Goldman Sachs is slaying the perception that online players like Amazon and BigBaskethave outsmarted brick-and-mortar retailers with better pricing in daily consumables and groceries. In a recent research report, Goldman Sachs analysts noted that Amazon and BigBasket sold personal care products at 10-30% premium compared to traditional supermarkets like D-Mart. The report though predicts online ordering would account for 22% of the modern Indian grocery retailing in five years, up from 3%.
While modern retail is still a small part of overall retail market in India, e-commerce in specific is at a nascent stage.
In a bear market, e-commerce could see the highest growth in modern Indian grocery market compared to traditional brick-and-mortar retailers. Traditionally, the grocery play has been a low margin business that requires continuous investmentsto build a strong supply chain.
“We believe there is an additional cost of about 3-5% of sales for home delivery as compared with pickups from a delivery centre or purchasing from a store. We believe consumers that value convenience over incremental cost will use the home delivery option, while price-sensitive consumers will prefer to pick up the order.
While D-Mart has presence in 132 locations across the country, both BigBasket and Amazon have been ramping up their operations.
BigBasket is delivering across 21 cities with 40,000 orders per day. According to the report, BigBasket accounts for 85% of online grocery market.