How does Otipy maintain its extensive supply of fresh produce and organic options while connecting with over 20,000 farmers across India?

Otipy is a leading e-commerce platform specializing in fruits and vegetables in the Delhi NCR region. We manage the sale of nearly 100 tons of produce daily, including a wide range of organic fruits and vegetables. Our extensive network connects us with over 20,000 farmers across India, ensuring a diverse and high-quality supply of fresh produce. In the organic category, we offer over 40 varieties of fruits and vegetables, all sourced directly from farmers.

What strategies are you using to attract buyers who are interested in premium, organic produce?

We are focusing on affluent apartment residents in the suburbs of Delhi NCR and Mumbai who seek premium, safe, and organic produce.

How do you ensure the safety, quality, and traceability of your fruits and vegetables?

Our products are farm-fresh and rigorously tested for safety, with certified lab results ensuring their quality at competitive prices. We offer complete transparency by providing end-to-end traceability, from harvest to delivery, so customers can track every step of the process.

Tell us about any new concepts and innovations you may have introduced

While our product’s natural composition limits ingredient innovation, we are actively collaborating with farmers to implement cost-effective, sustainable farming techniques.

How is the market for organic fruits and vegetables expected to evolve in the coming years?

The current e-commerce market for fruits and vegetables is valued at approximately $755 million, accounting for about 26% of the total fresh food e-commerce sector. This figure is projected to rise to $2.36 billion by 2028. Within this market, organic produce currently represents 7-8% of the total, but due to growing food safety concerns and increased purchasing power, this share is expected to nearly double in the coming years.

How will your strategy help increase the market share of organic produce in the fruits and vegetables sector?

Organic produce currently accounts for 7-8% of the total fruits and vegetables market. However, rising food safety concerns and increasing purchasing power are expected to nearly double this share in the near future. Our strategy is straightforward: we will collaborate closely with farmers to cultivate high-quality, safe, and fresh organic produce. Leveraging our consumer insights on demand and quality, we will provide valuable feedback to our suppliers to ensure they meet customer needs while maintaining competitive pricing.

How do you ensure consumer trust in your organic produce, and what measures do you take to validate the authenticity of your products?

Seasonality significantly impacts the demand for fruits and vegetables, while consumer trust plays a crucial role in the demand for organic produce. We are committed to delivering genuinely organic products and offer our customers the opportunity to validate this authenticity by visiting our fields and interacting with our farmers.

We also manage a proprietary app and a dedicated supply chain to seamlessly deliver products directly from farmers to our customers. This transparency and assurance of true organic quality will enhance trust and drive demand for our products.

How does your marketing strategy build trust and address concerns about organic produce?

Our marketing strategy is centered on establishing trust in our organic produce. We focus on building brand communication and strategies that emphasize trust, safety, and affordability to address current concerns in the organic sector

How is the rising interest in organic produce influencing both consumer behavior and farmers’ transition to organic farming?

As incomes rise and awareness of safe eating grows, interest in organic produce has surged. This increased demand is driving higher consumption of organic products and supporting more farmers in transitioning to organic cultivation

Tell us about your future plans.

 We currently operate in Delhi NCR and Mumbai, where we are nearing profitability. Once we achieve proven success in these markets, we plan to expand to other major Indian cities.

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This partnership will seamlessly integrate QueueBuster’s  POS technology into Otipy’s newly launched physical electric carts, enhancing operational efficiency and customer satisfaction.

QueueBuster’s POS solution offers a comprehensive suite of features, including over 70 real-time sales and inventory reports, as well as seamless integration with more than 50 software, hardware, and payment systems. Notably, its seamless integration with weighing scales enables automated weight recording and billing processes.

With real-time billing, inventory management, CRM loyalty programs, and integrated weighing scale functionalities, Otipy will be able to deliver faster checkouts and a streamlined shopping experience for its customers.

Expressing his excitement about the collaboration, Umesh Kumar, SVP- Supply Chain,  Otipy, said,  “At Otipy, our approach centers on direct procurement from farmers driven by demand predictions. This strategy eliminates intermediaries, guaranteeing fair payments and uplifting the farming community. Recently, with the introduction of our physical electric carts, we required a robust and user-friendly Point of Sale (POS) solution to streamline transactional data and ensure swift billing and efficient inventory management. Partnering with QueueBuster enables us to harness their advanced POS technology, enhancing our retail operations and delivering an unmatched shopping experience to our customers.”

Commenting on the association, Varun Tangri, CEO and Founder, QueueBuster POS, said, “We are excited to build a strong partnership with Otipy in their quest to deliver fresh farm produce through their newly launched Otipy electric carts. This collaboration marks a pivotal moment in the retail industry, especially for omnichannel and new-age brands seeking the right POS solutions for their offline businesses. With a focus on technology-driven efficiency and a deep understanding of the unique challenges faced by retail outlets and carts & kiosks, we are poised to transform the retail landscape.”

By automating scattered farm produce retail and streamlining operations, both QueueBuster and Otipy  have aligned with the Make in India and Viksit Bharat initiatives. This alignment underscores their commitment to empowering local farmers and businesses, thereby fostering economic growth and sustainability.

