Online grocery delivery in India is a tricky business, as PepperTap closed down its hyperlocal delivery model in India and Grofers closed its operations in 9 cities. Amazon also recently got into this with the Amazon Pantry service in the country.
According to a report by Reuters, Flipkart has plans to expand its product portfolio and get into groceries, and a possible re-entry into the furniture business. “There’s definitely room to build a profitable grocery business, but it’s hard. That doesn’t mean it’s not possible, but it’s hard,” Flipkart CEO Binny Bansal told Reuters.
BigBasket and Grofers are the leaders in the grocery delivery service, and it is not a very attractive business because of high operating costs and the problem of delivering perishable goods is still unsolved.
Flipkart has said that it wants to experiment in this business starting Q1 2017 and see if it can really make into it. Thinking about the longer term, the company feels it has a lot of potential like other segments in the next 3-4 years, as products get standardized and it gets easier to transport materials.
Re-launch of furniture business
The company had first entered the online furniture business in August 2015, but did not pick up pace, as focussed market competitors like PepperFry and Urban Ladder became mainstream and more attractive.
It usually becomes difficult for companies to diversify and compete with specialized online services, and this was also the case with Flipkart. In fact, the e-tailer also tied-up with HomeTown and Durian to offer their range of products online, but somehow the sales were not encouraging.
Now with a bigger push and a more customer-centric approach. Flipkart plans to relaunch the online furniture store in three to four months. There will be a larger variety of furniture products, but then it is not just the variety but also the quality and the price range the customers are looking at.
Is Flipkart being too optimistic in diversifying?
The grocery business in India is no joke. Largest cities in India are not able to sustain it and most of the players have gone out of business because of poor operations. Now at this time if Flipkart decides to get in, it will have to figure out the operational issues, however it will enjoy the brand name and the trust from people.
Having a model like BigBasket might be profitable for the company, but at the same time indistinguishable for the competitors. The planning for this had already started last year, and finally the company is eyeing entry into this business.
The furniture business is quite attractive, and involves big bucks. However, Urban Ladder and PepperFry now have their own private labels that have become successful and appeal to the consumer. Now an entry into this market would mean aggressive pricing and attractive designs to lure the customers.
Other than that, delivery of furniture items is not easy and if flipkart could reduce the delivery times, then that could be a plus on the side. However, with market leaders in this space, Flipkart could be a little optimistic about its growth plans in both these verticals.
Before launching these products, Flipkart must assess the market and the demand thoroughly, because if both the businesses come crashing down, then the P&L statements gets largely impacted.