When the advent of the Internet was just blooming, Online Grocery Delivery service was supposed to be one big shot at success. People did their studies and carefully made the investments, but odds were not in the favour and the business could never bloom. Although the scenario has changed quite a lot over the years, the grocery industry still is struggling. With other industries like apparel shopping, electronics and mobile purchases, cab booking, online payments, food delivery all doing great, the struggle with online grocery delivery service never got better.

However, start-ups still try to keep up with their efforts and try bringing in something new on the table. But what’s the result?

Well, nothing actually seems to work for their target customers as they still rely on shopping traditionally from local stores. The result is a multitude of businesses eventually ending up calling it quits. Wondering what could be the cause of these repeated failures? Well, to bring the most obvious fact on the table-the profit margin in grocery is very less. Yes, these local stores barely make big profits let alone online grocery delivery service. As they have additional staff payments, fuel and app management to add to the expenses. Another reason is people’s idea of Grocery shopping as a Social activity offline. The bargains and the chit-chats with other customers are what makes it pleasurable. For years, it has always been that way and maybe people are not willing to give up on this.

Let us dig deep and see what could be other reasons which make online grocery delivery service an unprofitable venture and how those obstacles could have been met beforehand:

1. Online grocery shopping remains unreliable

How do you shop for fruits and vegetable from the local market? You actually handpick each one of them and put it in your basket and that’s how it goes. You hold it, shake it or tap it to determine its quality and then make the purchase but all this is not an option while you’re shopping online. Online, it is like merely scrolling through the same pictures and remaining doubtful about the quality. With these pictures, the customers cannot determine freshness from the colour and the odour. These websites couldn’t possibly spend the time and money necessary to take a picture of each actual piece of fruit and post it online. You just have to do with dummy pictures and if that does not work for you, you may not be satisfied with the experience. The fact that they have been shopping there for many years and their loyalty and trust lies with their regular vendors is difficult to make up to.

What could be done?
The answer to this problem is simple yet not very easy to execute. But if you thrive hard and put in some additional efforts in the app-building the solution could be met. The idea is to give the same feel to the user which he gets while shopping for grocery online. This will mean that you have to add real pictures of the grocery on the list and that would be pretty much life exploring through different shelves. Also, one more area where you could win customer’s trust is by making super-fast deliveries and offering them the same freshness in fruits and vegetables as if they got it straight from the store.

2. Customer acquisition cost

As we said the grocery delivery service is barely profitable and in that too you have to spend additional money to attract the customers. This is done by offering different promo codes on first purchase and it adds to the cost considerably.


Also, these apps have Low customer retention rate. They offer huge promotions to customers like offering discounts on first purchase and added bonus points to redeem later. But this ends up biting them later with more losses. This is because most customers register on the app and make a purchase only to use the first time these promotional offers. After that, they delete the app and get back to buying at their regular local markets. They would register using 4- 5 different mobile numbers in the same household make first orders and then would never come back again. This leaves the industry in even more crisis.

What could be done?
The nature of Typical Indian market remains the same more or less. In that case, it would not very wise to target the same category of the audience again and again. What could be done instead is, before entering a market a thorough study should be done to understand consumer’s psychology. This should include questions about their tastes, preference, and lifestyle so that they know what they would be dealing with and can offer services accordingly. In fact, there should be separate Market research, consumer behaviour study, analysis of the culture, habits, paying capacity, demographics before designing the apps. So, that you have the features embedded already which you want to offer to the audience.

3. Running accounts at the local retail stores

We all know for a fact, there is one nearby retail store in the neighbourhood which has our account. We buy things from there and get them added to the account and pay later. These retail stores offer us the flexibility will payment and we can make purchases even without paying at that time. This sort of relationship and reliability is what these grocery delivery portals are missing onto.


What could be done?
The app can have similar features to where they can offer weekly, half-monthly or monthly payment options to the customer. So, that would tempt them to be a regular user as they can order things and pay for them later as per their convenience.

4. Huge marketing costs

In this already failing state, these grocery delivery enterprises have to spend additional time, money and effort on marketing. Yes, it is foremost important to remain in the eyes of the customer and get their attention. This is the reason grocery chains make huge expenses on marketing and advertising on various media, especially print and outdoor. Names such as Big Basket have paid Bollywood actors like Shahrukh Khan, millions of dollars to become their brand ambassador and others continue to do it in their own way.


What could be done?
The company can be smart with its marketing and devise promotional plans which do not cost them much. Also, they should divide the whole budget of marketing into three phases- prelaunch, post-launch and regular marketing. This way they won’t run short of cash at point of time and can even come up with smarter ways of getting the user’s attention.

