Amazon India eyes huge opportunity in grocery, claims half of its business to come from segment

US giant e-tailer Amazon sees a huge opportunity in the grocery sector and believes groceries and households products will account for half of the business in coming years.

"From avocados to potatoes, and meat to ice cream -- we'll deliver everything to you in two hours," said Amit Agarwal, India head of Amazon, in an interview to Reuters adding that in the next five years groceries and consumables would be more than half of our business.

This will depend on how the e-tailer democratizes aspirations, make convenience normal and bring the next 100 million customers on its platform.

Amazon already claims goods such as creams, soaps and cleaning products as the largest product category on its site in terms of the number of units sold. The e-tailer has already kicked off experimenting with a few fresh groceries in the country.

Amazon already has flagship fresh grocery delivery service called AmazonFresh in its home market.

In India, which has second largest user base outside the US, Amazon currently offers food products through Amazon Pantry and standalone app Amazon Now. Both platforms procure from third-party sellers. Amazon also plans to offer perishable items.

Amazon CEO and Founder Jeff Bezos last week through a letter to shareholders said that Amazon India is the fastest growing marketplace in the country. Amazon added more members to its Prime loyalty programme in India in its first year, than any previous geography in Amazon's history, he added.

This year, e-commerce major has added 15 new fulfilment centres, based in four cities- Bengaluru, Delhi, Mumbai and Hyderabad. US-based e-tailer overall warehousing capacity has now grown to 56 fulfillment centres across 13 states with a total storage space of 13.5 million cubic feet.

Earlier, Akhil Saxena, VP for customer fulfillment at Amazon India, said that with new centres for daily essentially will allow them to serve customers better serve in key metros.

According to industry experts, hyperlocal business is considered a low margin business. Amazon intention shows its has set keen eyes on the segment. According to industry experts, the e-tailer, through an efficient system aims to improve margins and market share.

Besides, Amazon had led investment rounds in a handful of Indian startups such as Housejoy ($22.4 Mn), Bankabazaar ($30 Mn), Shoppers stop (it picked up 5% stake for approx $27.7 Mn).

Amazon eyes big opportunity in India

India, which is reported to have around 500 million Internet users, offers a huge e-commerce opportunity for players competing in the segment.

Over the next three years, the e-retail industry is expected to continue its strong run, growing over 2.5 times to $28 billion (Rs 1.8 trillion) by fiscal 2020, according to the global analytics firm Crisil report.

Among the online segments, online grocery will be a fastest-growing segment (around 65-70 per cent CAGR between fiscals 2017 and 2020) in e-retail and almost quadruple over the next 3 years to Rs 100 billion in terms of revenues, the report further outlined.

The growth in e-grocery would be driven by investments, new strategies adopted by grocery players like introducing private labels, same day and next day delivery as well as B2B food service.

At present, Amazon claims to have over 115 million registered users in India.

Of late, space saw significant investments and developments. US retail giant Walmart is also in the final stage to make an entry in the Indian market through taking controlling stake into Flipkart, which is backed by big investors such as SoftBank, Tencent and Microsoft. Once Walmart comes into the picture, the segment will witness fierce competition.

Meanwhile, online grocery platform, BigBasket recently got $300 million backing from Chinese investment and e-commerce giant Alibaba.

While Grofers raised 100 Mn from Softbank, Indian e-commerce major Flipkart, who launched grocery delivery service ‘Supermart’ also in talks with Walmart to raise almost 10 billion.

With Amazon joining in with full force, the e-grocery space will become a battleground for players such as Grofers, BigBasket and new entrant – Flipkart and upcoming entities in grocery such as Quikr and Paytm.

Archrival Flipkart, after launching grocery service in Bengaluru, is also planning to kick-off grocery delivery service ‘Supermart’ in Hyderabad, Chennai, and Delhi (NCR). Entrackr had reported that the company also has staged a closed pilot in Delhi for its employees last week. It’s slated to launch grocery vertical by May end or early June in Hyderabad and Chennai.

At present, Grofers claims to have 30 percent market share of online grocery retail while Bigbasket commands over 50 percent market share in online grocery space.