PUSHING GROCERY OFF THE EDGE TO TAKE THE E-COMMERCE PLUNGE IN SRI LANKA

Online Grocery shopping is the trickiest e-commerce nut to crack and many large supermarket chain have only made a half-hearted attempt to do so. Customers too have been slow to adopt online grocery buying. A study by Morgan Stanley recently showed 84% of shoppers still prefer to choose their grocery items personally and this has remained unchanged since 2016.

One the one side Grocery in Sri Lanka is largely MRP driven and extremely price sensitive hence margins can be deemed too slim for the additional logistics of home delivery. On the other side the grocery customer does not have an incentive to shop online unless the inventory provides choice and thereby a meaningful basket size to take the online plunge. The challenges surrounding the delivery of fresh is another major psychological constraint. In a market where going to the Sunday pola is still the things to do, the idea of relying on the online channel for freshness seems unrealistic.

I absolutely love to crack these hardest nuts and going into the 2nd phase of Kapruka’s engagement with Sri Lanka’s leading supermarket it’s important to look in the eye of these large players and tell them exactly how to make online grocery a winner.

Online must be about Choice

One obvious advantage is choice. At the store your space is limited to your shelf and the number of brands and SKU’s on shelf is limited by the masterfile. Online grocery should be about offering that choice and more to the customer.

Local store feeding a region works

Logistics is the other make or break game that can be made the advantage in online channel. Most go for the very traditional fulfillment model which is the inventory model. It simply means you have a certain inventory that is dedicated in your warehouse ready to be shipped on demand. But this requires a lot of holding costs and opportunity costs become huge. The hyperlocal modal on the other hand is the model for scalability and most new entrants in the field opt for this. Going hyperlocal means plugging the last mile logistics to the local store with each of them feeding their region.

No frills No fat channel

So in this 2nd phase with Cargills Food City, Kapruka is navigating with the giant to go hyperlocal- and with that to relook at some of the cost structures that get in the way of seeing the potential of online grocery.

The beauty of E-commerce is that it is a completely different beast to traditional brick and mortar retailing. It carries none of the frills or the fat layers of your store that’s plugged with innumerable front-end costs from shelf space, to sales staff, to electricity that squeeze margins. It is essentially a high margin model that can simply take-off on the already sunk costs of physical stores and warehouses.

Online Grocery is without doubt an economically challenging space. But increasingly with the willingness to innovate coupled with scalability some large players like Whole Foods partnering Amazon and Walmart going it alone are cracking this nut.

So while the store experience is here to stay for Grocery, agility and willingness to change can make e-commerce a plunge worth taking. Backed by Kapruka and its Grasshoppers infrastructure that is transforming the last-mile delivery in Sri Lanka it really time to decide to take that leap or simply watch from the edge.