5. Huge operating costs

It is easier for delivery companies to set up shop in a few big cities and cater to the customers there as they are spread over a small area. But with big cities, the issue is customers are scattered all over the city, taking the cost and time per delivery high. People are spread out around rural, urban, and suburban areas, making it hard to reach a majority of shoppers from just a few physical locations.


What could be done?
The app should have tie-ups with more and more local stores and accordingly, the delivery man should be assigned to cater to the audience of that particular area. This means the app should not be operating from one point of centre and rather should have multiple centres.

6. Audience behaviour

The common lure that drove many entrepreneurs getting into the online delivery grocery service was the idea that shoppers would pay more money for goods delivered to their door. However, the opposite of that is the truth. Most shoppers will only order groceries online is those are being offered at lower prices, at discounts or when they can be assured of saving money. This way it becomes way more difficult to attract customers that they thought it to be.


What could be done?
In that case, there should be separate Market research, consumer behaviour study, analysis of the culture, habits, paying capacity, demographics before designing the apps. So, that you have the features embedded already which you want to offer to the audience.

7. Huge initial investments

An online grocer needs to have a warehouse in every metro, along with widespread connections of retailers and their own fleet of delivery vehicles. Sometimes, they even have to pay to the retailers to do a tie-up with them adding additionally to the costs. Due to these expenses, grocery delivery services could not cut cost more than food purchased at a local supermarket and the customers end up with these retailers only.


The products ordered by the customer might all not be available at a single store, and this makes a delivery boy run from store to store to get all the products ordered in the list. This becomes a big issue as Time and fuel get wasted in this process. This makes expenses go higher. Cash handling by delivery boys is also a concern and most inventory-less apps are struggling to deal with it.

What could be done?
Do more tie-ups with big businesses, whole-sellers, and supermarkets. So, that not only you are offered inventory at lower prices but you will always have stock filled and no inconvenience will be caused to the customer. The more the tie-ups the less the delivery man will have to run from place to place and his time could be put to more productive use.

8. An unfeasible option for smaller purchases

These online grocers charge you delivery charges which is very much justified but that adds considerably to your bill if you are making a small purchase. For example, if you want to buy things worth Rs. 200 then also you have to pay the same delivery charge of Rs. 70 as you have to pay for an order worth Rs 2000. This way, the customer finds online grocery delivery uneconomical for smaller orders and hence they end up with their retailers.


What could be done?
The idea is to get more customers and in that case, you will have to operate at break-even points also. This is specifically the case with smaller deliveries. In that case, you will have to lower the delivery price as per the cost of the order so that it becomes a feasible deal for the customer as well.

9. The inconvenience of delivery time

The customers would not like to wait up for a delivery boy bringing their grocery and plan their day accordingly. I mean who would like to sit and wait for the order to be delivered when they can just get down and walk a few tips and buy it themselves. In fact, they can pick up their grocery at any time convenient to them rather than allowing the online delivery service to plan it for them.


What could be done?
Here, the app should have the feature where the customer can before-hand get the option to decide the time of delivery so it does not get inconvenient for him.

10. Competition from super-markets

We have Big Bazaar, Easy Day, More and Suvidha and so many others in the list. These supermarkets offer great discounts to customers. Especially during some special occasions or festivals. In fact, they put the huge sale on their products as per the stock availability and expiration date. This tempts customers to buy some products which they didn’t intend to and which is economical for them. All this accounts to more savings from purchase at the supermarkets and online grocery delivery can never compete with that.


What could be done?
The online grocery delivery apps can also run similar deals and can offer similar discounts and benefits to the customer every now and then. Especially during the festive season as this will give them a good competitive edge.

11. Training And Customer Service

Training the staff has also posed a big challenge to start-ups. The companies have to make huge investments on Recruitment, training, and retention of their staff. Another thing where the companies burn a lot of money is to provide Customer-friendly services, handling the delivery, managing time and cash.


What could be done?
Prepare your workforce beforehand and provide them with proper training. The better the delivery, the better the customer satisfaction and popularity is. The best form of marketing that could ever be is word of mouth and if you have a satisfied clientele it will do the work for you.
Given both the pros and cons, it remains to be seen whether online grocery shopping will become as widely accepted other e-commerce businesses, or if it will keep on falling back like this. However, here we have given some ideas to deal with current problems faced by the industry. The app development company should devise a smart plan and strategize to work on them and bring the best features and functionality for the end-users.