Why are Indian Online Grocery Startups Failing?

Source: iamwire

Enabled by the power of internet and mobile Apps, online grocery stores started making a mark in the huge Indian e-commerce industry about half a decade ago. They boosted of having the most advanced processes and great potential to give the age old local kirana stores a run for their money.  But unfortunately, the results have been the other way round.  Many of the online grocery start-ups are running on losses and many have slowly closed their businesses. Let us explore some of the reasons which are responsible for this slowdown.

Source: Livemint

Consumer Behavior: Majority of the Indian consumer always looks for ‘value for money’ in their purchasing behaviour. They prefer to go online only when there are great discounts available compared to the nearby grocery store. And many times even with the huge promotional discounts and added bonus points the start-ups have failed to attract the  consumers. People end up going to their loyal neighbourhood kirana store, buy veggies from the cart pullers or take a quick drive to the nearest retailers like Bigbazaar, Reliance fresh, More , Spencers, Dmart etc who also offers great discounts. People lack the trust factor on the grocery online stores. Moreover it could be the touch and feel factor of the products for the consumers when it comes to food items.


Huge Marketing Costs: Start-ups spend huge on promotions. Be it celebrity endorsements, advertisments ,discounts on first purchase, loyalty discounts or free offers all increase the cost of marketing. Big Basket spends millions on endorsements hiring actors like Shahrukh Khan and others like Peppertap and Grofers spend large in print and outdoor advertising. All of these have unfortunately failed in giving sufficient returns to these companies.

Stocks & Discounts: The big players in the market always keep the bigger stocks and also have very attractive promotional discounts thereby making the online companies continuously struggle to keep its customer base intact. Moreover many retailers start ordering in bulk when the online companies give some offers thereby not letting them serve the larger audience.

Market Penetration: The online companies have not been able to penetrate deep into the market with many cities not having the e-commerce culture and having old buying habits. The concept seems to work only for a limited percentage of tech savy people and for people who find it a difficult to go to the shops and buy groceries which may be because of their busy life schedule or personal buying habits.

Technological Issues: Issues like App download procedures, excessive loading time, poor data connection etc leads to dissatisfaction of many customers.

Inventory management: Companies have to maintain a strong inventory despite the fear of having less order volume thereby increasing their cost. This problem adds up for the products with less shelve life.  PepperTap and Grofers had expanded to small towns but they had to withdraw because of lesser orders.

We can summarize that with proper market research and analysis of the culture, habits, paying capacity, demographics, easy use of the App, collaboration with the big players, better workforce and inventory management techniques etc could probably change the fortune of these companies since huge money is at stake.

Article by Abirami.

Why are Indian Online Grocery Startups Failing?


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