Chennai: Both online grocery retail and modern grocery retail are growing faster to grab increased share of the overall market in the next four years. While modern retail is poised to grow to a size of $60 billion, online grocery retail will be a $10.5 billion.

While the $525 billion food and grocery market is expected to grow by a CAGR of 9 per cent to $880 billion by 2023, modern retail would grow by 25 per cent and almost double its market share to 6.7 per cent and online retail would grow by 55 per cent for a 1.2 per cent share, finds a study by BigBasket.com and RedSeer Consulting.     

Increased comfort and trust of customers in e-tailing, especially electronics and fashion coupled with strong value proposition of e-grocery players, wide varied assortment and express delivery options, will drive this growth, finds the study.

“The online grocery segment has been one of the fastest-growing e-commerce verticals in India and will continue to flourish in both metro and non-metro cities in the years to come,’ said Hari Menon, Co-Founder and CEO, BigBasket.com. However, each channel will serve a different need of the customer and hence keep growing.

Local kirana stores will continue to serve as a channel that serves immediate need-based items such as fresh vegetables and dairy and immediate need-based items not available in kirana stores will be purchased from modern retail stores. Online grocery sites will meet the needs for generic categories like staples, snacks, biscuits and body care products.

India’s online grocery space has gone through a significant evolution in last few years – from explosive growth and funding in CY15 to growth challenges and funding winter in CY16 and then kickstart and accelerated growth phase 2018 onwards. In this stop-start journey, many new business models have evolved, and many themes have been proven and disproven.

The study finds that tier 1 cities marked by low modern retail penetration vis-à-vis metro and mini metros are fertile grounds for online grocery retailers. They have established themselves in catchment areas where the proximity to modern stores is less.