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You are here: Home / Uncategorized / Consumers in smaller cities and towns are now increasingly shopping groceries online

Consumers in smaller cities and towns are now increasingly shopping groceries online

June 1, 2020 by cbn Leave a Comment

Illustration: Rahul Awasthi
Illustration: Rahul Awasthi

Consumers in smaller cities and towns are increasingly using online grocery delivery services and are shopping for higher-value basket sizes compared to the top seven cities, at least six companies in the sector told ET.

A fear of the Covid-19 pandemic as well as closure of many physical stores, coupled with non-availability of items in corner stores, is leading to the shift in consumer buying patterns, they said.

Cities such as Jaipur, Ahmedabad, Indore, Trichy, Salem, among others, are witness to the trend, they pointed out.

“Tier II cities grew by 56% in April compared to March while metros grew about 35%,” said Hari Menon, co-founder of BigBasket.

Menon, though, clarified that the spike was not because of a lower base but due to the availability of manpower and built-in infrastructure capacity at these cities to fulfill additional orders.

Rival Grofers, too, said it was able to retain 62% of users who came on board in March after the nationwide lockdown, adding it expects to retain around 50% of new users long term.

“Today, the adoption of online grocery is happening via environmental forces, and we believe that this trend is going to stay as a large number of consumers who shopped during the lockdown have already transitioned towards online grocery shopping,” said Albinder Dhindsa, cofounder of Grofers.

At least half a dozen national and regional startups, including Swiggy, Zomato, Shopkirana, Dealshare and Shopmatic shared the sentiment.

Swiggy, which scaled its grocery delivery to 300 cities in two months, said order value in small towns tends to be higher compared to metros.

“We have noticed a higher average order value, or AOV, of 7-10% from the smaller cities,” a Swiggy spokesperson said.

Some part of this increased usage is driven by striking close partnerships with local governments.

“We worked closely with various local officials from different cities because, after the lockdown, we had to get passes and licences to arrange supply for these kirana (corner) stores,” said Sumit Ghorawa, co-founder of ShopKirana.

The company launched its ‘Zaruri’ app, which allowed customers to place orders with their neighbourhood stores. “We then delivered these orders in about 1-2 km radius. In the long run, we plan to scale it up and increase our fleet size as well,” said Ghorawa.

Consumers buying pattern changes

After the lockdown, the buying pattern also changed with consumers cutting back on discretionary spending, the startups found.

For instance, before the virus outbreak, 30-35% orders were FMCG and pulses but these items make up for 60% of the basket now.

“The mix has shifted more towards essentials. This shift will sustain for the next 12 months and after that, some discretionary spending will start creeping in,” said Vineet Rao, CEO, DealShare.

Fruits, vegetables, dairy, meats, snacks and packaged food are the top-selling categories, according to Zomato.

“We have seen a steady increase in ordering frequency across smaller cities…Inventory management is slightly easier in tier II cities since the variety of products and brands is definitely lesser and demand is inclined towards staples,” said Mohit Sardana, COO – Food Delivery, Zomato.

These startups relied on WhatsApp, social media, referrals and word of mouth to create awareness among the customers.

“We started with our existing customer base first, re-targeting, and then did referrals to drive more order growth. Since the audience is fairly from smaller cities, referral discounts are also very adoptive there,” said Jasmeet Thind, co-founder of CoutLoot.

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