Flipkart Founder’s First Grocery Hurdle Is To Wean Away Wife From BigBasket
For Flipkart Group Co-Founder and Chief Executive Officer Binny Bansal, the challenge to crack the grocery market starts at home.
“My wife is a BigBasket customer,” Bansal said, breaking into laughter at the SAP Startup Social event in Bengaluru on Thursday. “And I’m trying to convince her to buy groceries from Flipkart.”
The candid comment underscores the hurdle the Bengaluru-based online retailer, acquired by Walmart Inc. for around $16 billion in May, will face in its foray into grocery. Suffice to say that it’s the new battleground in Indian e-commerce. Lucrative because it’s a habit-forming category and ensures customer stickiness with frequent purchases, unlike electronics.
Flipkart is up against entrenched players such as the Alibaba-backed BigBasket, Amazon India and SoftBank-backed Grofers. And that’s not all. Brick-and-mortar players such Avenue Supermarts Ltd., the parent of D-Mart, is running a pilot to deliver products ordered online and billionaire Mukesh Ambani-owned Reliance Retail Ltd. is betting on a network of kirana stores to go online. The opportunity is massive as online sales are just a tiny fraction of India’s $400-billion grocery market.
Flipkart was piloting its grocery business—called Flipkart Supermart—for the last six months, and recently launched in Bengaluru to deliver staples. To be sure, this is its second entry in the segment. The online retailer shelved its poorly received grocery app Nearby two years ago.
Flipkart will sell staples and consumables under its own label, Flipkart Supermart Select, in categories such as pulses, spices, dry fruits, it said in a statement. It may expand its grocery business to five to six more cities by the end of this year.
“The challenge is huge for Flipkart,” Harish Bijoor, founder of brand consultancy Harish Bijoor Consults Inc., told BloombergQuint over phone. He attributed it to the verticalisation happening in e-commerce. “If it’s grocery it tends to go to BigBasket, if it’s electronics or smartphones it goes to Flipkart.”
Bijoor acknowledged the effort by players like Amazon and Flipkart to “horizontalise” their platform, in which they want to be “the everything store”. “This is something that Amazon is doing very well globally, he said. “India being a service-centric market, service in grocery requires a different core competence as compared with segments like electronics or apparel.” India’s largest e-commerce company has cracked both the categories.
Flipkart said in a statement it understands that the opportunity is massive. Online grocery comprises a mere 0.5 percent of the overall grocery market, which is pegged at $400 billion, according to the e-commerce company. Ratings agency Crisil expects the online grocery market to generate Rs 10,000 crore in revenue over the next three years.
Besides offering discounts, Flipkart said it’s packing in features such as doorstep delivery at preferred time slots and guarantee on fresh products. There will be a ‘best-before date’ for each product on the display page, the online retailer said. To lure customers, it’s also adding the ‘Buy Now Pay Later’ option.
That may just not be enough, said Satish Meena, New-Delhi based research analyst at Forrester Inc. “Flipkart’s biggest challenge is to prove that they are better than Amazon and BigBasket and convince customers who relate Flipkart more with the smartphone and fashion categories.” BigBasket already has a premium loyal customer base, he said. “This is one category where discounting alone can’t ensure customer acquisition. Even Amazon is trying multiple formats in India to crack the market.”
The e-commerce firm which was founded in 2007 out of a house in Bengaluru’s Koramangala—now a teeming hub for startups—has an X-factor up its sleeve, the marketing muscle and expertise of Bentonville, U.S.-based retail giant, Walmart.
Walmart understands the importance of logistics behind the grocery play and can help Flipkart devise strategy to build its brand, said a person in the know of Flipkart’s plans on the condition of anonymity. This was one of the reasons, the person said, Flipkart waited for the Competition Commission of India to greenlight its acquisition by Walmart before it rolled out its grocery business.
Meena agreed. Walmart’s backing can work in Flipkart’s favour and strengthen its grocery business, he said. “Walmart knows margins and how to run warehouses.” He said this will take time as Walmart doesn’t have a robust infrastructure in India, like the one they have in the U.S. “This will, however, take time to build and could help Flipkart extend its lead in the grocery market. But it’s still 1-2 years away.”
Bijoor believes that for Flipkart to win the online grocery play and establish itself as a brand, it needs to acquire another entity which is good at it. “For a player like Flipkart, grocery isn’t competence that can be developed but acquired.”
For the time being, Flipkart’s strategy is to lure customers on its platform and get them to try its offering. As Bansal said, “Just yesterday, I told my wife, good deals are available on our grocery platform. Why don’t you try it?”