Flipkart to re-enter grocery segment

The logo of India's largest online marketplace Flipkart is seen on a building in Bengaluru, India, April 22, 2015. After losing top engineering talent for years to America's tech heartland of Silicon Valley, India is luring them back as an e-commerce boom sparks a thriving start-up culture, unprecedented pay, and perks including free healthcare for in-laws. Picture taken April 22, 2015. To match INDIA-ECOMMERCE/WORKERS. REUTERS/Abhishek N. Chinnappa - RTX1BBUK

Locked in an intense battle with Amazon, homegrown e-commerce major Flipkart is looking at re-entering the grocery segment that accounts for a significant portion of India's retail industry. "Yes we will get into grocery... 80 per cent of units bought in India is grocery... USD 400-600 million is grocery market, so we have to get into it," Flipkart CEO Kalyan Krishnamurthy said at a TiE event here. This will be the second attempt into the grocery segment for the Bengaluru-based firm.

In October 2015, Flipkart had launched a separate groceries ordering app called Nearby for delivering fruits, vegetables, soaps and other staples from supermarkets to customers. However, following a weak response, Flipkart closed the business a few months later. 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 USD 500 million in e-retail of food products in India.

"There are three models for grocery. One is a 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 per cent of the market is the third one which is monthly basket where 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 USD 600 million in India and pegged to touch USD 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 as well, is believed to be in fray for acquiring its smaller rival Snapdeal.