Playing the Grocery Game and winning it

Walmart’s grocery push is no surprise. For Walmart, groceries are a mainstay in its home country, accounting for over half its net sales there, according to its annual filings with the Securities and Exchange Commission. The sheer expanse of Walmart’s grocery category includes everything from meat and produce to health aids and pet supplies, a far cry from Flipkart’s comparatively meager grocery spread.

Laggard in the space

But even while Flipkart has remained a laggard in the space, competition has heated up. India’s nascent online grocery market is already a crowded space with vertical players such as Bigbasket and Grofers jostling for supremacy. Walmart knows it must act fast because space leads to customer stickiness as grocery orders are made every few days.

In order to do that though, Supermart—in its current avatar—is woefully inadequate. It is present in only five cities and offers just staples, snacks and packaged goods. Over the last year, however, it has been in expansion mode. A fruits and vegetable pilot that Flipkart undertook in Hyderabad is set to be implemented in all cities Supermart operates in, one of the executives quoted earlier said.

Without hyperlocal capabilities, however, Supermart will sell perishables with a longer shelf life. Vegetables such as onions and potatoes, that can be fulfilled with its current supply chain.

The capacity of the warehouses

Supermart has grown considerably since Walmart’s entry. It ramped up the capacity of its warehouses, adding more delivery hubs and serving more locations, one of the executives said.

This year, Supermart registered 275,000 grocery orders during Flipkart’s 6-day-long flagship sale— Big Billion Days—the executive claimed. This is up from just 45,000 orders during last year’s sale, he added.

While this plays to Walmart’s plans, it does cast doubts on the need for Flipkart’s Farmermart. While details of Flipkart’s plans with Farmermart are not known yet, Farmermart’s raison d’etre likely lies in navigating India’s convoluted foreign direct investment (FDI) in e-commerce rules.

Unlike an e-commerce marketplace, 100% FDI is allowed in food retail for products made in India. Such food retail entities are also allowed to hold inventory. So while Supermart is constrained by e-commerce regulations tied to Flipkart, Farmermart can operate as a separate grocery unit.

Amazon took advantage of these regulations earlier this year by scaling up its food retail business. Today, Amazon Retail India is the main seller for its online supermarket, Amazon Pantry. All that’s left for Flipkart to follow in Amazon’s footsteps is an approval for a license from the government. Last month, Flipkart’s top brass met with Union Cabinet Minister for Food Processing, Harsimrat Kaur Badal.

A separate food retail unit will give Walmart the freedom to execute its grocery ambitions while allowing it to sidestep the increasing scrutiny on e-commerce marketplaces.

Walmart has decided that grocery is the next big growth area for Flipkart. But even as it reorients the Indian e-commerce juggernaut, it still has one eye firmly on all the other businesses under Flipkart’s umbrella.

Overturning the Ekart

Already, it is fine-tuning plans to spin payments company PhonePe—considered non-core to its e-commerce business—off into a $10 billion standalone entity. In fashion, meanwhile, the plan is to bring all its fashion offerings under one system, said a Myntra executive. Having previously merged the backend supply chain for Myntra and its similarly fashion-oriented sibling Jabong, there are plans to integrate Myntra’s supply chain with Flipkart Fashion’s.

At logistics arm Ekart, the changes have been more pronounced. Ekart has seen major management rejig at the very top, said multiple Flipkart executives.

Ekart’s supply chain has three divisions:

a) Large—televisions, fridges and furniture.
b) Non-large—products like mobiles and apparel
c) Grocery

While restructuring is a common side effect of large acquisitions, Ekart saw leadership changes across all three divisions.

About one and a half months ago, Paresh Huria, the head of operations for Ekart’s large and grocery supply chain quit after five years at the firm. Large’s senior director for operations Nitin Bhan—also at Flipkart for over 5 years—quit less than a few weeks later to join food delivery startup Swiggy, an Ekart executive said.


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