About 8% of the grocery market in India are organized. This market is currently dominated by the hypermarket, supermarkets and convenience markets like FoodBazzar, Hypercity, and Dmart etc (KPMG, 2014).

With a large customer base and increasing penetration of Internet connectivity (partly through smart phones) and the growing popularity of online shopping, some entrepreneurs have seen the potential in creating e-stores for groceries. If you understand the retail market, a bit of creative thinking and excellent customer service can help you build a great business.

As a result, players like Big Basket, LocalBanya, Godrej’s Natures Basket, Zopnow, AaramShop etc are competing to eat up this 8% sliver of the market. Most of the existing retailers offer their service in metros and major urban centers, which accounts for approximately 30% of the population of India (Bank, 2014).

The aim of this study was to understand if the choice of ‘place of purchase’ was dependent on the ‘items on the purchase list’ in grocery and staple segment. The article identifies four major categories of the Indian grocery market players as follows:

• Organized Grocers
  • eGrocers
  • Hypermarkets
• Unorganized Grocery Market
  • Modern Mom and Pop Shops
  • Traditional Mom and Pop Shop

eGrocers and Hypermarkets are the part of organized Indian food and grocery market. The last two categories are the part of fragmented and unorganized retail sector, which constitute to the 90-93 % of the industry.

People from tier I and tier II cities like Mumbai, New Delhi, Pune, Ahmedabad, and Kanpur were surveyed for this study. The respondents were given three prototypes of a typical Indian grocery list – A, B and C and were asked to select their preferred place of purchase for those respective lists. Thus an indirect way of gathering the responses was used in this study. The lists were designed using “groceries and utilities” and “fresh farm produced vegetables” products. The place of purchase mentioned were Hypermarkets, e-grocers, modern mom and pop shops and traditional mom and pop shops.

List A: This list consisted of groceries and utilities like multipurpose flour, soap, dairy products, eggs, etc., and fresh farm produced vegetables used in a typical Indian household.

List B: This list consisted of only the freshest farm produced vegetables used in a typical Indian household.

List C: This list consisted of only groceries and utilities like multipurpose flour, soap, dairy products, eggs etc., consumed by a typical Indian household.

The data are represented in the adjoining chart. The survey confirms the poorer penetration and preference for eGrocers. Irrespective of the item on the list fewer people have preferred it to buy from eGrocers.

The most preferred location for buying groceries is hypermarkets. The reasons cited by the respondents were: 1. Wide range of product categories, 2. Physical shopping experience, 3. Discounts and 4. Being able to pick and choose their groceries.

The moment vegetables are added to this list of groceries, the preference shifts towards local markets. The respondents emphasized on these factors such as Timeliness, Familiarity with their local vendors, Credit transactions and Being able to pick and choose their groceries.

When it comes to buying just the vegetable local market hands down beats all the other players. The factors that make a person prefer local markets are already mentioned above. In tier II cities many small vendors traverse through residential areas and sell vegetables on their hand driven carts. The service provided by them is personal, efficient, customized and most important economical. Also, it cannot be forgotten that these vendors are the part of the big unorganized chunk of the food industry in India.

To conclude, one can see that there is a part of the working population within urban India is realizing and appreciating the comfort and convenience provided by the eGrocers. Still, it would be a Herculean task for them to compete with unorganized local vendors in tier II cities.