Have consumers changed the way they buy essentials and groceries?

After more than a year of seeing the pandemic, the world is slowly moving towards recovery, with the Covid-19 vaccine bringing hope into our lives. However, the last year definitely can never be forgotten by those who have lived these times! Not just for what we went through but also for changes it has brought in our lives and habits. Recent articles across publications have outlined many of these changes and how they will impact businesses and brands in the coming times. However, we saw the most significant behavioral changes were ‘adapting to work from home’ and ‘the online shopping trends.’

Though Lockdown 1.0 placed restrictions on e-commerce and consumers were dependent on local stores for essentials, lockdown 2.0 slowly made e-commerce a way of life by allowing the delivery of the essentials. Due to fear of going out,’ consumers switched from retail shops, supermarkets, and shopping malls to online portals for purchasing a range of products, including essentials and subsequently non-essentials. Comfort with digital payment methods and e-wallets further helped the growth of e-commerce. Who could have imagined five years back that we could pay our local fruit vendor or milkman or even the newspaper delivery guy using Paytm and Google Pay!

According to IBEF, the market opportunities for online commerce in India are expected to touch $200 billion by 2026 from $30 billion in 2017. The report also stated that the Indian e-commerce industry could overtake its US counterpart to become the second-largest market for e-commerce in the world by 2034 after China. 

But Covid-19 acted as a catalyst in e-commerce penetration and growth. This phenomenon was globally driven by consumers’ need for safety and convenience, and even in India, online had gained more salience than projected. Bain & Company-PRICE survey of 3000 households across income groups and geographies between April and June 2020 revealed that about 13% of respondents were buying online for the first time, while about 40% of them were buying more online. Increased smartphone usage and internet penetration across semi-urban and rural segments further helped boost online sales. According to articles in the press, India had an internet user base of 504 million in May 2020 (40% population), with more rural users than urban.

The Internet was introduced in 1995 in India, and e-commerce soon followed with the online sale of books and music. However, the concept took shape in the year 2002, with IRCTC introducing an online reservation portal. Flipkart started its operations in 2007 with books and slowly expanded to other categories. In early June 2013, Amazon.com launched the Amazon India marketplace without any marketing campaign. In July 2014, Amazon invested $2 billion (Rs 12,000 crore) in India to expand the business after its largest Indian rival, Flipkart, announced $1 billion in funding.

Online Purchase of Grocery and Essentials
The online marketplace had been growing steadily in India, with people getting comfortable with the idea of online purchases without the touch and the feel of the product. According to our research, 58% of new customers had been added to the online grocery market during the pandemic, out of which 38% expressed intention to continue shopping online after the pandemic. 15% of new users bought essential items online. However, they were not sure whether they would continue doing so post-pandemic. 5% of new users were confident that they wouldn’t opt for online shopping of essential items. 19% were already buying essential items online pre-pandemic, and 23% of consumers had continued to purchase grocery items offline even during the pandemic. The necessity and lack of other options gave people an opportunity to try shopping online. The reward of convenience and ease that came with online shopping was strong enough for some to change a habit, while for many, it was robbing the pleasure of experiencing the hustle and bustle of the marketplace. However, shopping trends for essentials displayed varied patterns. More females (44%) were shopping online than males (35%). Gen Y (42%) was shopping more than Gen Z, and Gen X. Western India (42%) surpassed the other regions for online shopping of essentials. The North, East, and South were close at 37%, 36%, and 35%, respectively (consumer research across Indian cities).

The growing demand for online grocery required online retailers to ramp up their processes to meet the demand, and hence they explored more channel partners and last-mile fulfillment partners. Demand was growing, and the consumers were not willing to wait for their essential supplies. Therefore, many online platforms collaborated with local kirana stores for demand fulfillment. The development of the last-mile delivery process was critical in India, where consumers are dispersed, and needs are varied. This was a win-win arrangement for online e-commerce players and kirana stores whose sales were affected due to low footfalls.

However, in Tier 3 and rural India, kirana stores were still fulfilling the demand of their loyal customer base and were the trusted. Research conducted across multiple cities in India stated that Tier 1 towns were more disposed to shop online for essentials (39%) as compared to Tier 2 and Tier 3 (34%), which reinforces the consumer’s comfort with familiar, especially in the times of uncertainty.

Another mobile business model emerged, especially in Tier 1 towns, which gave rise to app-based platforms like Dunzo. The local kirana stores, bakeries, dairies, fruit and vegetable sellers could now register themselves and serve the demand in a larger geographical territory. As supplies were restricted and people were apprehensive about stepping out, they found it easy to order at kirana stores, not necessarily in their vicinity as a Dunzo partner would deliver anytime, any-where at some extra charge.

Another factor that contributed to the online purchase of essentials was comfort with digital payment platforms. With India moving steadily towards the digital India dream, digital transactions that had been on an upswing since demonetization experienced a further impetus due to safety and social distancing norms. Availability of more digital wallets, more effortless and secure transactions, and the overriding safety concerns have led to a record adoption of digital payment channels during the pandemic.

56% of new customers have been sustainably added to the digital payment market during the pandemic. 53% of new users who opted for digital payments during the pandemic would like to continue doing so, whereas 6% of new users were not sure of the same. Gen Z (54%) and Gen Y (52%) were more comfortable with digital payments than Gen X. Western India topped in the usage of digital payments, whereas South India was more conservative. However, an almost equal number of people in Tier 1, 2, and 3 towns were using digital payment methods. However, digital payment providers are currently non-differentiated and need to continuously expand their offerings and provide a frictionless user experience to new customers to prevent churn and build loyalty.

By the time we bid farewell to 2021, the memories of the past year and the hardships may be behind us. Still, the changes it has brought into our lives, lifestyles, and habits would continue to impact the brands' marketplaces and brands.

Dr. Ashita Aggarwal is Professor of Marketing at Bharatiya Vidya Bhavan’s SPJIMR, Mumbai.

[This article has been reproduced with permission from SP Jain Institute of Management & Research, Mumbai. Views expressed by authors are personal.]