The world’s top companies-- Amazon, Reliance JioMart, Walmart-backed Flipkart--are eyeing a greater share of this unorganised market in India, devising ways of either using pure play food and grocery e-commerce models or scale up hyper-local sales platforms to deliver staples, soaps, shampoos
NEW DELHI: News of Tata Sons agreeing to acquire control of India’s largest online grocer BigBasket, in a deal valued at more than $1 billion, will heat up competition in the country’s food and grocery retail market that constitutes the largest chunk of domestic retail trade.
On Saturday, Mint reported that Tata Sons’ digital services subsidiary Tata Digital Ltd has proposed to acquire up to 64.3% stake in Supermarket Grocery Supplies Pvt. Ltd (SGS), which sells products to commercial units through business.bigbasket.com in the first step.
Subsequently, SGS may acquire full control of Innovative Retail Concepts Pvt. Ltd (IRC), which sells products to customers through bigbasket.com.
The move comes at a time when online shopping in India has picked pace. However, when compared to other categories such as apparel and electronics, the share of online food and grocery sales remains small but growing.
The share of food and grocery retail in India rests at 65.9%, a significant and the largest chunk of the overall retail market in the country, of market size of $560 billion, according to a 2020 report by Technopak Advisors. Of this, the reach and size of online food and grocery e-commerce rests at 0.5% and $2.75 billion, respectively, as of FY20. A large part of the retail trade is still unorganised and dominated by small mom-pop stores or neighbourhood shops.
Over the next five years, however, the online food and grocery retail market is set to touch $28 billion with a 4% penetration. This number will be nearly on a par with the size of modern trade or sales though large, organised food, and grocery retailers in the same period.
In contrast, in FY20, 14% of all apparel retail happened online, for consumer electronics the share was even greater at 26%.
Now, the world’s top companies-- Amazon, Reliance JioMart, Walmart-backed Flipkart--are eyeing a greater share of this unorganised market in India, devising ways of either using pure play food and grocery e-commerce models or scale up hyper-local sales platforms to deliver staples, soaps, shampoos. For Tata Group, competition will be plenty.
“Since 2012 the growth of Indian Retail has also outpaced the overall growth of India’s GDP. This was primarily driven by increase of discretionary retail and that in turn was attributed to rising income and affordability of the consuming class . This is reflected in falling share of food and grocery retail and the rising share of discretionary retail categories between FY 12 and FY 20," Technopak said in its estimates.
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