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Grofers converting grocery shops into its brand stores

This is Grofers’ second stint in brick-&-mortar format; in 2017, it opened tuck shops at Oyo properties.

, ET Bureau|
Updated: Jun 26, 2019, 06.12 AM IST
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This is Grofers’ second stint in brick-and-mortar format; in 2017, it had opened tuck shops and small stores at few Oyo properties as a pilot but discontinued it within two months.
MUMBAI: SoftBank-funded Grofers is converting dozens of grocery stores into its own branded outlets as the online retail firm looks to broaden its distribution and push own label products to earn better margins. It has changed nearly 100 such kirana and supermarket outlets to Grofers discount stores in the Delhi NCR region where it will manage back-end sourcing, inventory management and technology support on a revenue sharing model.

“The move helps in having bigger purchasing power. Also, it will be a subset of our offline delivery system since we already deal with nearly 6,000 partner stores,” said Albinder Dhindsa, co-founder of Grofers that raised more than $200 million in May from investors including SoftBank Vision Fund, South Korean investment firm, KTB and Tiger Global Management.

“We started testing this model in November last year and hope to have 200 such stores by expanding network to Bengaluru in the next few months,” he said.

Grofer

This is Grofers’ second stint in brick-and-mortar format; in 2017, it had opened tuck shops and small stores at few Oyo properties as a pilot but discontinued it within two months. Also, about two years ago, the company changed its business model to inventory-led from a hyperlocal delivery start-up helping sales nearly double each year. The company claimed annual sales of Rs 2,000 crore.

Within India’s $500 billion grocery market, just 0.2% is online but players are growing nearly 50% annually after using data penetration and adoption of web-shopping in India to expand business in a category that until recently remained the monopoly of neighbourhood stores. Online grocers — Grofers and rival Bigbasket — have an outsize share, but Amazon, Flipkart and Swiggy are gradually mainstreaming the category.

With highest frequency across categories and high potential for private labels, eGrocery can grow to $99 billion over the next decade, according to a latest CLSA report.

“Online doesn’t offer any hing significant beyond convenience in the grocery segment which is a habit driven category and difficult to break. Retailers, both online and physical, have to look at channels where consumers go,” said Devangshu Dutta, CEO at consultancy firm Third Eyesight.

Grofers also joins the league of retailers such as Pepperfry, Myntra, baby products retailer FirstCry and Lenskart that started out solely in the ecommerce space, before branching out with physical stores. Grofers, however, maintained that their physical stores will not cannibalilse sales from its online venture since it appeals to an older consumer base compared to a younger demographic online.

Also, for Grofers as well as rivals, high focus on private labels is a key for bargaining power and unit economics. Both Flipkart and Amazon too have launched private labels mostly in staples and packaged food, which see a higher traction online compared to branded home and personal care products.

"From 40% share of private labels, we hope to target about 60% in the next few years," said Dhindsa.

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Abu Dhabi Capital Group backs Grofers

Grofers says on track to hit Rs 550 crore monthly GMV

Grofers plans to double sales, focus on profit

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