Online grocery retailers are finding a messiah in private equity (PE) players.
As grocery retailing witnesses a change with more and more net-savvy and time-pressed consumers buying their daily needs from portals, PE players see this as an opportunity to invest.
The sector is roughly growing by 25-30 per cent year-on-year. Though currently grocery retailing is restricted to metros and major urban centres, investors and retailers feel growth in logistics is bound to spur demand.
Some of the recent PE investments in e-grocery retailing include Ronnie Screwvala’s Unilazer picking up a 25 per cent stake in Mumbai-based EkStop Shop, Karmvir Avant investing in LocalBanya, and Ascent Capital investing $10 million in BigBasket. “We see tremendous potential and scalability in the e-grocery space in India. A disconnected last mile experience for the customer, high customer life time value, and an ability to build local monopolies in the top metros of India are all exciting opportunities for this kind of business to grow,” said Abhishek Shah, AVP, Unilazer Ventures. EKstop, which ensures same-day delivery, besides discounts and promotion, said it will use the funding to expand its reach and build the platform.
It has partnered with over 500 brands to offer over 8,000 products and has its own in-house logistics and warehousing capabilities, the company said.
Mumbai-based online grocery retailer LocalBanya.com, which raised an undisclosed Series A funding from Karmvir Avant Group, had also raised funds from BCCL’s Springboard Investment in July 2013.
LocalBanya CEO Karan Mehrotra said nearly 59 per cent of the transaction in its site is done by women while senior citizens account for 14 per cent. “We work on a model where we hold very little inventory but tie up with vendors,” he said.
Online players also note that the cost of owning a domain is minuscule (anywhere between Rs 2,000 and Rs 10,000), compared with owning physical infrastructure. Hence, the cost of setting up an online grocery store is much less.
Almost all retailers, however, concede that the delivery of fresh products is a constraint. They also point out that understanding the retail supply chain is also key to the business. Smart logistics and vendor tie-ups are also the key to survival.