Grofers partners 600 new local and regional FMCG brands

MUMBAI: SoftBank-funded e-retailer Grofers has tied up with more than 600 new regional and local consumer goods brands, doubling the number of sellers on its platform as part of a strategy to offer significantly higher discounts during its mega sales at a time when competition from Reliance JioMart and Amazon is intensifying.

By doing so, it will be able to offer 20-50% discounts during the nine-day sale period, at least 15% higher than it did in its previous sale. “We have onboarded these brands that are at least 20% cheaper than leading brands even after discounts because that is our biggest pitch during grocery sales,” said Albinder Dhindsa, co-founder of Grofers. Earlier, the discounts were mostly led by private brands which helped the e-tailer earn higher margins, he said.

The company said it will also extend support in terms of credit and working capital, similar to its existing partners which make private labels for it.

Grofers, which operates on an inventory-led model, gets nearly half its Rs 2,000 crore annual sales from its own brands and labels. The e-tailer has also converted a few grocery stores into its own branded outlets, where it manages back-end sourcing, inventory management and technology support on a revenue sharing model.

“To be profitable, scale is very important and higher discounting will help us achieve that,” said Dhindsa. “All the brands put together will have an average discount of 33% now, compared to 27% a year ago. In addition, we are also seeing higher billing size.”

The platform has seen 40% growth in membership since the lockdown, he said.

The company has expanded its warehouse capacity by adding three new facilities to its network and has hired 2,000 additional warehouse staff in anticipation of increasing demand.

Online grocery sales in India are expected to grow to $37 billion by 2024-25 from $2 billion in 2019-20. While rivals such as BigBasket and Amazon have been selling groceries online, competition escalated after Reliance JioMart expanded from a pilot in three markets to more than 200 towns in May. A recent Goldman Sachs report said Reliance JioMart’s launch along with the tie-up with WhatsApp will drive online penetration and the company will corner nearly 50% market share in online grocery retailing by 2024-25.

According to a recent Nielsen report, the e-commerce channel for fast moving consumer goods (FMCG) segment grew at the fastest rate of 16% in the quarter to June, although supply chains and last-mile deliveries were disrupted due to government regulations and movement restrictions in April. While online channels account for 3% of total FMCG sales, their contribution is more than 9% in metros, said the report.

Grofers partners 600 new local and regional FMCG brands Grofers partners 600 new local and regional FMCG brands Reviewed by TechCO on 8/08/2020 Rating: 5

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