Dealing with the growing competition in the grocery delivery space, Smrithi Ravichandran, vice president, head of grocery at Flipkart says, “We are working towards strengthening the market through technology and innovations leveraging deep consumer insights, sustained growth across categories, and strategic investments in new avenues.”
In an exclusive interaction with ETRetail, Ravichandran shares her insights on the rising online grocery demand across India, and utilisation of technology in scaling the Flipkart’s grocery business in real Bharat which includes small cities and remote areas.
Q) How do you see the increasing demand for online grocery services? In what way, pandemic helped Flipkart’s grocery business grow?
Demand for grocery services online has gained immense momentum in the last couple of years. The pandemic acted as a catalyst that gave rise to lifestyle changes and compelled consumers to become more conscious of their choices.
Our Flipkart Supermart (Flipkart Grocery), which we started in 2018, have been a significant contributor to the overall growth of the platform. Last year during the festive season, grocery witnessed a 2.3 times increase in new customers using the platform.
Flipkart Grocery currently serves more than 1,800 cities and over 10,000 serviceable pin codes across all 28 Indian states. It has ramped up its operations in the past couple of years by establishing over 23 fulfilment centres spread over an area of 27.5 lakh square feet.
Q) How has consumer behaviour changed in last 2-3 years? Did you see any demand uptick from tier 2,3 and beyond regions for online grocery shopping?
The Indian online grocery market is estimated to reach US$ 26.93 billion in 2027 from US$ 3.95 billion in FY21, expanding at a CAGR of 33% (Ibef). Interestingly, only the top 10 million households that earn over 20 lakh yearly, and spend around 20-25% of the total earnings on grocery items, contribute less than 12% to the overall growth of the grocery market in India, however, this segment still has the highest focus and competition, currently.
The true potential lies in the 277 million households in smaller areas of the nation that earn below 10 lakh, but cumulatively spend over 400 million annually on groceries. Smaller pockets and towns are severely under tapped, although the paradigm is changing and we witness consumers from non-metros are also entering the online space.
Last year, nearly 70% of the grocery demand on Flipkart was recorded from tier-II and -III cities.
To ensure consumers from smaller cities and towns find a perfect platform for all their daily essentials, we have designed an interactive and an inclusive platform as part of our homepage revamp efforts last year. As part of the new design, there is a separate and more visible tab available for Grocery on the homepage. Additionally, to enable greater inclusivity and reach out to the heterogeneous consumers, Flipkart has made its app available in 11 Indian languages so far.
Technological capabilities like regional language interface and voice assistant have been game changing in creating a more sustainable e-commerce ecosystem which is both empowering and inclusive for customers from across different regions.Smrithi Ravichandran
It is estimated that three out of five shoppers belong to tier-2 or smaller cities, one in three shoppers belong to low-to-middle income segments, and one in three shoppers is Gen Z (younger than age 25). Each of these micro-segments exhibits distinct shopping behavior. For instance, shoppers in tier-2 or smaller cities have higher salience of voice and vernacular search, whereas low-to-middle income households rely more on image-based search.
Q) Can you put some light on the growth drivers in the e-grocery market?
Some significant drivers of the e-grocery market that we witness today beyond convenience include higher internet penetration in smaller cities, secure mode of transaction, access to expansive and quality selection of regional products, strengthened supply chain, access to product comparison, personalization and importantly, seamless shopping experience enabled through innovation.
Disposable income is another significant driver. The Indian consumer’s household expenditure on groceries increases as one goes deeper into the smaller cities. The idea with this category should be to get consumers to transact every month, make it a regular task and not just once in six months or once a year.
In parallel, digital platforms like ours will need to optimize channel mix, design a tailored assortment, drive high visibility, and build differentiated capabilities around the supply chain, especially for fresh groceries.
Q) Do you see any effect on your business from the competition increasing in this space?
