Food and drink e-commerce has become one of the lucrative growth categories for e-commerce retailers in the recent past, propelled by the pandemic. After registering strong value growth in 2020, the category continued its strong growth momentum in 2021.
With the increasing competition, e-commerce retailers are focusing on delivery speeds to attract consumers. While next day delivery was the norm prior to the pandemic when it came to grocery deliveries, retailers are now delivering groceries as quickly as 10 to 15 minutes after ordering.
E-commerce in India is no longer restricted to tier 1 cities. With the increasing penetration of internet connectivity, coupled with the impact of the pandemic, consumers have been shopping online more frequently even in tier 2 cities.
While food and drink e-commerce witnessed very strong growth over the last couple of years, the contribution of consumer online spending on food and drinks to total consumer spending on food and drinks remains very small, therefore offering significant growth potential. An increasing number of consumers experimenting with online delivery and the rising penetration of food companies beyond metropolitan areas will only continue to benefit the category.
With not much differentiation to offer in terms of products, e-commerce grocery companies tend to focus on delivery speeds to gain an advantage. With some players offering no minimum order for free delivery, coupled with delivery speeds of less than 15 minutes, an increasing number of consumers are likely to turn to online retailers for impulse purchases.
While there are a significant number of companies operating in the online grocery delivery space, companies are currently offering huge discounts and benefits to increase their customer base, which might not be sustainable in the long term. Groceries is a low-margin business, and it will be difficult for companies to sustain with the current business models in the long run.
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Internet retailing sales of food and drink (all packaged and fresh food and drink (hot drinks, soft drinks and alcoholic drinks).See All of Our Definitions
This report originates from Passport, our Food and Drink E-Commerce research and analysis database.
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