‘Preferences vary; consumer needs remain the same’

The biggest grocery businesses in the world have managed to deliver savings to their customers, AL BINDER DHINDSA tells Alokananda Chakraborty

You had to tweak your business model as recently as in 2016. What were the key insights that made you relook at your business model/operation?

In 2016, we pivoted our business to an inventory-led model. The biggest reason that made us pivot to an inventory-lead model is that it was difficult to control user experience. Very few merchants had technology to give inventory visibility to us, which lead to customers either not receiving all the products they had ordered, or not receiving good quality products.

It was an important decision for us to make this change and keep up the growth. We set up warehouses in 12 cities in a span of six months and since then, we have grown over 4X in the last one year with a 10-15 per cent monthon-month growth, while simultaneously decreasing our operational costs. We have been able to achieve this growth while also improving the customer experience as now we have better control over inventory and we can extract better margins from the manufacturers.

What are prerequisites to succeed in the food and grocery retailing segment?

There are two key things one needs to crack to succeed as a grocery retailer. One, understanding the customer. What a customer wants, what he/she values the most, what is the monthly purchase cycle of the customer, the barriers and the triggers that will lead to a purchase, how she makes a decision of shopping through a platform are some of the most important things a retailer has to understand to become successful. Two, reducing cost. The key to building and sustaining a grocery retail business is to manage costs, and technology plays an extremely important part here. Less cost enables you to deliver more savings to the customer. Our business model helps us work with a shorter supply chain with expenses that are lesser than our offline partners, as they have high fixed costs.

With increasing competition, how do you scale up to stay competitive?

I think online grocery is a very important category, especially in India where consumption is still primarily along non-discretionary spends. This is the reason all the large horizontal players are now looking at expanding into this category. If their core markets were providing enough value they will not be looking at expanding into a specialist category with operational complexity. Even a player like Amazon still doesn’t have a coherent grocery strategy in the US market where they have been operating for almost 25 years.

Overall, the entry of these players means there is a lot more focus on the segment. However, I think they will try out their own hand at this segment before eventually aligning in this vertical. Unless the horizontals are willing to change their business and product to match the expectation of the grocery customer, I don’t see them flourishing in this category. While it is nice to think in terms of market dynamics among large corporations, the customers and their expectations are what is going to make or break a segment (or company).

For us, the number one priority is to keep growing in our target group while making sure we are moving more and more markets towards profitability. Even if you look at our track record in the last year, we became the biggest player in the segment while all the horizontals came along with their own grocery players and other competitors also spent a lot on marketing. Our segment focus and commitment to building a specific use case for the customer has meant we haven’t really been bothered by what the other guys have done in the segment and even managed profitability in our largest market. We will continue to do better for our customers and sharpen our value proposition— its the best way to stay in the fight.