India’s online grocer Grofers has reported a 111% increase in its revenue to INR1,767m (US$24m) in FY20 (ending March 2020). However, with overall expenses increasing 53% to INR8,142m (US$112m), the retailer reported a net loss of 42%, equating to INR6,374m (US$88m).
Increase in warehouse space, store partners and private labels
The online retailer is now present in 38 cities and able to make express deliveries in two hours. Most of its sales are coming from Delhi, Ahmedabad, Bengaluru, Chennai, Mumbai as well as smaller towns in Kanpur, Faridabad, Jaipur and Ghaziabad. Grofers’ addition of warehouse space, partners and investment in private labels have allowed the retailer to grow 2x as much as the previous year:
- 10,000 sq ft of warehouse space have been added
- Store partners have also increased from 7,000 pre-COVID to 12,000 currently
- Private labels now also contribute to 42% of Grofers’ revenue. The retailer plans to invest US$15 million more in this category, as it is expecting private labels to make up 60% of its revenue in the next three years
Growth of online grocery business during lockdown
Since this report only covers up to March 2020, it remains to be seen how exactly the retailer has grown in the balance of the year when the lockdown was implemented in India. But we expect that Grofers will continue this trajectory in revenue growth in FY21, since online grocery stores have been in demand since the lockdown in April 2020. During this time, it has been reported that Grofers has acquired 2.6m new customers and attracted 64% first-time online grocery shoppers.
Overall profitability expected by 2021, while facing increased competition
Grofers has been initially eyeing profitability by 2020, but this ambition has now shifted to 2021. We expect the retailer to face increased competition, given the entry of major ecommerce players:
- Its bigger rival BigBasket has also reported last week a 36% increase in its revenue in 2020, and has the potential to grow further with the backing of the Tata Group
- Reliance Retail’s JioMart is using Kirana stores as franchise partners to deliver non-perishable grocery items in India
- Flipkart has announced the inclusion of food and grocery in its inventory
- Local food delivery giant Swiggy is scaling up Instamart, its on-demand grocery delivery service