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Thanks to its super-fast and super-agile supply chain, which significantly cuts down on the time it takes for the produce to reach the consumer after it is harvested, Otipy’s farm products boast of offering ‘best freshness, best quality, and best prices.’

Just  few years into its operations, this online retailer has raced ahead to become India’s fastest  growing community group-buying start-up for fresh farm produce with the gross revenue of  Rs. 115 crore for  the FY 23-24.

Otipy delivers fresh and chemical-free fruits and vegetables along with dairy. bakery  and grocery products to over 5 lakh customers across Delhi-NCR, moving about 110-120 tonnes of fresh produce from the farms to its consumers every day. With time, Otipy hopes to become the largest organized retailer in the country for fresh fruits and vegetables, leaving behind even established behemoths in this space like Mother Dairy and Reliance Fresh.

For those of us used to the ways of quick commerce grocery, getting a product delivered to the doorstep within 10-20 minutes flat is now a matter of routine convenience and urban mundanity. But the switch flips for quick commerce players if a consumer wants a sack of farm-fresh cauliflowers or a bag of fresh ripe tomatoes at 7:00 in the morning! Even the fastest quick delivery whizkids will be left blushing in the face when fulfilling and delivering on orders for genuinely fresh fruits and vegetables at the crack of dawn.

Enter agritech start-up Otipy (operated by Crofarm Agriproducts Pvt. Ltd.), whose online app is optimized for quick delivery of fresh produce and other grocery items, and that too with the guarantee of freshness and at a more pocket-friendly price. Launched in 2020, Otipy has raced ahead to become India’s fastest growing community group-buying start-up for fresh farm produce with the gross revenue of Rs. 115 crore for the FY23-24.

Currently, Otipy moves about 110-120 tonnes of fresh produce from the farms to its consumers every day, which is higher than any other online retail player and second only to the daily tonnage moved by established fresh food retailers like Mother Dairy and  Reliance Fresh. By the end of this year, Otipy hopes to sprint ahead of even these behemoths and become the largest organized retailer in the country for fresh fruits and vegetables

The parent company Crofarm was founded by Varun Khurana, 5 years ago, in 2016, as a B2B operations for the supply of fresh fruits and vegetables. Four years later, Khurana launched Otipy as the consumer arm of Crofarm. In the process, Otipy also became India’s first community group-buying platform for fresh produce and daily essentials.

About 80% of Otipy’s product basket comprises fresh fruits and vegetables; dairy and bakery products make for another 5%; and the remainder is taken up by standard grocery products. This online app is now the leader among all the other online retail players in the Delhi-NCR region for providing fresh fruit and vegetables, thanks to its super-fast supply chain operations. Today, Otipy delivers fresh and chemical-free fruits and vegetables along with dairy, bakery and grocery products to over 5 lakh customers across Delhi and other towns in the NCR like Noida, Ghaziabad, Gurgaon, Sonepat, Meerut, Bhiwadi, and Mumbai.

Since its launch, the wheels of business for Otipy has been spinning faster every passing day, validating its business model of quick and fast delivery with the guarantee of offering freshly harvested farm products that embody maximum freshness, better quality and come at a more attractive price.

From concept to a compelling business model

Before founding Otipy, Varun Khurana was the Chief Technology Officer at Grofers, now rechristened Blinkit. The stint helped him gain a good grasp of the intricacies involving online retail and specifically the grocery category, including the management of fresh fruits and vegetables.

‘‘My first business experience with fruits and vegetables was at Grofers where I experienced that the perishable nature of the produce makes the Fresh category very unique. Unlike traditional grocery items, stocking and retailing fruits and vegetables is a very risky proposition. After leaving Grofers, when I spent some time at the farms, I realized there were additional gaps in the supply chain from farm to consumers. Wastages are high for this category, which result in a high markup between the price that a farmer gets and what a consumer pays,” observes Khurana.

In order to understand the demand for farm-fresh products, get the skinny on consumer psyche and preferences when it comes to buying fresh fruits and vegetables, and know if Otipy’s business model and value proposition would resonate with consumers, Khurana decided to conduct a survey across consumers of farmfresh products on behalf of his company Otipy. Close to 2,000 individuals from across Delhi-NCR participated in the Otipy’s Survey on demand for fresh farm products and food wastage, with almost equal participation from men and women (49.48% male and 50.52% female) between different age groups of  people from under 18 to above 50 years.

The survey revealed that given a choice, 90% of the people would opt for buying farm-fresh vegetables instead of getting stored food delivered from supermarkets and other vendors. The survey also revealed that almost 50% of people prefer not to consume refrigerated food and only 7.89% of people consume it frequently. As to the grocery shopping pattern of consumers, the results showed that a majority of buyers plan grocery shopping on alternate days (36.03%) or twice a week (36.45%) followed by 15.82% once a week.

