Grocery Marketplace Business Model Pros and Cons

Grocery retailing is changing, and in this new digital era – digital Grocery or Grocery Marketplace is the new edge.

A grocery marketplace business model ( https://www.yourretailcoach.ae/fmcg-e-grocery ) is one wherein,

- > There is a platform – which is managed by the platform owner
- > There are multiple varieties of groceries sold
- > By more than one seller (that is a multi-vendor platform), who may be selling the same groceries as other or different
- > Catering to a wide audience – the buyers

Advantages of grocery marketplace

Let us explore the advantages of a grocery marketplace

- > Generally, the vendors of a grocery marketplace are the regular Kirana stores, supermarkets, grocery stores, etc. So, for them registering as a vendor provides an additional channel of revenue to market and sell their goods.
- > The cost of advertising on these marketplaces channels is generally cheaper and more economical than the traditional ones
- > The audience or buyers are the direct target audience, and hence chances of getting business are higher.
- > For a consumer or buyer, it allows an easy and efficient manner to compare prices and offers from two sellers and make a call on where to buy
vIf the online marketplace is an established one, it gives credibility to the seller indirectly – thus attracting more customers.
- > Since it is an open marketplace, the reviews about a grocery seller are visible to all buyers. It becomes a fair and transparent way for the buyers to judge the seller and/or the quality of the grocery.
- > Ease of access to the consumers in terms of doorstep delivery and not having to step out to purchase the essentials
- > The sellers do not need extensive IT knowledge or the need of maintaining and developing an online platform (which can be expensive and time-consuming) – it is more like a plug and play mechanism used by all sellers.
- > Sellers generally do not need to employ additional manpower or labour for the activities.

Disadvantages of grocery marketplace

Though the online grocery marketplace ( https://www.yourretailcoach.ae/fmcg-e-grocery ) has advantages – there are some disadvantages also.

- > The biggest disadvantage or problem area is that the grocery marketplace owner will make revenue by charging a commission to each sale. Typically, the margins only grocery sales are low in comparison to general merchandise, thus making it non-viable or profitable for small grocers to operate. Only on the niche or imported items, the margins are better to operate for them. Thus, in the long run, the interest of the sellers starts to deplete.
- > Immediate need – in case you need a packet of milk immediately – you would prefer to go down and pick it up from the local nearest grocery shop rather than ordering online as the delivery would take a certain minimum time defined by the platform. So the immediate need customers cannot be catered to.
- > The online grocery platform ( https://www.yourretailcoach.ae/services/e-commerce-online-stores/ ) will generally have a minimum cart value to process the order or make it free delivery. If the need of the customer is not in line with the minimum cart value threshold – the customer would rather buy it from a local Kirana store than the online marketplace platform.
- > Real-time inventory updates. Most small and medium type grocery stores do not have accurate inventory or correct inventory uploaded on the online platform. Due to which many subsequent issues arise

-> A customer placed an order looking at the available catalogue and placed an order – now while at the “picking stage” at the seller's end they may find that a particular SKU is not available and mark it unavailable in the order. The customer may get his refund – but then the cost of delivery may be unjustified to the rupee value of the goods delivered.
-> The sellers at times replace the unavailable product with the nearest possible match and execute the order. The consumer generally does not appreciate this due to the price difference or the brand preference – leaving the customer irate and probably losing him forever.

- > Returns are a nightmare in the grocery business. Due to the sheer low margins – the reverse logistics cost simply does not allow the scope of a return pick up for whatever be the reason. Thus, it leaves everyone in the value chain dissatisfied.
- > Generally, the platform will have a defined time frame in which the delivery will be made. And if those are breached, we have an unhappy customer- as the USP of the online marketplace is the home delivery – and if that itself is not made available, we are sure to have customers leaving the platform for good.
- > In a grocery marketplace – unlike a general merchandise marketplace – you choose the seller and then you choose from the sellers listing the available grocery. The availability of the required SKUs in their listing is a challenge. Leaving the customer high and dry. It is quite a rare phenomenon where the customer would place 2 -3 orders from each seller to fulfil their need and end up paying 2-3 times the delivery fees. Thus, item availability is a big challenge.
- > Due to heavy customer walk-ins at various times, the seller may take time to “accept” the order. Thus, delaying the overall time frame of delivery and disrupting the pick-up mechanism of the online platform. It also leaves the customer in doubt till the time of acceptance or de-acceptance in doubt whether the order would also be executed or not.
- > If an established supermarket or a dark store is in the vicinity of radii of delivery, the orders tend to get skewed towards those players, and the remaining sellers have a very little order contribution – thus making them lose interest in this for the long term.

Though there are challenges in the grocery marketplace model – these can be overcome with the right set of processes and the correct choice of sellers. At Your Retail coach, we have dedicated in-house e-commerce and grocery consultants that could help you build a robust grocery marketplace business model ( https://www.yourretailcoach.ae/services/market-research/ ) and assist you with all the allied steps and requirements in the process to launch and execute these models.
Get advise for E-commerce retail business : http://www.yourretailcoach.ae/contact-us/

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This release was published on openPR.