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How does an online grocery store work? Simply put, they collect orders via common portals and then assign orders for delivery to designated customers. That’s what it looks on the outside, on the inside each player in the Online Grocery Market In India, has to develop an approach that makes sense to them based on market conditions. How do they do that?
There are a few models that are practiced and seem to work. The warehouse-model. Here, the company in question has its own warehouses/warehouses managed by a group of staff, that also handles other functions like wastage, procurement, etc. The last time we checked, BigBasket worked on this model and they also market many of their in-house white-label brands. Pros: It is possible to have better control over the margins they have. Cons: It is costly to build and maintain as there are physical warehouses, this can get more capital intensive with more warehouses that you build. The local store aggregation. Here the company might only manage the incoming orders. Then they pass them over to local stores to fulfill and deliver to the respective customers. This involves maintaining a network of small local retailers. Pros: The model hardly has any assets like what’s seen in the warehouse and is also cost-effective because of this. Cons: The customer experience can differ, even be inconsistent as the delivery quality can vary from one retailer to the next. Some might even be impacted due to shortcomings of their own. The delivery-only model. Here, the company does not own any inventory to hold products, just a fleet of delivery guys and vehicles. They work by getting orders, procuring products from the stores and then purchasing those items from them or delivering the orders for them. Pros: It’s the exact opposite of local store aggregation, where the company has better control over the kind of delivery experience they build. Cons: Customer orders are subject to a fill rate, where fulfillment is determined by stock availability, without lost sales or backorders. The Deep-Integration Omni-channel model. This is a more complex take on the delivery-only model, where the company is interconnected with reputed offline stores. They process orders from their own warehouses and that of these offline stores as well, to try to capitalize on the offline and online preferences that buyers have in the Indian market for online grocery. Pros: The delivery and customer experience is in their hands. It is cost-effective because of its asset-light. Cons: The orders delivered or fulfilled are dependent on the inventory partner if the product or the actual partner is available.
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