Another interesting find was that close to 75% of consumers admit to wasting food on a daily or weekly basis, and close to 60% consume it the next day if it’s cooked food or give it away to animals if it is rotten fruits or vegetables. “Based on the findings of the survey, the optimism for our business model was further amplified. The proof of the pudding is that we have already become the biggest online supplier of fresh fruits and vegetables in Delhi-NCR. It has also reinforced our belief that consumers are switching to healthy eating habits and lifestyle and that one of the priorities of the new age consumer is to opt for fresh and refrain from refrigerated products, alongside their concern for minimal wastage of food,” remarks Khurana.

However, retailing fruits and vegetables has always been a problematic category and is fraught with challenges. Explaining this piece of the retailing puzzle, Khurana says: “Supply chain operations around conventional retail are mostly geared towards sourcing and storing the product. So, when a consumer orders a grocery product, very often that item is already available on the store shelf or is lying somewhere in the warehouse and they get delivered according to their scheduled time slot.

However, this part of the operation becomes counterintuitive when it comes to storing and retailing fresh fruits and veggies for the reason that these products are perishable and have a very limited shelf life. They keep degrading in quality every passing minute that they remain in the warehouse and by the time an order comes in and they get delivered, the quality of the produce has already seen a significant deterioration.”

Building a supply chain optimized for speed, freshness and quality

To get around the problem of the perishable nature of fruits and vegetables, Otipy has built a super-fast and super-agile supply chain, which significantly cuts down on the time it takes for the produce to reach the consumer after it is harvested. Thanks to its versatile supply chain, Otipy boasts of industry’s  lowest wastage which, at 3%, that is 10x better than the conventional supply chain. Also, by leveraging its community leader model, Otipy operates at the industry’s lowest logistics cost — as low as Rs. 3/kg — from its warehouse to the consumer’s doorstep.

There are quite a few innovations that Otipy has built around its supply chain to meet its objective of offering ‘best freshness, best quality, and best prices’. To begin with, the entire gamut of operations is powered by a cutting edge predictive algorithm, which is optimized for maintaining the freshness parameter of the produce. Unlike in the quick commerce model where the product being ordered is already lying in a dark store, the produce is still at a farm when an Otipy customer makes an order on the app.

“Our prediction mechanism makes it possible for us to know that, say, there will be a total order for about 4 tons of cauliflower on a specific day. Based on this prediction, we accordingly make the arrangement for the produce to be harvested by the afternoon, get it lifted off the farm and transported to the warehouse by evening. Here, the produce is first quality-tested, picked, sorted, packaged and then dispatched for delivery, all in a matter of 4-6 hours. This way, by following up on our well-defined supply chain processes, we are able to align and bring about a parallelism, or a conjunction, between the transit time for the produce to reach the warehouse and the overall booking order time for that produce. Also, we are able to substantially shorten the time lag required for the produce to be harvested and delivered to the consumer,” says Khurana.

Other technological innovations embedded into Otipy’s supply chain include building both the software as well as the hardware required for full automation of the whole supply chain process In the quick commerce delivery model, the entire supply chain is designed and centred around providing convenience for the consumers. In order to deliver on the promise of 10-20 minute convenience, the cost of supply chain operations for the quick commerce convenience players is fundamentally higher. They need to run and operate dark stores with delivery boys positioned every 3-4 km along the geographies they serve to fulfill on the promise of delivering convenience,” says Khurana

Also, the quick commerce delivery model is not suited to products belonging to the fresh category. It’s a hugely challenging task to keep stocking fresh fruits and vegetables thoughout the day and keep delivering them as per the flow of orders. First, the quality and freshness of the products take a big hit and replenishments in the cases of stock-outs become a huge issue. Also, because of the perishable nature of fruits and vegetables, there is a lot of wastage with products going bad or losing their freshness

“Unlike the quick commerce players whose focus is on quick delivery once an order arrives, our focus is on optimizing the time between the harvest of the produce and the time of delivery so that there is no quality decay or degradation in the nutritional value of the produce. To realize this objective, we have worked on shortening our supply chain and making the turnaround time for the produce faster and quicker. This way, we have ensured that the produce reaches the consumers within just 12 hours from being harvested, allowing us to maintain the freshness of the produce,” says Khurana.

He adds: “We procure fruits and vegetables directly from farmers and then with the help of local community leaders that work with us as delivery partners/resellers, we do the doorstep delivery to the consumers. The idea is to deliver fresher, more nutritious and quality-resilient produce in the hands of the consumer.”

By funneling the produce through the supply chain in the fastest possible time, we are able to deliver produce that are not only fresh off the farm but also come packed with higher nutritional value. At the same time, our shorter supply change results in minimal wastage of the produce. As there is less wastage, we are able to save and earn more and are able to pass on the price benefits to our customers. This way, our consumer offerings not only come with better quality, they also enjoy a comparatively better pricing,” explains Khurana.

Due to the much lower rate of the wastage of products and thanks to the accrued savings, he says that the prices of Otipy farm products are about 15% lower compared with similar category products sold in the neighborhood stores and about 5-7% lower than the prices of similar products available at established supermarkets.