The vision to make digital commerce accessible and to enable a seamless online shopping experience for consumers in India is being shared by many brands in the country. The problem we have set out to address is quite large and has room for everyone to collaborate and work towards accomplishing the mutual goal.
We are boosting entrepreneurship by building an ecosystem for sellers and working towards uplifting the socio-economic opportunities for everyone we work with.
For the last 15 years, Flipkart has made major infrastructure investments to build an inclusive platform that delivers value across India and Bharat as well as serves consumers even in the most remote regions through the power of technology and innovation.
Since inception we have invested extensively to ease onboarding of customers, particularly those from outside metro areas which accounts for more than 60% of the total consumer base on our platform.
Flipkart’s supply chain is also one of our competitive strengths. Currently, we deliver over 100 million shipments per month.
Q) How do you use technology to onboard sellers and enhance their digital experience on your platform?
Business owners need just 3 things to become a Flipkart Seller, at least one product they plan to sell, supporting details about the business and pickup address to help us pick their products for delivery.
We are assisting thousands of MSMEs take the first step and digitalize their business to reach a pan-India market of over 450 million online shoppers through e-commerce over the past decade.
We introduced several industry-first marketplace policies last year that focused on making the onboarding process easier for the sellers. This includes 10-minute onboarding; ease of listing and cataloging – an AI-led automated solution which converts any product image to Flipkart-standard quality; payment/return policies – with this, Flipkart processes seller payments within 7-10 days from dispatch. A few more are integrated group travel benefits for sellers with Cleartrip integration.
A host of enhancing tech capabilities on the marketplace for both existing and new sellers were introduced as well to help sellers enter into the digital space.
This includes easy settlements and simplified costs. Flipkart also leverages data insights to make the mapping of product commissions more predictable, reduce cost and democratize e-commerce for MSMEs. We further provide reduced and flat return costs for product listings that reduces the cost for sellers and enables them to earn more.
Catalog cost reduction is a step towards democratizing e-commerce for all. In fact, catalog creation through an AI-led image editing solution has resulted in significant cost reduction for all sellers across the verticals.Smrithi Ravichandran
Flipkart registered over 11 lakh businesses including Shopsy and achieved a milestone growth of 220% in its seller base over 2021, during the last festive season.
Q) How do you assess the online grocery market growth in the upcoming years?
India has robust fundamentals supporting a continued boom in e-grocery services. Grocery, along with other categories such as fashion, general merchandise including personal care, have the highest penetration headroom and will therefore fuel growth of the overall market.
Q) What kind of strategies do you plan to implement to scale this business?
India is essentially a value-centric market and more so in grocery. On an average, consumers across Indian households spend around Rs 6,000 to 8,000 every month. Annually, the cumulative expenditure on groceries is probably the largest compared to any other category. Naturally, consumers are constantly on the lookout for value in the grocery segment. Even with the penetration of modern retail, the largest players are actually pivoting on value. The offering here is good quality products at a great price.
Similarly, we will be playing on selection which is core to a customer’s basket. For instance, in any given city, the total number of available grocery products is about 25,000 to 30,000, but the biggest chunk, i.e. 90% of what customers want is between 5,000 to 7,000. Our aim is to provide consumers immense value on every purchase paired with great quality and wide selection.
In the coming years, we will be expanding our presence across more towns and cities in India.
Q) Do you manage the complete supply chain and support the farmers to bring their products from farm to fork?
For us, fresh groceries have been an important prerogative and through our strategic partnership with Ninjacart’s made-for-India business-to-business (B2B) supply chain infrastructure and technology solutions, we are ensuring delivery of high quality fresh produces to our consumers’ doorstep across the country. Ninjacart powers our backend since they are directly facing the farmers for procurements.
Currently, Flipkart Grocery has trained and built capacity for over 10,000 farmers, the platform has an extensive partnership with over 300 FPOs in India. Last year, Flipkart Grocery collaborated with The Spice Board of India to assist farmers in Idukki, Kerala with procurement of spices, provide timely training and access to the pan-India market.