The online grocery market in India has taken off since last year's coronavirus-led lockdown. Consulting firm RedSeer estimates that online grocery sales jumped 60% in 2020 as consumers switched to the online channel during the strict lockdown. The good news is that many of those consumers are expected to stick to online grocery purchases in 2021.
RedSeer predicts that online grocery sales could jump between 41% and 49% in the first half of the year. Not surprisingly, the likes of Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT) have been stepping up their game to corner a bigger slice of this market and prevent local rival JioMart from dominating India's online grocery space. Let's see how.
Amazon and Walmart expand online grocery operations in India
Walmart's Indian e-commerce operation Flipkart has just expanded grocery deliveries to more than 50 cities in the country. Flipkart says that it can now quickly deliver groceries to seven metro cities, and over 40 other smaller cities neighboring those metros thanks to dedicated fulfillment centers. The company aims to expand its online grocery reach to more than 70 companies in the next six months.
The Walmart-owned company's aggressive expansion in the online grocery market could help it keep growing at a faster pace than the broader market. Flipkart Grocery's revenue has tripled in the past year, according to the company's estimates. Its latest moves are aimed at keeping up that impressive pace of growth, as evidenced by the fact that Flipkart is targeting more Tier-2 and smaller cities compared to large metros.
That's not surprising, as Tier-2 and smaller cities in India reportedly accounted for 66% of overall online consumer demand in India last year, according to a third-party report. These cities are expected to play a bigger role in India's e-commerce market in the coming years, indicating that Flipkart is doing the right thing by targeting these areas.
What's more, Flipkart Grocery is offering a wide selection of more than 7,000 products spread across over 200 categories. The company has tied up with farmers and farmer producer organizations across India to build up its supply chain of fresh produce. Walmart's Flipkart seems to be pulling all the right strings to make a bigger dent in India's fast-growing online grocery market.
Amazon, on the other hand, already has a wider presence than Flipkart in online groceries. Amazon Pantry -- the e-commerce giant's non-perishable grocery service -- was operating in 300 Indian cities and towns last year. The company also offers one- and two-day deliveries in select cities. Meanwhile, Amazon Fresh was operating across 8 Indian cities last year, supplying fresh produce and frozen items through a network of 25 processing centers.
Amazon has now decided to integrate the Fresh and Pantry operations to give consumers a one-stop-shop for groceries and fresh items and plans to fulfill orders in two-hour time slots, as opposed to its earlier four-hour time slots. Lower delivery times could give Amazon a boost in India's online grocery market. Amazon has also been gradually expanding its Fresh service to new cities, which should bolster the company's chances of putting up a strong fight in this competitive market.
A big opportunity to play for
Goldman Sachs' analysts estimate that India's online grocery market will grow at an annual rate of 81% through 2024, up from the 50% compound annual growth rate it clocked in 2018 and 2019. The size of the market is expected to jump from just $2 billion last year to $29 billion by 2024. Even then, the online channel would account for just 5.1% of India's total grocery market, which was worth a whopping $380 billion in 2019.
That's why Amazon and Walmart are doing the right thing by scaling up their grocery offerings in India, especially considering the threat they face from homegrown start-up JioMart. The Reliance Retail-backed start-up has quickly scaled up its operations in India, and Goldman expects it to capture half of the online grocery retail market in the country.
However, JioMart's American rivals aren't sitting idle -- they are going hard after online grocery in India, which could add billions to their revenue in the long run. Amazon and Walmart's Flipkart dominated India's e-commerce space, with a combined market share of close to 90% during the 2020 festive season. It wouldn't be surprising to see them replicate this dominance in groceries in the long run.
As such, it would be a good idea to keep a close watch on Amazon and Walmart's moves in India's grocery market, as there is a lot to play for over there and both companies could win big from the huge opportunity on offer.