Leveraging the “reseller” model for cost efficiency

Otipy’s business model helps to connect end consumers to farmers through a community of resellers who handle the last-mile delivery of fresh produce. In fact, the whole concept of fast delivery of the produce with better quality and at a more competitive price is supported by Otipy’s “reseller” business model. To offer an analogy, think of how companies like Tupperware sell their products through their sales representatives who operate in their respective communities. Similarly, Otipy representatives, called resellers, induce consumers to download the app and the resellers are able to track the consumers as place orders on the Otipy app. The company then arranges to deliver the products to the resellers for distribution among the buyers.

“We don’t sell through delivery boys but through our resellers who often tend to be owners of small businesses. For instance, a typical Otipy reseller might be a lady running her own beauty parlor or a boutique with the help of 2-3 assistants or helping hands. Or someone might be a home chef whose home-cooked food has a good following within his neighborhood or a real-estate broker. These are the kinds of businesses that start not before 9-10 in the morning, which means that their owners have idle time and capacity on their hands early in the morning, which they can put to good commercial use by becoming our resellers. We offer about a 7% commission on the sales to our resellers, 70% of whom are female and, on average, a reseller makes about Rs. 15,000 a month. By recruiting these resellers, we are trying to make good economic use of their idle capacity in the morning hours in terms of labour and infrastructure and without impacting their regular activities and primary source of income,” says Khurana.

The number of resellers that Otipy employs keeps changing according to their performance and demand cycle of the platform. “In recent months, the numbers have touched 500+ but there is also a constant change and churn happening. We keep adding or pruning the numbers based on our requirements and according to their capabilities in growing the buyers’ base and meeting the growth targets. Those resellers who are not able to deliver on time or not able to expand their buyers’ pool are justifiably dropped and new replacements come in. We want to have resellers who want to stay with us in the long run by sharing our vision of creating a groundswell of goodwill and support for buying farm-fresh produce and spreading the message of freshness,” says Khurana.

Giving an example of the cost differential and wastage levels between quick commerce and reseller based delivery models, Khurana says: “In a quick commerce grocery delivery model, it takes anywhere between 20-25 minutes for a delivery boy to fulfill an order and come back to his base station; by this estimate, it can take about 2 hours to fulfill just 4-5 orders. In our case, our reseller fulfills 25-30 orders within a 2-hour time frame and s/he is able to do it just by utilizing their idle capacity in the morning. It’s thus a no-brainer that our supply chain model is perfectly optimized for cost-effectiveness. It’s also the reason why we are able to offer better prices to customers and that too without burning a hole in our own pocket. Also, in a conventional retail supply chain there is about 35% wastage of fresh fruits and vegetables whereas it’s only 3% in our model. This factor also allows us to offer a better pricing for the products to the consumers.”

Each Otipy reseller typically recieves 25-30 orders a day, from the buyers in his/her community. For speedier and more streamlined delivery, Otipy arranges its fleet management in a way that each of its carts can deliver to at least 4-5 resellers when making the rounds. “It takes not more than 2 hours every morning for our resellers to distribute the produce among their buyers, leaving them with sufficient time to pursue their other business and regular activities. At the same time, we are able to make good on our value proposition of delivering better-quality produce with better freshness and more affordable prices,” points out Khurana

Sourcing strategy with quality assurance

As with any retailing enterprise, sourcing is the primary backend operations for Otipy. For sourcing the farm products that it sells to end-consumers through resellers, Otipy works with over 20,000 farmers over the course of a year. These farmers are either part of farmer-producer organizations (FPOs) or are groups of individual farmers that the company refers to as “lead farmer” model. Under the lead-farmer model, the company works with groups of leading farmers who might have at least 6-8 acres of land under cultivation in a particular region.

After discussions and negotiations, Otipy enters into a broad arrangement with these farmers for the supply of a particular crop over the course of a season. “These arrangements are based on mutual trust but are not contractual or obligatory in a legal sense. Based on our data projections for various agri-produce, a broad arrangement is worked out with such lead farmers who are willing to supply a specific tonnage of the cultivated produce according to the prevailing price of the commodity,” informs Khurana, adding that the company pays them approximately 10% more than what they would get paid in the regular mandis. “Like our resellers, our farmers too have an additional incentive to supply us with superior grade farm produce because they get a fairer price for the product,” says Khurana.

The farmers are divided into groups and each group might have about a hundred farmers. During the course of a year, Otipy is engaged with some 200 farmer groups and at any point in time about such 100 farmer groups or some 10,000 farmers are actively engaged with the company for daily and seasonal supply of various farm products. Otipy’s arrangement with the farmer groups are spread across the country and across different geographies based on the seasonal demand for different agri products.

“We have a pan-India sourcing footprint with our farmer communities spread across different regions in the country. These include Nashik in Maharashtra for sourcing onion, grape, and pomegranate; Karnataka for green coconut; Ganganagar in Rajasthan for kinnow; and particular belts in Gujarat, Haryana and Himachal for various other seasonal farm products.” As all Otipy products are QR-coded, any quality complaint can be traced back to the roots with pin-pointed accuracy so as to locate the product’s farm origins, thus obviating any chance for a quality-compromised product.

