Home / Companies / News /  Amazon taps grocery biz  to  expand  in  towns

Amazon India is doubling down on the fast-growing grocery business to attract more first-time buyers who are mostly from the non-metro cities and towns, a top company executive said.

In the past year, the US online retailing giant saw a sharp rise in first-time online shoppers, particularly from tier-II and III cities and towns. Around 65% of orders and more than 85% of new customers on Amazon India were from tier-II and beyond markets.

On the grocery front, a relatively new category, Amazon India’s overall customer base and first-time buyers doubled on Amazon Pantry and Fresh post-covid with more than 60% share of new customers from non-metros.

Amazon in February integrated its pantry service (dry grocery) with instant grocery service Fresh in 10 cities to create an integrated online store with express delivery. In the remaining 290 cities and towns which do not have the Fresh service currently, Pantry will continue to provide dry grocery.

“Grocery as a sub-category grew more than 2X and became a gateway for new customers on These customers have, over time, shopped across categories. There is a huge growth potential in online grocery, which is still a small market. I anticipate a complete evolution in the way people do grocery shopping in India, and this category will grow multiple times for the next few years," Manish Tiwary, vice-president, Amazon India, said in an interview.

Expecting a large chunk of new customers to continue to come from smaller towns and villages, Amazon plans to scale its grocery offering this year through a dual approach, wherein it will expand its reach with dry grocery and double down on the top 50 cities with the entire range of fresh and dry grocery, Tiwary added.

India’s nascent yet burgeoning e-grocery sector is creating a multi-player field where companies are adopting diverse business models to capture customer share beyond the metros.

With Tata Digital Ltd-BigBasket and Reliance Jiomart in the fray, horizontal e-commerce marketplaces like Flipkart and Amazon are betting on grocery as a key growth frontier this year.

The plans of online retailers have been boosted by the strict lockdown last year and the associated tailwinds as people stayed cooped indoors, which led the gross merchandise value of the e-grocery segment jump to $3.3 billion in 2020, from $1.9 billion in 2019, according to RedSeer. The research consultancy expects the sector to touch $24 billion by 2025.

Even for its subscription-based Prime membership, Amazon saw a significant increase in new members from smaller towns. Around 3X more customers signed up for Prime during the festive season last year compared to a normal business day, with three out of five sign-ups from non-metros.

Amazon India, which scaled its ‘Local Shops’ programme to 50,000 offline retailers across 450 cities in March, expects to double the count of stores by this year-end.

As part of the programme, which was launched a year ago, kiranas and offline retailers can come aboard and start selling on Amazon’s e-commerce platform. It also helps supplement existing footfalls at these kirana stores with a digital presence.

“Local Shops started as a compensation for people not walking into stores and moving online. But stores are seeing value and making this a part of their expansion. There is active participation of sellers from beyond top 20 cities. This year, seller acceleration in some of the new categories like grocery should continue," Tiwary said.

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