E-grocery companies are unfazed by the merger of Future Group with Bharti Retail, stating that unlike the bricks-and-mortar model, online retail is scalable and can be profitable in the future.

The merger creates one of the biggest entities in food and grocery retail with as much as 18.5 million sq feet of retail space and 570 stores under its operations. This will be closely followed by Reliance Retail, which has about 12.5 million sq feet of retail space and 2,621 stores (all formats put together)

“Bricks-and-mortar retailers are taking cognisance of the scalability of online retailers. Real estate and overhead costs are eating into their margin and they realise that if they don’t consolidate, offline model will suffer,” said Greencart founder Rajiv Tevatiya.

Grocery e-tailers also say issues like parking and finding the right retail space are also a challenge for bricks-and-mortar retailers whereas e-commerce companies are growing, backed by the growth in internet penetration.

Tevatiya said Greencart adds about 15,000 customers every month. “Our model is scalable and is growing faster than bricks-and-mortar retail as we offer convenience and freshness at doorstep, which is still a challenge for big players due to its size”.

Karan Mehrotra of Localbanya, says the merger is good for the industry as it will help grow the retail market.

According to various estimates, India’s retail market is estimated at $520 billion. Food and grocery stands at $387 billion.

Food retailers in the country enjoy margins as high as 20 per cent and above on staples.

“Our overheads are low and we follow an asset-light model for expansions unlike bigger players who have issues like real estate, rentals and warehousing costs,” said Navneet Singh, Co-founder, PepperTap.

Singh said the company, which takes about 350 orders a day on weekdays and more than 500 orders a day on weekends, currently operates its own delivery network which helps save costs.

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