The road map ahead

Otipy has plans to expand to other urban clusters away from its current epicentre around Delhi, Noida, Ghaziabad, Sonepat, Bhiwadi, Meerut,  Gurgaon, and Mumbai to other regions.  “The NCR region has a population of about 3 crore with some 75 lakh households. Currently we are serving about only 5 lakh consumers, which means that there exists plenty of headroom to grow. Over the next few years, we have plans to expand across newer cities and geographies in India and possibly even reach out to some international markets and outposts as well,” says Khurana

He adds that the company has the resources to fund its expansion plans. “Our unit economics is pretty solid and it’s not that we need to burn a lot of money on customer acquisition and funding our growth plans. Also, the investor interest in our business is pretty high. In our last funding round in March this year, which was a Series B round, we raised about Rs. 235 crore ($32 million) from investors led by Westbridge Capital, and with participation from SIG and Omidyar Network India.

Otipy had earlier carried its series A funding of Rs. 76 crore ($10.2 million). “Our current capital is sufficient to see us through our growth plans for the next 4-5 years and we don’t face any headwinds on the financial front. However, we are open to future investments and capital infusion at the right valuation because that money will allow us to experiment with a lot of other things beyond our regular business plans,” says Khurana. The brand plans to raise RS 75 million in Series -C fundings.

Apart from its current core focus on the fresh fruits and vegetables category, and dairy to some extent, Otipy also wants to enter and mark its presence in other grocery categories as well. In line with this objective, Otipy has expanded its product portfolio with a line of bakery under the brand name “House of Fresh”. “You can expect us to deepen our presence into categories such as dairy and bakery and other perishables like flowers,” shares Khurana.

Like its fruits and vegetables, Otipy’s House of Fresh bread is freshly baked, instantly delivered and is available in 12 different variants. “The breads are baked in the evening and delivered to the customers early next morning in an embossed packaging that shows the time when it was baked and packaged, making them India’s freshest breads,” says Khurana, adding that the House of Fresh breads have already surpassed the sales volumes of several other established bread brands. “We will keep introducing more such farm-fresh products with the aim of providing access to such products to everyone in the country,” signs off Khurana.

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Food and Grocery (F&G) constitutes the largest segment within the retail sector in India, encompassing a significant two-thirds of the total retail expenditure and a market size of USD 730 billion in 2023. Growing at a rate of 8-8.5% per annum the market is expected to cross a trillion dollars by 2027.

This growth can be attributed to various factors. These include the persistent increase in per capita income, the ongoing urbanization process, the rise in nuclear families, the shift from unpackaged to packaged foods leading to price increases, and a noticeable inclination towards premiumization.

Regarding categories, staples and fresh products remain the primary players in food retail, making up roughly 75-80% of the total consumer expenditure on Food and Grocery (F&G). However, emerging categories like packaged snacks, confectionery, and beverages are experiencing significant growth, with a compounded annual rate of 15-16%, nearly twice the overall F&G category growth rate.

“Convenience” is one of the biggest trends shaping the market, especially in the mid to premium segment, and it is changing not just what we eat, but also how we shop. Convenience foods including snacking items, ready-to-cook & ready-to-eat products, beverages etc. are taking more shelf space both in retail stores as well as our kitchens.

When it comes to retail channels, convenience-oriented formats are not only increasing their market share but also driving the expansion of the Food and Grocery (F&G) retail market.

Further, it is worth noting that changing lifestyles, shopping habits, and aspirations have significantly influenced customer behavior, leading to a notable shift towards modern retail outlets for purchasing grocery items, as opposed to frequenting traditional kiranas.

In fact, driven by this trend, familyowned traditional kirana stores have also started modernizing their layouts and displays and wherever possible making the stores selfserviced. While almost all stores in urban areas have started home deliveries, many local retail chains have also launched their apps and are partnering with online aggregators to increase their sales.

These online F&G stores/platforms witnessed a substantial surge in demand during the COVID-19 pandemic due to the closure of physical stores and restrictions on the number of customers they could serve. During the initial lockdown in 2020, this segment experienced a remarkable 75% growth

Categories such as FMCG and Fresh, particularly fruits and vegetables, witnessed an impressive 145- 150% increase in monthly sales. As the impact of COVID-19 gradually diminished in the following years, consumers embraced the comfort and convenience offered by online F&G platforms and quick commerce providers, leading to a sustained preference for online shopping.

These online retail channels for Food and Grocery (F&G) are poised to further expand their reach and boost sales. Time-strapped consumers prefer the convenience of last-minute shopping, avoiding the need for monthly or fortnightly grocery planning and trips to physical stores.

Changing Landscape of the F&G Retail Market

The F&G retail market currently consists of three key segments namely, Traditional or Unorganized retail, Organized or Modern retail, and Online retail.

Traditional or Unorganized Retail constitutes the largest assortment of retail establishments in India, amounting to approximately 12.8 million in total, covering about 93% of the total F&G market in value terms. These establishments typically span from 100 to 1,000 square feet, with the majority falling under the 500 square feet range. These stores typically cater to the quirks of the local folks, offering personalized and customized service, providing flexible credit options, and making home

deliveries for customers. The number of traditional grocery stores in India has witnessed a consistent growth over the last 10 years, experiencing a slight decline in 2020, attributed to the unprecedented COVID-19 pandemic. However, in 2021, the figure made a recovery, reaching a count of 12.8 million.

