Amazon expands grocery delivery biz as others exit
The idea of delivering groceries may have disappointed a lot of startups in India, but the $105-billion online giant Amazon seems to be quite upbeat.business Updated: Feb 04, 2016 23:57 IST
Thin margins may have forced a lot of grocery delivery startups to shut shop in India, but the world’s second-largest e-tailer, Amazon, seems to betting big on the domestic market.
The Seattle-based, $105-billion company, which already has a fledging e-commerce business in India, on Wednesday announced the launch of its app-only grocery delivery service — Amazon Now — in Bengaluru. It will deliver over 6,000 items multiple categories such as snacks, beverages, cooking staples, beauty and personal care products among others. The company will deliver the product in two hours or less, and free of cost for orders above `250. The e-tailer has tied up with big chains, including BigBazaar, Reliance Fresh, Bharat Petroleum In & Out, Godrej Nature’s Basket and Food World.
“We are encouraged by the learnings from Kirana Now — a pilot that we started last year to enable customers to shop for their everyday essentials from local stores,” said Samir Kumar, vice-president, category management,Amazon India.
Grocery delivery startups are already under immense pressure in India. From a total of 40 companies, four years back, the number has come down to a 3 to 4. The existing players in the business include Grofers, Big Basket, Peppertap, Zopnow, and Localbanya.
Big Basket, which allows consumers to buy products of most retailers on its site, reported a net loss of `61 crore on a total income of `178 crore in 2014-15. It is partnering third-party stores and launching its own label in kirana stores to counter losses.
The others, including Peppertap and the most funded of them, Grofers, provide an online platform for ordering groceries from neighbourhood stores. They, too, are coming up with attractive offers to gain customers. In fact, Grofers recently closed operations in nine cities
Localbanya temporarily suspended operations last September due to fund crunch.
Ekstop and atmydoorsteps are some firms that have closed down.
Big Basket’s co-investor Ganesh Krishnan told HT earlier that most delivery-only players, operating at single-digit margins, will find the going tough in the long run. “Delivery alone will not work. Gross margins are too small to recover even the cost of delivery.”
But the demand is there. Groceries constitute 50-70% of the $500-600 billion Indian retail market, and Amazon will use its extensive scale of operation and wide network of agents to gain customers.
“This is just turf-grabbing. They already have an e-commerce business that is trailing (behind Flipkart in India). They are probably trying to get more eyeballs,” said Nagaraja Prakasam, an angel investor. “Plus any incremental revenue can only make its GMV (gross merchandise value) bigger.” GMV is the total value of goods transacted on the platform.
“Healthy competition is always good. I am glad they are (Amazon) doing an inventory-less model like ours. It makes a lot of sense,” said Mukesh Singh, co-founder of Zopnow.