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In these testing times when the entire world is reeling from the effects of the COVID-19. Small businesses were the ones that were affected the most. These small businesses also include the people who ran grocery stores before the lockdown. Local online stores are creating a niche market segment in the field of eCommerce. This is helping a lot of new startups to pull up their socks and grab hold over consumers.

Going by the current circumstances, there has never been a better time to start an online grocery store. The outbreak of the pandemic has glorified the significance and effectiveness of mobile applications in our day to day lives. From attending offices over phones to ordering grocery to book doctor appointments there is nothing that these palm-sized devices cannot get done.

Fortunately, the hyperlocal delivery model is one of those rare choices that vendors are left with. One thing which any grocery store must not forget is that there is not a choice but a necessity. Offline stores are completely heading south but people can’t survive without it either. So demand is high and availability is all that matters. Just take this opportunity with a positive approach. This can make or break the path leading to a successful business. Just be bold and figure out the right move for your business aspirations.

What’s an Online Grocery Store?

An online platform that lets grocers sell their products via an app or a website is known as an online grocery store. Many small-scale grocers who are not able to generate a decent amount of sales. Get a fair chance to hike their profit with increased sales in exchange for nominal subscription fees. Just like any other B2C eCommerce business, an online grocery store also has registered vendors. The only difference is that the service of these sites is based on time and topography. They don’t have to put in any extra effort to go from shop to shop in search of product or brand. Everything is present in front of their eyes. All they have to do is to choose and place an order.

Why start an Online Grocery Store?

When the thought of how to start an online grocery business strikes your mind. You start with considering the prospect of grocery application development. When you aim to bring a digital solution to the screen. You are readying yourself to meet the needs of your target audience. You offer them a solution that can help them have comfort in their daily life. Now is the right time to choose the right online grocery website/app that can help you generate profits.

Business Models to Consider

When talking about the functions and operation of an online grocery business, here are the following influential factors –

  • Finding and expanding the basic grocery business model to an advanced solution.
  • Creating a well-planned strategy and a roadmap to transform your business model into an agile, efficient, and accurate profit-generating plan.
  • Researching & analyzing your target market.
  • Understanding & defining your delivery regions.
  • Analyzing your competition for the best results.

Out of all these factors, entrepreneurs or business owners often waste so much time and resources in choosing the right grocery business model. We explain the three major business models in the grocery industry to get started with or build on your existing business.

Online Grocery Store Model – A business owner starts his online grocery store (website/app) and delivers groceries to customers in a specific city or region. Either, he has inventory stored in a warehouse or running an offline grocery store. Key players in this business model are the Business Owner (who is also the admin) and the Customers.

Online Grocery Marketplace Model – A business owner starts an online grocery marketplace by tieing up with local grocery producers/retailers who will list & sell their grocery products on the marketplace. Key players in this business model are the Business Owner, the Sellers, the Customers and the Delivery Staff.

Hybrid Grocery Model – It is a combination of the inventory and marketplace grocery business model.

Revenue Model of an Online Grocery Marketplace

Vendor Subscription – A vendor has to pay a fixed amount of money to the admin to list, access, and sell on the grocery marketplace. A vendor can choose the required subscription plan from several available options and can also upgrade or downgrade the plan according to his/her requirements.

Commission on Each Transaction – Admin can charge a commission on every transaction from the seller.

Commission on Delivery – On every transaction, the admin can charge a fixed delivery fee from both buyer and delivery boy.

Secondary Revenue Streams

  • Selling merchandise such as jars, reusable carry bags, etc., to help with brand promotion.
  • Starting a blog and publishing sponsored content on it.
  • Hosting banner ads on the app/website.

Features to consider for an Online Grocery Store

Scheduled Orders – The customer should be able to schedule orders for products that they require on a weekly/monthly basis so that they don’t have to remember to place an order every time they require that particular product.

Real-time Order Tracking – Order tracking plays an important role when it comes to building trust for your services. You cannot simply ask your customers to wait for their orders in a complete state of confusion. There are possibilities that the order is delayed or reaches its destination in advance. Tracking the order progress would make it easier for you to take orders at their doorstep.

Secure Payment Gateway – When it comes to integrating a payment gateway with your mobile application it becomes important to make sure that the transactions made are safe and the customer gets multiple options to pay from such as Credit/Debit Cards, UPI & 3rd party Wallets.

Discount coupons/Promo codes – These days, it is a common practice among businesses to send discount coupons to make the most out of seasonal sales. So your website/app should have the ability to receive & process these discount coupons.

Search Tool – If customers can’t find what they are looking for by browsing product categories. They should be able to search for it. To enhance the customer’s experience, the search tool should have the auto-suggest feature.

Social Commerce Features – Features such as sharing products on social media, social signup, or selling directly on Facebook or Instagram would also help your business get exposure.

Challenges associated with an Online Grocery Store

The unique challenges this type of business presents are due to the nature of grocery products which are either perishable or intended for immediate consumption.

Inventory Storage & Delivery Infrastructure – Regular online stores can afford to tackle instances like delays in delivery, wrong item delivery, returns, etc. But for online grocery stores, it will be a pretty much ‘do or die situation’ due to the nature of grocery products. Therefore, the entire supply chain – from farms/manufacturers to storehouse & then to the customers – needs to be very robust & time-efficient. Additionally, since perishable food products need to be stored & delivered in refrigerated chambers. Storage infrastructure would add up the business operations cost marginally.

Quality Assurance – Apart from that, when it comes to vegetables & fruits, most customers prefer to buy only after physically checking them for their freshness & quality. When shopping online, such an option is not possible. So, persuading customers to buy groceries online remains a persistent challenge.

Low-Profit Margins – Today, people shop online not just for convenience but also because they expect to get better prices. Online grocers face the same challenge of offering competitive pricing but with too much money spent on building & maintaining the storage infrastructure & efficient supply chain, keeping satisfactory profit margins might become difficult.


Grocery consumption is a basic human need, and people are increasingly relying on online shopping. With the growing popularity of online shopping, the online grocery business idea fits perfectly in the current dynamics, despite the above-mentioned challenges. The important thing for entrepreneurs planning to enter this sector is to be aware of these challenges & know how to go about them by leveraging the right technology, trends & tactics.

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