Organized or Modern Retail is the second most important segment for F&G retail. This segment started growing in the mid-2000s and remained extremely buoyant and competitive till 2019 (pre-COVID days). The segment is engaged in intense competition, as major contenders strive to captivate consumers with alluring deals, offering well-stocked shelves in pristine, brightly lit ambiance, and showcasing a vast assortment of products.

As of 2021, supermarkets reigned supreme within modern retail, comprising approximately 49% of the market share, closely followed by convenience stores at 43%, with hypermarkets trailing at 8%. The non-discretionary nature of F&G demand kept the segment resilient even during the peak pandemic in fiscal year 2021, when revenue fell only 3%.

The segment currently contributes to about 6% of the total F&G market and is expected to reach a substantial USD 60 billion by the year 2025, contributing to about 7% of the market.

The penetration of modern retail has remained fairly low in India, as compared to most other Asian countries, e.g. in China modern retail contributed to 57% of total F&G retail. A key reason for this is that modern retail in India is still a very “big city” thing and penetration is limited to a few Metros, Tier 1 & 2 cities, because of operational and other reasons.

Given that F&G is traditionally a low margin business and the cost of retail in India is fairly high, the modern F&G retail formats have always been under pressure. Further, while consumers like the glitz of shopping in large supermarkets and hypermarkets, once in a while, Indian consumers crave for convenience which these formats are not able to provide.

Hence like in many other sectors in India, the market seems to have leapfrogged to the next format/ sector i.e.; online F&G retail, even though the modern retail formats remain in an evolving stage in India. Also, most modern retail stores have now launched their online sales channel through apps as this helps them leverage their already existent brand recall, customer base, physical stores and warehousing infrastructure, inventory, and other assets.

Online Retail is the newest kid on the block and the flavor of the season for F&G retail, largely driven by quick commerce players like Blinkit, Zepto, BigBasket now, etc,. Unlike most other categories, F&G for a very

long time remained insulated from the e-commerce revolution, given the high penetration of unorganized and organized stores with delivery facilities, and the unit economics for low margin F&G products being not very lucrative for the online channel. However, COVID 19 changed the game as orders on online platforms surged by three to four times and average order values also increased by about 25%.

In the year 2022, the online F&G market in India was estimated to be worth USD 6.8 billion, which is less than 1% share of the overall F&G market. Projections based on diverse statistical data indicate a remarkable growth trajectory, with the market expected to skyrocket to an astounding USD 37 billion by 2028, contributing to about 3.5% of the overall F&G market.

This forecast indicates an exceptional Compound Annual Growth Rate (CAGR) of 32% projected for the period from 2023 to 2028. The e-Grocery segment has witnessed substantial growth in the number of active users, surging from 12 million in 2019 to 23 million in 2022, with expectations to surpass 50 million by 2025.

Rise of the Online F&G Market in India

The driving forces behind this remarkable surge in the online F&G market include the rapid proliferation of internet accessibility and smartphone adoption, the increasing ease of online payments, improving enabling infrastructure for logistics across the value chain till the last mile, the evolving lifestyles of consumers and the transformative impact of the COVID-19 pandemic.

The extensive array of products available on online F&G platforms, and the competitive pricing strategies employed by key players are further swinging customers towards online retail.

The online F&G sector primarily operates through two thriving models: the hyperlocal/quick commerce and the marketplace model. In the hyperlocal model, also known as quick commerce, companies like Blinkit, Zepto, BB Now, and Instamart play pivotal roles. These platforms provide quick local delivery, catering to the immediate needs of consumers within specified vicinity. These platforms either operate through dark stores or through partnerships with retail stores in each locality they service. Generally, they offer a limited assortment, about 2200- 3000 SKUs, and delivery timelines are a few minutes to a few hours at the outset. Quick commerce players largely cater to last-minute or unplanned purchases and adopt a cluster based model for expansion players and delivery is within a few hours to a few days. Marketplaces largely cater to the planned purchases

In between these two models, and swinging more towards marketplaces are models like Milkbasket, Otipy, Supr Daily etc. which offer morning delivery, the order being placed by the previous midnight. These players also aggregate products in their own warehouse and then deliver the orders placed by the customer

Geographic Distribution of Online F&G Retail

In the year 2022, almost 95% of the online F&G sales came from metros and Tier 1 cities. The southern region of India emerged as the dominant force, commanding the highest share of revenue at 33%. The Southern states also steered India when it came to modern F&G retail adoption and driven by their young IT workforce, with Bengaluru and Chennai being cities with the densest population of digital consumers, also leads when it comes to online F&G retail adoption.

The flourishing of this territory can also be attributed to the presence of prominent industry gaints like Bigbasket and Amazon and that most concept testing starts in these states. Among the cities in South India, Bigbasket reigns supreme as the go-to online F&G platform, particularly in Hyderabad and Bangalore

In second place, the Western region of India commands a 30% share of revenue and is poised for rapid growth, with a projected CAGR of 37.3%. This remarkable surge is primarily fueled by the increasing adoption of online F&G platforms among tech-savvy millennials and working women.

