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FOOD IN THE DOOR

Ninjacart investment shows online grocery is going to be the new frontier for Walmart in India

Reuters/Pawan Kumar
War to go next?
Ananya Bhattacharya
By Ananya Bhattacharya

Tech reporter

Flipkart is taking the fight with Amazon to the farm.

Yesterday (Dec. 11), India’s largest homegrown online retailer and its American parent, Walmart, made a joint investment in the Bengaluru-based B2B fresh produce supply chain company Ninjacart.

“This (Ninjacart) acquisition is aligned with Flipkart’s strategy of being a one-stop shop,” Yugal Joshi, vice-president at Texas-based consultancy Everest Group told Quartz. “It seems they do get inspired by Amazon, which has also entered the fresh produce market.”

The three entities—Walmart India, with its 27 Best Price Modern Wholesale stores, Flipkart’s online grocery arm Flipkart Supermart, and Ninjacart, which has a reach across seven Indian cities—are teaming up to take on the US-based giant in the grocery retail space. 

After all, the potential is huge.

India’s online grocery market is slated to grow to Rs1.03 lakh crore ($14.6 billion) by 2023, from Rs6,201 crore ($875 million) in 2018, an analysis by market research firm ReportsnReports suggests. The uptick will come on the back of customer acceptance, increasing internet and smartphone penetration, new market entrants, and the increasing focus of online marketplaces like Amazon and Flipkart in the segment, it says.

Up against Amazon

Already, Amazon’s interest in offline grocery retail is obvious.

The Seattle-based company bought the upscale American grocer Whole Foods for $13.7 billion in 2017 to jumpstart its grocery-delivery efforts. In India, too, the Jeff Bezos-led company has created an alliance of sorts with the retail business tycoon Kishore Biyani’s Future Group.

Biyani’s company is already listing its labels on Amazon, and the two firms have been trying to make joint plans around distribution, warehousing, and creating products for Amazon and its grocery format, Pantry.

In November, popular hypermarket chain Big Bazaar, a Future Retail brand, was fulfilling between 300 and 1,000 orders per day per store for Amazon’s two-hour delivery service Prime Now from 18 stores in Delhi, Mumbai and Bengaluru.

At the end of the month, the competition commission of India (CCI) gave the nod for Amazon’s acquisition of a 49% stake in the promoter business Future Coupons, a subsidiary of the Future Group. Stocks of various Future Group companies soared between 15% and 20% following the CCI’s move, which purportedly gave Amazon an edge over Walmart in India since Future Coupons has a 7.3% stake in Future Retail.

However, the Ninjacart deal could tip the scales the other way.

The four-year-old agri-tech business, which had so far raised over $150 million, complements Flipkart Supermart, launched in November 2017. Ninjacart uses big data, predictive analytics, mobile applications and internet of things to power a just-in-time supply chain to connect over 44,000 farmers with more than 60,000 corner stores and restaurants.

At the same time, Flipkart can give wings to Ninjacart’s business. Notably when it comes to scale. “Over the past year, we have focused on creating the right infrastructure, supporting local farmers, producers and food processors, and building sustainability into the ecosystem,” Kalyan Krishnamurthy, CEO of the Flipkart Group, said after the acquisition announcement.

Moreover, parent company Walmart, whose cash-and-carry business has partnerships with farmers across the country, can hold Flipkart’s hand through this rivalry.

But Amazon is undeterred. Country head Amit Aggarwal said Amazon’s grocery business is thriving, after the Ninjacart fundraising announcement.

A buffet of rivals

Amazon isn’t the only retailer with its eyes on the prize when it comes to online grocery sales.

Reliance Smart, led by India’s richest man Mukesh Ambani, has been charting out its own hybrid online-offline model. Food-delivery firm Swiggy delivers fresh groceries, flowers, health and supplements, organic and gourmet food, meat, and even pet-care products from neighbourhood shops through its Swiggy Store. Dunzo, a hyperlocal delivery app, counts Google among its investors. Just this month, online grocery platform Grofers expanded to 27 Indian cities, up from 14. Alibaba Group-backed BigBasket is a formidable rival which, together with Grofers, captures 70% of India’s online grocery market.

So, to take on the competition headfirst, Flipkart’s play has to be bigger than just fresh produce.

Rich with cash from Walmart’s 77% stake buy in the company for a whopping $16 billion, Flipkart has recently been loosening its purse strings to grow its business far and wide in recent months. In March, it set up a $100 million internal fund to back fintech, supply chain, and SaaS startups. In December, Flipkart raised Rs283 crore from its Singapore-based parent entity Flipkart Private Limited.

Bread, butter, and beyond

The buck won’t stop at produce, experts say. “Amazon has also entered the (online) medicine market and is building alliances with banks and insurers to disrupt financial services. Flipkart may imitate that as well,” said Joshi of Everest Group.

Already, Flipkart picked a battle in the over-the-top (OTT) segment this year. In August, it launched video streaming on its app, à la Amazon Prime Video, which includes content from services such as Voot, Arre, Viu, and TVF.

Competition between the two continues to heat up. Flipkart may have a rich parent now, but Amazon has deep pockets.  Bezos committed a $5 billion investment to the country in 2016. In October, Amazon funnelled in Rs3,400 crore into its online marketplace arm and Rs900 crore into its payments platform.

It has also been a first-mover to woo non-English speaking internet users in India. In 2018, Amazon launched a Hindi language interface. Almost a year later, in September 2019, Flipkart launched a Hindi version of its app. By then, Amazon even had a chatbot that interacts with users in Hindi.

For the time being, the jury’s still out on who’s winning in Indian e-commerce. It depends on who gets the next shot in the arm, be it with funding, an acquisition, or entirely something else.

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