Race Against Time: How Offline Grocery Stores Are Adapting to Rapid Retail Growth

Fast commerce disruptors like Blinkit, Zepto and Swiggy Instamart have taken urban India by storm, promising deliveries within minutes and changing the way consumers shop for essentials. “Fast commerce is a game-changer for us. There’s tough competition,” says Niyaz KN, director of Bengaluru-based MK Retail.

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With convenience at the forefront of everything, offline retailers are rethinking strategies to stay relevant in this highly competitive market. A key part of their adaptation is partnering with third-party logistics providers, who are also benefiting from the growing demand for faster deliveries. At the same time, some retailers are also beefing up their internal delivery fleets.

Adapting to the race for fast shopping

MK Retail, for example, is reducing home delivery times from 30 minutes to just 15 minutes, according to Niyaz. By partnering with logistics providers like Loadshare and PhonePe’s Pincode, MK Retail aims to capitalize on the fast-paced retail trend while maintaining a strong presence in retail.

Similarly, The Organic World, another Bengaluru-based retailer known for its gourmet offerings, is considering a delivery window of less than two hours, with plans to reduce it to just one hour in the coming months, according to Gaurav Manchanda, founder and director of the company. It currently offers next-day deliveries.

In June, retail giant Reliance Retail began piloting one-hour grocery and fast-moving consumer goods delivery in select areas of Mumbai and Navi Mumbai, according to media reports.

Manchanda said improving the online ordering process is key to staying competitive.

Other stores like Ratnadeep Supermarket and Nature’s Basket, owned by RP Sanjiv Goenka Group, are grappling with similar challenges as they try to adapt to changing customer expectations.

The development of fast trading

The fast-paced retail sector in India is booming. In 2023 alone, the market grew 77% to $2.8 billion in GMV (gross merchandise value), according to Redseer. However, the phenomenon is still largely confined to large metro cities, where consumer habits have evolved towards ultra-fast delivery of everyday essentials.

Today, traditional retail—small local shops, pharmacies, grocery stores—still accounts for 88% of fast-moving consumer goods (FMCG) sales nationwide. In metropolitan cities, e-commerce has carved out a 7.2% share of the FMCG market, and fast-paced retail is playing an increasingly important role in the space, according to NielsenIQ.

Platforms like Blinkit have emerged as leaders in the sector, with a 46% market share, closely followed by Zepto and Swiggy Instamart. Blinkit and Zepto together control 60-65% of the instant trading market, according to Karan Taurani, an analyst at Elara Capital.

These platforms are capitalizing on consumer expectations for speed and convenience, transforming the way grocery shopping is done in cities like Delhi, Mumbai and Bengaluru.

“So many of us order groceries every day, depending on what we want to cook that day. I want the convenience of getting my order within 10 minutes,” said Mahima, a 24-year-old from Mumbai.

Logistics and scaling strategies

Brick-and-mortar retailers are paying attention to the voice of the consumer and are adopting a dual strategy: investing in logistics to compete with fast-paced retail transactions while retaining their core strength – brick-and-mortar customers.

“There is a lot of competition. We need to change our approach to selling,” said Niyaz of MK Retail. Online orders currently account for 10% of total sales.

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The logistics game is key. Many offline retailers are partnering with third-party logistics providers to grow quickly, while also investing in their own internal delivery fleets to maintain control over the customer experience.

For example, MK Retail works with 12 delivery partners within a 3-5km radius, but complements these with external partnerships to meet growing demand.

“While these workers can only fulfil a limited number of orders per day, our tie-ups with third-party logistics companies, as well as Ola and Loadshare, will help us grow our share of online orders from 10% to 15% over the next few months,” Niyaz noted.

According to CEO Manchanda, the Organic World chain of stores, which currently has 20 stores, is also thinking about expanding its brick-and-mortar stores, which will act as unofficial stores, which will speed up deliveries.

“To shorten delivery times, we will likely expand our fleet, optimize delivery routes to increase delivery efficiency and reduce travel times, increase the number of our stores across the city so that they can effectively function as dark stores for deliveries, and improve inventory management to ensure that high-demand products are always in stock,” he added.

Bonanza for logistics companies

Logistics companies such as Shiprocket and Borzo have also benefited from rising demand.

Shiprocket’s recently launched vertical fast delivery service Quick has partnered with multiple department stores across cities including Delhi-NCR, Bengaluru and Mumbai over the past two months, enabling deliveries within minutes.

“As consumer demand for faster deliveries continues to grow, especially during the holiday season, Shiprocket Quick allocates couriers in less than 10 seconds and often delivers orders in less than 5 minutes,” said Gautam Kapoor, Co-Founder and COO, Shiprocket.

Intra-city delivery service Borzo has also signed partnerships with around nine grocery retailers in the last few months, including Hyderabad-based Ratnadeep Supermarket and Food Hall.

“Larger supermarket chains naturally have higher order volumes, but medium or small chains with lower order volumes and greater distances contribute to margins. We are seeing significant demand from supermarket chains in key metros. Borzo’s 45-60 minute delivery model aligns with the needs of retail chains, offering a fast, reliable solution without the complexity and cost of ultra-fast deliveries,” said Eugene Panfilov, Managing Director, Borzo India.

However, creating a digital business is not at all easy.

“Online delivery is no easy feat. Only scale can define the success of a digital business, and a lot of investment is going into technology and last-mile logistics,” said Taurani of Elara Capital.

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In a Q4FY24 earnings call with investors, Avenue Supermarts, the parent company of supermarket chain DMart, said it has no plans to launch ultra-fast delivery services. Instead, the company will focus on expanding its store network to cover areas where fast-paced retail is gaining popularity.

The Profitability Puzzle

While express traders are winning the convenience battle, they still struggle to achieve profitability.

Blinkit recorded an adjusted EBITDA loss of ₹37 crore in the last quarter of FY24, although this was a significant improvement over ₹203 crore loss in the same period last year. Zepto, on the other hand, saw its losses widen to ₹1,272 crore in fiscal 2023, underlining the challenges of scaling a low-margin, high-volume business.

Fast trading is based on frequent, small orders, with an average order value (AOV) ₹460 for Swiggy’s grocery division and ₹617 for Blinkit.

MK Retail and The Organic World, meanwhile, are focusing on maintaining larger order volumes to ensure profitability.

Orders above ₹They believe that 1500 will allow them to cover their delivery costs, which are usually ₹70-100 per order. For smaller orders, many retailers introduce delivery charges, as seen in the case of MK Retail ₹50-60 fee for orders below ₹500. They claim that this approach allows them to remain competitive without losing margins.

Manchanda said fast trading has a complex economic structure, and doubling down on ultra-fast delivery can increase costs by as much as 5%, so caution is needed to maintain profitability.

Another problem for fast-track platforms is product quality. Consumers are increasingly reporting poor product quality and inconsistent delivery. This has given traditional retailers the opportunity to differentiate themselves by emphasizing quality.

Mahima from Mumbai added that she receives refund requests for at least one order every week, highlighting the need for better quality management.

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As the lines blur between online and traditional retail, those who can deliver not only speed but also quality, customer satisfaction and profitability will ultimately win.