Flipkart Eyes The Grocery Space...Again

Locked in an intense battle with Amazon, homegrown e-commerce major Flipkart is looking to re-enter the grocery segment which accounts for a significant portion of India's retail industry.

"Yes we will get into grocery... 80 percent of units bought in India is grocery... the grocery market is 400-600 million dollars, so we have to get into it," Flipkart's Chief Executive Officer Kalyan Krishnamurthy said at an event on Friday.

This will be the second attempt in the grocery segment for the Bengaluru-based firm. In October 2015, Flipkart had launched a separate groceries ordering app called Nearby to deliver fruits, vegetables, soaps and other staples from supermarkets to customers. However, it closed the business a few months later following a weak response.

Flipkart's rival Amazon India has launched its grocery ordering app, Amazon Now last year. The app is now available in four Indian cities including Bengaluru, Delhi-NCR and Mumbai. Amazon plans to invest around $500 million in e-retail of food products in India.

Also Read: Can Amazon Become India's Everything Store?

"There are three models for grocery. One is daily purchase, the average selling price (ASP) there is very low at about Rs 300-400. Then there is a weekly business model, which is a bit higher. Thankfully, 60-70 percent of the market is the third one which is monthly basket where the average is about over Rs 2,000. With those, it's a very sustainable business," he said.

The online food and grocery segment also includes players like BigBasket and Grofers, who are also looking at expanding their operations.

As per industry reports, the online F&G delivery market is estimated to be around $600 million in India and pegged to touch $5 billion by 2020.

Talking about acquisitions, Krishnamurthy said the company is looking at targets for enhancing capabilities.

"We will look at M&A, size doesn't matter. What we are looking at is capabilities. A lot of business we acquired over time were actually small," he said citing examples of PhonePe and Jeeves.

Flipkart, which has made big-ticket acquisitions like Myntra and Jabong, is believed to be in fray to acquire its smaller rival Snapdeal.