Key challenges faced by online grocers huge

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Key challenges faced by online grocers Huge investments are needed in: Cold storage facilities to maintain quality of perishable products until the last mile Apart from this availability of skilled manpower, rising labor costs are also some of the risks, which have a significant bearing on sustainability of operations. Investments in Logistics Efficient Sourcing Difficulty in Scaling up delivery Developing local supply-chain network due to bulky nature and short shelf life of products Dynamic route planning considering city traffic conditions for on-time delivery Backward integration needed to reduce intermediaries and improve efficiency in sourcing Fragmented agri-supply makes it difficult to procure quality produce at competitive costs City/region-specific distribution network makes it difficult to scale up the business Tweaking business models as per city dynamics is required when entering a new market/city Despite challenges, online grocery holds huge potential While on one hand, online grocery offers significant growth prospects, on the other it is plagued with challenges in terms of wafer-thin margins and supply-chain related issues. With rising competition, the players are likely to get into price wars by offering deep discounts to gain increased market share. This will squeeze the margins and could force less competitive players to shut shops or get acquired by bigger players. For long-term sustainability, players would face an increased need to scale up quickly and differentiate through innovation. Innovation can be in terms of catering to specific customers and offering niche products or offering customized services. Like most sectors which eventually attain a certain size, consolidation is bound to happen. Although online grocery retailing is likely to see a churn, it will be one of the sectors to watch out for in the coming years. Thin Margins Intense competition, commoditized nature of products, volatility in prices and price sensitive demand puts severe pressure on margins Source: EY Analysis 10 | The retailer
Chinmay Ojha Assistant Director Chinmay Ojha, Assistant Director, Strategic Market Intelligence (SMI), EY – Chinmay has more than 10 years of experience across consulting, project management, business development and research & analysis with professional services firms including EY. He has worked on a range of projects involving growth strategy, marketing & sales strategy, market entry & assessment, and business plan analysis for the leading global and Indian consumer products and retail clients. Chinmay leads the CP/Retail SMI team in India and also helps in driving the thought leadership agenda of the CP/Retail sector.. Email: [email protected] Tel: +91 124 470 1155 Inputs from Nivedita Ukidwe, Strategic Market Intelligence, EY Knowledge The retailer | 11
2 Technology enablement in distribution channels Consumer Product (CP) companies are relentlessly striving to gain a competitive edge and increase market share. In a market increasingly influenced by vacillating consumer choices,

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