Online groceries - a snapshot

Global crises have often proven to be tipping points for consumer behavior – and for businesses that drive demand from changing consumption patterns. Covid-19 has been linked to technology tipping point where it has actually transformed businesses forever. Grocery ecommerce is one area that has seen significant disruption during the pandemic as consumer buying and consumption patterns evolve.

In Pakistan, the online grocery space has been comparatively slow in catching up other categories of retail like electronics and apparel. Nonetheless, increasing numbers of players have been seen going towards digital adoption and ecommerce platforms even before Covid-19 pandemic. However, as the virus cases continue unabated, structural changes have emerged in grocery shopping patterns and infrastructure. Amidst the lockdowns due to Covid-19, online grocery shopping has seen visible spike during these pressing times as physical movement and social gathering were profoundly affected in the country.

With its population size, the market potential for online groceries is huge. According to Invest2innovate’s recent report, “Rise of Grocery Startups in Pakistan”, grocery market of around $48 billion out of the total $125 billion retail market presents the startup ecosystem with an abundance of opportunities. Whether Covid-19 will be a tipping point for online grocery depends on volume flows, prompt delivery, adequate shipping, and ample inventory and warehousing, and investment in technology (For more read: Grocery ecommerce: will it sustain?)

So far, the momentum is in favor of online grocery shopping. The i2i’s recent report highlights that over $11 million were raised by online grocery startups in 2020 alone in Pakistan, which is a sharp jump from the previous years. The trend has not only been about startups entering the space during the pandemic, but also existing brick and mortar and traditional players transforming their models to make online presence, capitalizing on their customer loyalty and strong warehousing and inventory system. Moreover, there have been grocery players that had online experience before the pandemic or were in the midst of developing the ecommerce infrastructure where Covid-19 pandemic actually accelerated their endeavors. Then there are also those e-commerce delivery companies that have a solid backing from a parent company or a prominent partner, and existing online platforms that switched to or diversified to grocery delivery.

However, the sector is in nascent stage and faces challenges. According to the study, customer satisfaction is a crucial challenge that the grocery startups in the online space face. These include quality of products, timely deliveries, order completion etc. Then there are severe inventory management issues that include digitization of the inventory and warehousing to provide seamless shopping experience. Also important is the liquidity: the online grocery companies need to have enough cash on hand everyday as most orders continue to be on COD mode of payment.