Online grocers, the newest ventures within the fledgling e-commerce business, are aggressively trying to crack, possibly, the toughest category for e-tailers: fresh produce.
The economics of grocery delivery are extremely difficult, given the complexities of fresh foods, the required infrastructure of warehouses and trucks, and the razor-thin profit margins. Even the world’s largest e-tailer – Amazon — started testing is fresh-produce service, Amazon Fresh, in Seattle in 2007 and spent six years honing its approach before starting to expand to cities including San Francisco, New York and Los Angeles.
Along with the primary problems of fresh produce exceeding the sell-by-date deadline in storage warehouses and being damaged during delivery, wastage of products due to over-stocking is yet another pain point for fresh-produce retailers.
Another grocery giant Tesco in UK recently revealed that it wasted 55,400 tonnes of food over the past year. This comprised about 30,000 tonnes of edible products. Now, Tesco is running a trial to give away all of its edible food waste to charities, including homeless hostels.
Groceries account for 65% of the consumer’s wallet spending, and if this category takes off online, there could be an upside to the growth of e-commerce in India, which is expected to touch anywhere between $48 billion and $60 billion by 2020 from $4.47 billion last year, UBS Securities said in a report released earlier in April. Going by the numbers, it makes perfect sense to tap a category that requires frequent top-ups and drives repeat purchases once a retailer wins consumers’ trust.
When it’s not so fresh
Bangalore-based BigBasket.com, which launched in December 2011, and sells products in categories such as fresh fruits and vegetables, grocery and staples, meats, personal care, etc., agrees that fruits and vegetables are tricky products in an online grocer’s portfolio. “We use analytics to predict fresh produce sales and directly procure them from farmers. Our buying takes place as the orders are placed by customers and by doing this, we are able to take care of the daily ups and downs in take-offs,” says Seshu Kumar, National Head-Merchandising, BigBasket.
Speaking on how Bigbasket retains poduct freshness and quality, Kumar explains, “We do not keep any inventory in fresh fruits and vegetables; by buying these against the orders, we are able to provide them fresh.”
“Due to our strong backward linkages and direct buying from farmers, our buying is optimised and hence we have minimal over stocking or under stocking,” he adds.
“With perishables such as fresh produce, freshness and quality are paramount for the consumer,” agrees co-founder and CEO of VeggyKart.com, Ravi Pahuja.
With services launched in Gurgaon on June 1, VeggyKart is primarily a marketplace for handpicked fresh fruits and vegetables, in both whole and cut forms, delivered to consumers in slick, hygiene packages. It also offers other grocery essentials, including dairy products, snacks and beverages.
“We’ve spent the past 14 months perfecting our sourcing channels, back-end infrastructure and delivery mechanism, before going public,” Pahuja says. At a 5,000 sq ft warehouse in Gurgaon, fresh produce is brought in every day, with a sorting staff to manage hygiene and cut fruits and vegetables to meet orders for cut produce. “There are two levels of sorting,” Pahuja infoms. “One at the sourcing point, the Azadpur Sabzi Mandi itself, and the next at the warehouse to weed out even minimally damaged produce.”
“We offload surpluses to local markets if there is any overstocking on any particular day,” Pahuja says.
With Nupur Chakraborty
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