Peter John in Online Grocery Model, Grocery, Marketing Shopping Center Digital marketing specialist • POFI Technologies Aug 5, 2020 · 2 min read · ~10

Different Business Models To Launch An Online Grocery Business

Different Business Models To Launch An Online Grocery Business

The pattern by which we shop for groceries has changed drastically over the past few years. The inclusion of innovative eCommerce strategies and business models have disrupted the traditional ways. In this article, we will observe closely the different business patterns of the eCommerce landscape and how it is changing the grocery industry and also at the ideal business models for launching an online Grocery business


Types of Grocery Business Model


  • Inventory
  • Multi-vendor marketplace model
  • hyperlocal grocery
  • Click and Collect

A business model based on inventory


In this business model, the eCommerce grocery store takes care of the inventory by buying and stocking up. They purchase the products from different vendors according to the demand and stores them in their own warehouses


The responsibility of taking care of the inventory, interacting with customers, and providing accurate services falls solely on the shoulders of the eCommerce grocery business. In short, the online grocery website takes care of all the activities right from placing orders to raising invoices. 


Grofers clone is one such company that operates on an inventory-based business model

Advantages


  • Easy to obtain the quality of products and timely delivery

  • Quicker delivery 

  • Consistent quality and services help in building the customer trust factor


Disadvantages 

  • Logistical difficulties due to warehouse maintenance 

  • A business model quite expensive

  • Scarcity of cash flow


A business that is based on the Multi-vendor marketplace model


In this type of business model, multiple buyers and sellers come together on a single platform for trade through a website. It is also called the “Zero inventory model” because the owner of the online platform does not have an inventory dedicated to their own. The business model of Peapod is based on the Multi-vendor marketplace.

In this form of business, the eCommerce establishment takes a percentage of the overall trade happening as commission and the responsibility of packing, dispatching and selling the commodity lies in the hands of the seller

Advantages  

  • No inventory expenses

  • More business reach and volume

  • Larger scalability

Disadvantages 


  • Dependence on shipping costs fluctuations

  • High competition

  • Acquiring consistency over the quality of products and timely delivery


A business model based on hyperlocal grocery


In this type of business model, the needs of consumers belonging to a locality are taken care of. This gives the offline retailers in a locality a taste of technology through eCommerce and also the chance to expand their business acumen by integrating technology into their activities. The highlight of this model is the lightening speed at which end users get their products delivered due to the tie-ups that the eCommerce businesses have with local vendors. Instacart operates on this model of business


Advantages  


  • Lightning quick delivery

  • More revenue through upselling

  • Feature to schedule shipments


Disadvantages 


  • Difficulty in selling perishable products

  • Higher logistical expenses

  • Headaches over maintaining inventory and quality of stock


A business model is known as the Click and Collect


This is a combination of eCommerce as well as the brick and mortar model. It is especially becoming popular during this particular time of the pandemic due to the contactless nature of shopping. This model gives shoppers the freedom to buy their products online and then collect it from the physical store according to their convenience. 


According to reports by Post and Parcel, by the end of 2025, the click and collect model will occupy 10% of overall sales. This model is also known as the Buy Online Pick-up In-Store (BOPIS). The operations of Kroger are based on the Click and Collect model.


Advantages 


  • Cost reduction as there is no need for expensive spaces for product display

  • Minimal cart abandonment as there are no delivery costs

  • More profits for eCommerce platforms as they can opt for shared warehousing and collection points


Disadvantages


  • Chances of unexpected costs on IT & stock storage

  • Preference of physical stores from the side of customers

  • Long queues due to lack of space for instore pick-ups


To wrap up


Before you launch your own online grocery business, try to take into account all aspects that affect your activity landscape. The above-mentioned business models are different from each other in specific ways and therefore analyze your requirements before you nose dive into one is a thing of absolute necessity. Make sure that the model that you choose suits your business requirements precisely. so that you can make your business more profitable and at the same time scalable. 





Sharon Arnett Aug 10, 2020 · #1

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