Dark stores take off amongst India’s online grocers

The instant delivery model it enables offers huge customer convenience.

Online grocery stores in India have begun to adopt the "dark store" concept, which involves an outlet that caters to online shoppers, as they seek to capitalise on the growing online food and grocery market in the country, according to a report from GlobalData.

Dunzo, an e-commerce company, has launched Dunzo Daily in Bangalore that promises to deliver groceries within 19 minutes of placing the order. Swiggy also expanded its Instamart service in August to five more cities with a commitment to deliver grocery items within 15-20 minutes. Meanwhile, Zomato-backed Grofers started 10 minutes deliveries in 10 Indian cities.

Instant delivery models have massive potential as it offers to consumers who tend to prefer getting their favourite items delivered and save time due to their busy lifestyles and hectic daily commutes, GlobalData’s Retail Analyst Ankita Roy said.

Dunzo Daily has been well-received in Bangalore, Roy noted. The company has taken initiatives such as opening more mini-warehouses or dark stores across each neighbourhood and assigning a daily delivery executive within a 5-kilometre radius for deliveries. 

“Matching delivery time with customer convenience has always been a challenge in last-mile delivery. But as the delivery industry in India continues to advance, it is not just about getting products to customers faster than competitors but also to meet a certain standard, meaning fast is never just enough,” Roy said.

Similar initiatives are already prevalent in Europe and the US. For Instance, Delivery Hero, an online food delivery company that operates in more than 50 countries internationally, delivers orders in less than one hour whilst Cajoo, a French startup delivers in 15 minutes.

Roy advised India’s delivery companies to focus on expanding their reach in Tier 2 and 3 cities, noting that economies of scale remain crucial in the industry amidst intense competition in the food delivery industry.

“However, with the fast proliferation of these services, and increasing competition, there is likely to be consolidation as companies seek scale and profitability,” Roy said.

India’s online food and grocery market are expected to grow at a compound annual growth rate of 20.5% during 2020-2025 to reach $117.4b in 2025, GlobalData said.