According to the report, growth in India’s online food and grocery retailing segment is a function of the rise in total internet users from 120m to 213m in the past year, a fall in mobile handset prices and a rise in smartphone penetration.
Online food and grocery retailing sites have increased from 14 in 2013 to 44 as of September 2014, targeting younger and professional population segments.
The report pointed out that Indian consumers are overcoming biases against purchasing items without prior inspection and the safety of automated online transactions.
“This shifting tendency is brought about by competitive pricing and the convenience of shopping for groceries from the comfort of one’s own home.
“Consumers are seeing that online retail provides some benefits over going to independent small grocers or store-based retailers’ outlets,” the report said.
In addition, the availability of multiple payment methodologies such as online banking, credit cards, debit cards and cash-on-delivery have meant that it is convenient for urban Indian consumers to shop online while saving both time and money, it added.
Opportunities and challenges
The report highlighted that India opened its market to imported food products just 10 years ago, and distribution of imported foods tends to be limited to major cities in the country.
“However, importers are expanding their traditional distribution to smaller cities and online sales could be a way to reach consumers that are even further from major population centres,” it said.
“Presently, most online retailers limit their distribution to a particular city, but operations may expand quickly if some business models prove successful.”
On challenges in the online retail sector, the report said that retailers are competing with mom-and-pop kirana stores that provide quick home delivery, often within an hour, and credit to neighborhood consumers.
“Compared to these stores, online retailers will need to overcome delivery challenges [such as traffic, poor roads, and greater distance and cost].
“Nevertheless, online retailers enable consumers to similarly bypass parking and traffic congestion in most Indian cities while providing better selection than a neighborhood store,” it said.