The concept of an online grocery store was based on the idea of making the life of people easy and comfortable. Shopping for grocery item is a routine job. It is something which people do to fulfill their household needs. Hence, came the concept of online grocery. Many local, as well as international players, came up with their websites and apps.
Even though grocery items constitute daily need items, still the online grocery stores are lagging behind as compared to other e-commerce businesses. Many online grocery stores did show tremendous growth in their start-up years, but with time, these stores failed to achieve set goals and started showing losses. Many big names like Grofers, e-grocers, Peppertap, etc. are either shutting down their businesses in various cities or planning to quits in 2019. Now the question arises “Why grocery stores fail in India?” What are the Challenges faced by Online Grocery Store?
- Delivery charges
- Fewer margins
- Huge marketing expenses
- Customer Loyalty
Below are the Challenges faced by Online Grocery Store in India
Buying grocery is a social experience: Buying grocery used to be a social event where families go to the market or a supermarket and buy their daily, weekly or monthly grocery needs. Many people enjoy browsing through those aisles of the supermarket and picking up the brands of their own choice.
Similar is the case of fruits and vegetables. Many people love to buy their fruit and vegetable in the traditional way as they can check each and every piece for its freshness. However, one neither smell the freshness of fruits and vegetable nor can check them physically. Among Convincing people about the freshness of the grocery items is one of the major Challenges faced by Online Grocery Store.
There are many Challenges faced by Online Grocery Store. One of them is the buyer’s reluctance to pay delivery charges. Most of the online grocery stores are giving facility of free delivery only when the customer places an order as per the limit set by them. This minimum order limit varies from website to website. In some it may be Rs 500, in others, free delivery service may start at the purchase of Rs 1000.
In most cases, a customer needs to pay delivery charges on order of small amounts. Buyers keep on switching from one website to another till they find a grocery website which charges a minimum delivery charge.
Difficulty in reaching small towns
Among various Challenges faced by Online Grocery Store reaching the people in small towns is the most difficult one. Most of the small cities in India have their own local markets. Everyone knows everyone in a small town. Hence, they are just like one big family. People love going to market and buy their own groceries as it gives them the opportunity to meet other people. Small towns are free from traffic, that another reason that people are not afraid of going to their local markets. Above all this, at local markets, people can do bargain with shopkeepers.
Hence, convincing them to shop online for their grocery is one of the main problems for online grocery startups.
No matter whatever the business, the main motto of any business is to earn a profit. Online grocery retailers work on a very thin margin of 5-7%. Making profits with these thin margin is one of the most difficult among all the Challenges faced by Online Grocery Store. Orders qualifying free delivery criteria further increase issues related to profit-making as the online retail store loses their delivery charge amount.
More focus on horizontal expansions
Online grocery retailing is very competitive. Hence, many online grocery startups start focussing on expanding their services to various cities. However, these horizontal expansions create various problems for online grocery startups like exhausting their VC money, etc. As a result in many cases, online grocery startups end up withdrawing services with time. Sustaining competition and running a business in various cities are some other major Challenges faced by Online Grocery Store.
Housewives are less tech-savvy: Sometimes the solution itself becomes a problem. Shopping grocery online aim at saving people’s time and effort of going to market and shop for their daily needs items. Well, most of the grocery shopping is done by housewives. Not all the housewives are tech savvy. For many housewives, apps and online grocery shopping is an alien concept.
Moreover, browsing through various sites and comparing prices doesn’t excite them. They prefer going to the market and do their shopping. Moreover, many housewives prefer bargaining over comparing prices on the internet. Among various Challenges faced by Online Grocery Store, attracting these housewives is the main issue.
Availability of preferable grocery item at the time of need
logistics and managing stocks for such a wide variety of grocery goods are other major Challenges faced by Online Grocery Store. Online retail grocery stores act as one large supermarket where the buyer can find numerous brands for one single grocery item. Most of the people are quite particular about their brand preference as far as their daily need items are concerned. Hence, when buyers fail to find their preferred brand or the grocery item they are looking for runs out of stock, it’s their local market which comes to their rescue.
Inability to master inventory management
Some of the online grocery startups follow the inventory-led business model. Under this model, the companies maintain their own inventories. This does provide them with various benefits as the company has complete control over managing stocks as well as its movement. However, the major drawback in managing a warehouse is its rental cost. The company needs to have a good financial backup to deal with the cost associated with warehouses and cold storages.
Infrastructure is another important factor on the list of Challenges faced by Online Grocery Store. Different online retail startups adopt different business models. Some online retail shops have tie-ups with local grocery retailers, and some have their own stores to take care of the grocery needs of their customers. Companies with their own stores need to have a huge capital. Expenditures like the rent of shops, maintenance of shops, cost incurred for transportation and other logistic related costs, together consume a major part of the revenue earned. Hence in many cases failure to manage infrastructure turns out to be the major reason behind why grocery stores fail.
