Solution to Case Study 1: Grofers — Assignment 2

India is the sixth largest grocery market with a 20–25% growth annually of e-grocery market. It is always great to be a pioneer of such a huge market but certain challenges grofers need to tackle in coming years as follows:

~ The biggest challenge would be to find a sustainable profit model.

Grocery market is a very low margin market usually 7% gross margin. If you see the grocery market over the years, many organised retail stores such as vishal mega-mart, subhiksha etc. have shut down due to lack of proper profitable model. Few organised retail stores have survive such as Metro, D-Mart due to mostly proper inventory management and sales of high-margin own brand products.

Online grocery leader bigbasket also offers own brand product that have a share of well over 40% in overall their sales. This type of approach will be difficult for hyperlocal delivery players such as Grofer. Currently, Grofer offers free delivery on order above 250 rs. Considering low margin, delivery charges and cost of offering better deal gives Grofer loss on every small order size it delivers. So, Grofer needs to find balance between this and their other sources of revenue such as new product branding which they recently did with coca cola’s sprite zero, sales from other segments to sustain as a leader in grocery market.

~ High Competition with the entry of big marketplaces and multinational companies

Amazon India using its strong logistics network recently launched an express delivery platform calling it Kirana Now, Snapdeal also partnered with Godrej Nature’s Basket, Tata Group launched grocery eretail shop My247market, Taxi aggregator Ola lauched quick online grocery deliver offering Ola Store using its fleet of taxis. So, Grofer needs to scale fast and provide a better deal and grocery experience to users to put its head ahead of all.

~ Managing inventory and technology

Another challenge for Grofers would be managing inventory in real time. This includes forecasting inventory levels for associated stores, dealing with hundreds of vendors at a time. Consumers do not like to have a out of stock of one or other thing which leave no option to find alternative or drive to the local store which may create negative impact for any company.