COVID-19 Accelerates the Growth of India’s Online Grocery Market

Taj Mahal, Agra, India | Photo by Sylwia Bartyzel

India’s online grocery market grew by 80 percent to $2.66 billion in 2020 primarily due to COVID-19 and the resulting lockdown. The sector is expected to grow exponentially over the next few years thanks to expanding internet connectivity and rising consumer demand for convenience, value, safety/hygiene, ease of payment, and product variety.

Opportunities for U.S. exporters exist in consumer-oriented products, especially tree nuts, fruits, and packaged/processed foods.

Rising Urbanization and Internet Connectivity Facilitate Online Grocery Purchases

As of March 2021, India’s population stands at 1.38 billion, 18 percent of the total world population.

Online Grocery Market
Taj Mahal, Agra, India | Photo by Sylwia Bartyzel

According to the World Bank, 66 percent of this population (900 million) lives in rural areas while 34 percent lives in urban ones. On average, India’s urban population increases by 2.3 percent every year, while rural population growth continues to decline with only 0.3 percent growth in 2019.

This rapid urbanization is facilitating access to a wide range of goods and services for an increasingly younger, “globally-conscious” consumer base whose incomes are growing, and tastes/preferences are evolving.

Along with this, internet connectivity is expanding thanks to declining costs of data and mobile devices (the preferred method of internet access).

According to the Internet & Mobile Association of India, India has over 504 million active internet users, of whom 227 million and 205 million are from rural and urban areas, respectively.

Moreover, nearly 70 percent of the country’s internet population are daily users, who primarily use the internet for social networking and messaging.

India’s rapid digital adoption will continue to grow as local sources estimate that the country will reach 1 billion internet users by 2025. This adoption will accelerate e-commerce use in rural and urban areas for years to come.

India’s Online Grocery Sector – A Small but Rapidly Expanding Market

Although online grocery sales represent less than one percent of total grocery sales in India, this sector is expected to experience tremendous growth in the next decade.

India’s grocery retail sector is considered the third-largest in the world and reached sales of $410 billion in 2020, according to Euromonitor International. The sector is dominated by traditional and unorganized retail formats, specifically, hawkers and neighbourhood shops called Kirana stores (similar to mom & pop stores in the United States), which represent 90 percent of the market in sales.

The remaining 10 percent is made up of modern grocery retailers (such as supermarkets and hypermarkets) and e-commerce. In 2020, online grocery sales grew by 80 percent to $2.66 billion as COVID-19 compelled consumers to shop more online due to lockdown restrictions and safety concerns.

During this period, consumers shifted their attitudes towards grocery e-commerce and began to see it as the most convenient and safest way to procure essential supplies.

India – Food and Beverage E-Commerce Sales

Online Grocery Market
Source: Euromonitor International

Traditional grocery stores are the greatest challenge to online retail in India as they are neighbourhood shops that can be quickly reached to deliver a range of essential and gourmet products. These shops are prevalent in both urban and rural areas and have maintained a loyal customer base, thanks to benefits such as discounts, promotional offers, and personalized service.

Moreover, these stores have also digitized their operations by accepting credit, debit, and e-wallet payments, and receiving orders through messaging apps, such as WhatsApp.

Just a few years ago, nearly 97 percent of grocery sales were made through 12 million shopkeepers around the country. However, this began to shift in 2005 with the emergence of modern grocery stores, which now total over 8,000 and continue to increase in number.

According to private estimates, the Indian online grocery sector is expected to reach $20-25 billion by 2025. This sector’s burgeoning growth is supported by rising urbanization and incomes, busier lifestyles, greater internet connectivity, the entrance of offline grocery chains, and changing consumer attitudes that demand greater convenience, product variety, safety/hygiene, and value.

The sector is highly dynamic with domestic and foreign firms competing to expand their market share and presence.

Major online grocery retailers include BigBasket, Grofers, Amazon India, Flipkart, and Jio Reliance, along with emerging retailers such as Nature’s Basket, DMart, More, Easy Day, and Milk Basket.