Notable cities in the Western region, such as Pune and Mumbai, are at the forefront of this trend. The North and East regions follow, with 25% and 12% shares of revenue, respectively.

India boasts a considerable population of working professionals who greatly prefer the convenience and simplicity of purchasing groceries online. These factors are anticipated to pave the way for substantial expansion within the online grocery market in western India, in the foreseeable future.

Category Share in Online F&G Retail

Online F&G platforms feature a range of product categories, with Staples and Cooking Essentials emerging as top-selling categories. These are closely followed by Breakfast & Dairy Products, among others. Notably, these platforms have expanded their offerings beyond groceries and begun to onboard and sell additional categories such as beauty and personal care products.

Expanding the Reach in Tier 2 and Tier 3 cities

 In a bid to tap into the significant growth potential in smaller towns and cities, online F&G platforms have increasingly expanded their reach to tier 2 and 3 cities, building infrastructure and capabilities to cater to these markets. By offering a wider range of products and services in these areas, they aim to capture the untapped market potential and cater to the needs of consumers outside major metropolitan areas

To ensure a steady supply of quality products and promote local and sustainable sourcing practices, online F&G platforms have also embarked on partnerships with FMCG brands and farmers. These collaborations not only benefit the platforms by guaranteeing a constant supply of highquality products but also support local economies and contribute to sustainable agricultural practices. Also, seeing the growth in the online

F&G retail, new players like Jiomart entered the market during this phase. Many like Dunzo, Swiggy, etc. pivoted from other models to F&G retail.

While the online market is still evolving, with various models currently in play, the landscape is expected to resemble existing offline formats, potentially surpassing or enhancing them:

Full-basket Offerings: Comparable to supermarkets, exemplified by players like Bigbasket. They offer extensive assortments, same-day delivery (often within a few hours), precise delivery slots, and competitive pricing on essential items.

Instant Delivery: This mirrors convenience stores and small supermarkets in the online realm. Firms like Blinkit & Zepto cater to customers ordering smaller baskets from a more focused selection. The emphasis here is on speed and user experience, especially for immediate, unplanned needs. Instant players are also broadening their offerings, including (warm) meals to capture a larger share of consumer spending and branching into take-out options from restaurants or meal delivery providers.

No-frills Offerings: The online discounters, represented by companies like Amazon fresh & Flipkart supermarket offer low minimum order values and waive delivery fees, prioritizing affordability in product pricing. However, customers may need to accept trade-offs in terms of assortment variety, delivery options, and additional services.

The online F&G platforms face some challenges, as follows:

1. Growth Beyond “Convenience” Driven Customers: Over 95% of the current online F&G sales are from Metros & Tier 1 cities and largely from convenience driven consumers, who do not care about getting some extra discounts or deals, trading it for time and convenience. However, given that a predominant part of India’s population lives outside these cities and in rural areas, the F&G platforms will have to expand to smaller markets where more price-sensitive customers reside. This is a double whammy. Firstly, since the customers are more price conscious and buy only on offers and discounts, overall the gross margins on consumers basket in these cities will be lower. Secondly, the cost of operations, in smaller and more remote markets will be relatively higher.

2. Minimizing Storage and Delivery Costs: Ecommerce is most suitable for products where price is high and weight/volume of the product is low, so that storage and delivery costs are low. F&G, in most cases, falls at the other end of the spectrum, where product weight/ volume is proportionally high and price us relatively lower than other categories. Minimizing storage costs and delivery expenses is hence crucial for profitability. This requires optimizing warehouse operations, exploring cost-effective transportation and packaging options, implementing dynamic pricing strategies and promotions, maintaining a minimum basket size/value for free delivery and optimizing delivery operations.

3. Ensuring Freshness of Edible Items till Customer’s Doorstep: Maintaining the quality and freshness of perishable items during the delivery process is a significant challenge. While brick-and-mortar retailers need to maintain freshness only till the products are in their stores, online platforms need to keep the products fresh till the goods are delivered to the customer’s house and there could be a substantial time gap between shipment from the warehouse/ dark store to delivery at customer’s doorstep. This necessitates robust supply chain management, effective packaging solutions and potentially leveraging technologies like refrigerated transportation. All this not just requires effort but also additional costs.

4. Squeezing Delivery Timelines: Timely and efficient deliveries are paramount to customer satisfaction and one of the key drivers to why consumer’s shop online. This challenge involves managing required inventory levels across multiple warehouses/ dark stores, managing a fleet of delivery boys, optimizing route planning, and possibly exploring advanced technologies like drones or autonomous vehicles for last mile delivery.

5. Higher Inventory Spoilage: Preventing food spoilage and
minimizing waste is a challenge for all retailers, but more so for online F&G platforms, as there are delivery related damages and losses as well.

6. Delivery Failures & Return Rates: Online F&G platforms see 12-15% failed deliveries and return rates, something that is not there in brick & Mortar stores. The cost of this reverse logistics could be more than the cost of the product in many cases. Thus for small value items, most F&G retailers will give a refund and may not even pick the product back.