Online grocery market is highly competition driven. Among all the Challenges faced by Online Grocery Store, preventing customers from switching to the competitor’s website is the most crucial challenge. With so many options available on the internet customer enjoys the benefits of browsing through various websites and select the product from a website which gives maximum benefits. Hence, staying ahead of the competition is very important for any online grocery startups. Online grocery stores need to keep a close watch on their competitor’s each and every move.
Another issue faced by online grocery stores is that they face the competition from both other online retailers as well as the retailers of local grocery shops. After all, a vegetable and fruit hawker also give door to door delivery. Surviving in such a competitive market is not an easy task. One has to keep on working on new and innovative ideas to attract new customers and retain their existing customers.
Freshness and quality of vegetables and fruits
Everyone wants to buy fruits and vegetable which are fresh. Different people have different ways to check the freshness of vegetables and fruits. Some check it by smelling, others may look it closely to see if it’s fresh or not and some may even prick them. People are quite selective for their vegetables. They do all the checks before purchasing them.
In case of online purchase, there is no way to check the quality at the time of placing an order. Hence, issues like delivering rotten vegetables or late delivery cause dissatisfaction among buyers. This may further lead customers to go back to their traditional shopping methods. Hence, delivering what has been promised is another major difficulty that makeup to the list of Challenges faced by Online Grocery Store.
Huge marketing expenses
Two of the biggest Challenges faced by Online Grocery Store are
Convincing shoppers to shift from their traditional way of buying grocery to the new, modern and advanced way of online shopping
Providing the best service possible while taking care of customer satisfaction.
To overcome the above-mentioned difficulties faced by online grocery startups, online grocery needs to spend a lot of money on marketing and promotional activities. These expenditures are added to total expenditures, and sometimes, the situation goes out of the hand. Expenditure to attract customers exceeds so much that it turns profits into losses.
Some online grocery stores even offered money to local retailers in order to have collaboration with them. Whereas others spend money on hiring famous celebrities for promoting their brand, for example, Big Basket hired Bollywood megastar Shahrukh Khan as their brand ambassador. These additional expenditures further reduced their profits.
Another major problem faced by online grocery stores in India is to earn customer loyalty. To overcome loyalty related issues online grocery companies give various offers and discounts to their customers. However, the customer has become much smarter. Buyers browse through various sites and compare the discounts offered by these sites. Finally, they buy the product from the grocery retailer which give them the best offer.
Offers and discounts turn out to be a temporary solution. Companies do succeed in getting the customer’s attention by giving a various offer, but it does not provide any permanent solution as most of the customers keep on shifting from one site to another. There is no customer stability in case of online grocery shopping. Hence, gaining customer loyalty has become the most challenging job for online grocery stores.
Difficulty in keeping up with buyer’s product preferences
Online grocery retailers cater to a much larger customer base as compare to any local grocery retailer. Different people have different taste and preferences. For example, some prefer organic pulses over normal pulses, etc. In fact, different customers prefer different product within the product category of the same brand, example some prefer Colgate sensitive whereas others prefer Colgate total.
Even these preferences are not stable they keep on changing.
The term grocery is an umbrella for various kinds of household and kitchen related items which in itself forms an exhaustive list. Within this list, there are thousands of products, and for each product, there are numerous varieties available in the market. Hence among various Challenges faced by Online Grocery Store, keeping up to customer’s choice and preferences is very difficult. Till the time, the online grocery store keeps on fulfilling the buyer’s needs, and requirements there won’t be an issue. But, one small mistake and the customer will not think twice and shift to another website.
Other Challenges faced by Online Grocery Store are:
- Recruitment of delivery staff and their training
- Issues related to logistics
- Managing and handling cash
- Handling perishable food items
- Managing wastage
- Appropriate handling of returned products.
Change is always welcomed with a little bit of resistance. People take time to get adjusted to new technology. Similar is the case with online grocery stores. The concept was developed on the basis that people would be ready to pay a little bit extra if their regular grocery needs are delivered at their doorstep. Well, in reality, the situation turned out to be totally different from what was expected. With the availability of so many options, buyers want to buy grocery from stores which promises them goods at the most reasonable price that too with other additional services like offers, free delivery, and even cash back.
There is no doubt that the road to success is not easy for any online grocery retailer. As discussed above, there are numerous Challenges faced by Online Grocery Store. However, the idea of online grocery shopping has met with both denials as well as acceptance by the people. Some shoppers welcomed this concept as it suits their lifestyle whereas others still prefer the old traditional way of buying their daily need items from local markets.