 
 
We analyse what could have gone wrong with the online grocery start ups and here are the probable reasons. 
 
Marketing siphons a lot of money <keyword id="2057213" type="UNKNOWN" weightage="20" keywordseo="Big-Basket">Big Basket</keyword> has <a href="http://www.businessinsider.in/government-defines-the-word-start-up/articleshow/51089062.cms">Shah Rukh Khan</a> as the brand ambassador. Then other online grocery brands like <keyword id="2466939" type="UNKNOWN" weightage="20" keywordseo="Grofers">Grofers</keyword> and ZopNow invest heavily on marketing, right from digital advertisements to billboards. This is again a hug expense. Firstly marginal profit and then monstrous expenses take a toll on the profit. 
 
Many retailers walk with the cherry of the cake 
Well, if Grofers or Big Basket is giving some benefit to the end consumers, often the small retailers start ordering milk, bread and cold drinks as these are the products where they make nominal profit. So as a result, the retailers re-re-selling the products. 
 
Marginal profits 
It’s a known fact in India that groceries aren’t profitable like gadgets. Selling 5 kg of sugar may give the retailer Rs 100 profit. It’s that tough. And then delivering the product at doorstep would result in more expenses. Before shutting down Peppertap, CEO Navneet Singh admitted that they were operating in negative margins per delivery, confirms a report by business website. 
 
Users look for better offers 
Many users tend to buy through apps only when they get <a href="http://www.businessinsider.in/government-defines-the-word-start-up/articleshow/51089062.cms">discounts</a>. This isn’t something that the buyers are to be blamed for. Indian market has always been price sensitive and this ought to happen. 
 
Price sensitivity 
Indian consumers are quite money minded and sensitive to prices. It’s not they are misers but they love savings, When you buy at department stores you get to scrutinize various brands, quality and of course the prices. But online grocers don’t give the user the luxury to select. 
 
Inventory mismanagement 
 
 
While Big Basket is spending a lot in inventory and Grofers is letting you choose stores. Having an inventory is always the best option provided you have that much cash in hand. What happens when a customer refuses orders? Sellers aren’t taking it back. If you have an inventory and if the item isn’t perishable, you can still keep it in stock for next order. 
 
Last mile glitch 
The <a href="http://www.businessinsider.in/government-defines-the-word-start-up/articleshow/51089062.cms">warehouse</a> is super responsive and the pick up is superfast, but then the delivery guys slip and the whole smoothness are hampered. Generally the delivery guys get Rs 300 per day for working from 9 in the morning till 10 at night. No work results in no pay. You don’t really expect a 10 inch wide smile at 9PM carrying your 10 Kg of monthly grocery item. 
 
Moreover unlike Gurgaon, Greater Noida where the real estate boom has given rise to skyscrapers, it’s not everywhere in India where an address is easy to locate and deliver. Naturally the delivery get delayed. 
 
Arsh Singh, COO at Tookan suggests that routing optimization, real-time tracking, keeping customer notified make the grocery delivery management a lot better.

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