7. Catering to Non-Tech Savvy Customers: Online platforms must fi nd ways to accommodate customers who may not be familiar with technology. This could involve providing extremely user-friendly interfaces, offering customer support, and conducting educational initiatives to bridge the digital divide.

8. Cultivating Customer Loyalty: Building and sustaining customer loyalty in an online environment is extra challenging due to the plethora of options available to consumers. Most consumers shop from multiple platforms and since it is extremely easy to compare prices, offers, delivery timelines etc. consumers tend to compare and shop from the platform that gives the best offers. Establishing personalized experiences, offering loyalty programs, and providing excellent customer service are vital strategies, besides the “hygiene” of offering the best prices

9. Intensifying Competition in the Online F&G Space: The online F&G sector is becoming increasingly crowded, making it challenging for new entrants to establish their presence. The competition is not just from other online platforms but also from the online arms of modern F&G chains.
Established players dominate the market, and breaking into this space requires innovative strategies and a distinctive value proposition. New entrants need to identify and cater to specific niches or underserved markets to gain a foothold. Additionally, partnerships and collaborations can be instrumental in creating a competitive edge

10. Balancing Profitability with Customer Expectations: With the competitive nature of the online F&G business, maintaining profitability while meeting customer expectations for affordability and convenience can be a delicate balancing act. Offering competitive prices without compromising on quality and service is a persistent challenge. Implementing efficient cost-management strategies and exploring innovative revenue streams, such as subscription models or private labels, can help strike the right balance.

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In FY23, Otipy boasted a gross revenue of Rs 115 crore, comprising Rs 96 crore from operating revenue, Rs 11 crore from discounts offered, and additional income of Rs 8 crore. Notably, fruits and vegetables accounted for 70% of the firm’s total collection, while groceries and dairy products contributed 20% and 10%, respectively.

Procurement costs constituted 70% of the company’s total expenditure. Varun Khurana, Founder and CEO of Otipy, emphasized the significant achievement of reducing supply chain costs, which has been instrumental in driving the company’s growth.

Varun Khurana, CEO and Founder, Otipy shared on the company’s LinkedIn handle, “Our journey this year has been incredibly rewarding, and our commitment to delivering premium, fresh produce coupled with unparalleled customer service has been pivotal in propelling our growth. We are now profitable at an order level. We have built a supply chain that operates at just Rs 40 in supply chain costs, allowing us to profitably deliver orders of value as low as Rs 270.”

Otipy has achieved an impressive average monthly revenue run rate (ARR) of Rs 20 crore and sets its sights on reaching the Rs 500 crore mark in gross revenue for FY25.

Currently operational in Delhi (NCR) and Mumbai, Otipy offers a diverse range of products delivered to customers’ doorsteps, including fruits, vegetables, dairy, and bakery items. The brand plans to expand its services to Bengaluru and Hyderabad by the end of 2024.

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As urbanization continues to draw men away from rural areas, women are stepping into vital roles within agriculture. They are cultivating crops, laboring on farms, and participating in related sectors such as animal husbandry, gardening, and post-harvest processing. These diverse contributions highlight the crucial role that women play in sustaining agricultural communities and economies.

Otipy’s ‘Annapoorna’ video campaign emphasizes that ending poverty necessitates the eradication of gender discrimination. It highlights how gender inequality deprives women of their rights and opportunities, perpetuating cycles of poverty. This cycle entraps women in a state of economic disadvantage, underscoring the urgency of dismantling gender-based biases and promoting equality.

Varun Khurana, Founder & CEO, Otipy, underscores the organization’s commitment to empowering women in agriculture. “At Otipy, we believe in the transformative power of empowering women in agriculture. The resilience, skills, and dedication that women bring to the sector are unparalleled. Through our campaign ‘Annapoorna’, we aim to reinforce the urgent need to dismantle gender-based discrimination, recognizing that true progress in ending poverty requires the full and equal participation of women in every facet of agricultural development.”

In line with its mission, Otipy has announced plans to conduct monthly training sessions for women farmers. These sessions, facilitated by teams from various stratas of life at Otipy, will cover essential practical skills like internet navigation, creating safe finance management, using smartphones, watching out for underlying ailments, hygiene practices, among others. Additionally, Otipy is also trying to address societal taboos surrounding issues like menstrual hygiene and periods, ensuring that women can engage fully in agricultural activities without encountering discrimination or barriers.

Through these initiatives, Otipy is laying the groundwork for a more inclusive and sustainable future for women farmers.

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This initiative amplifies Otipy’s market presence and facilitates greater access to its customers in Tier 2 and Tier 3 cities as well as other locales. By joining forces with the ONDC, the brand aims to capitalize on the ONDC’s infrastructure and resources to reach new customers, drive sales growth, and further establish itself as a prominent player in the agritech industry.

This move not only reinforces Otipy’s commitment to customer satisfaction but also shows its proactive approach to leveraging emerging technologies and strategic partnerships to drive sustainable business growth. 

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