Why Grocery Franchise Is A Hot Investment Idea?

Until recently, the grocery industry in India has been highly fragmented, unorganised, and predominantly small and family-owned businesses due to poor access to capital, technology and regulations.  With changing scenarios like demographics, high economic growth and increasing incomes, the proliferation of brands, consumer awareness etc are boosting the organised grocery industry.

The emergence of grocery chains like BigBazaar, More Megastore and others have successfully paved their way into the industry and are rapidly becoming customers’ favourite due to their cost-effectiveness. Globally, India is the sixth-largest grocery market and has a humongous potential for growth due to the rising population as well as disposable incomes. The Indian grocery market, which accounts for 69% of India's total retail market, offers plenty of opportunities to grocery franchisees.

What’s Shaping the Market

The grocery market in India has come a long way from the erstwhile Kirana shops to the mega-marts of today. The emergence of larger chains and stores began around 2005 and the sector has since grown to over 4,900 supermarkets and 500 hypermarkets across India. The inclination towards grocery chains is now clearly visible by their growing numbers and the hype of grocery franchises have also penetrated the tier II & III markets, including small towns. The factors responsible for the influx of grocery franchises are:

• Quality of products;
• the location of the grocery chain;
• price of products at the grocery chain;
• product Range at the grocery chain; and
• service at the grocery chain

The Big Battle

Grocery is the largest consumer segment by far; Indians spend more than 50% of their monthly income on groceries. It has become a must-capture space for all franchisors. Considering the huge market potential, various brands—both national and international—are fighting to get the share of the profitability pie.

The grocery market in India is estimated to be over 60% of the country’s total retail market. It’s not just the size of the grocery pie that is attractive to players—it’s the high buying rate. Groceries (and vegetables and fruits) are an essential purchase for every household. They are bought frequently and with a high repeat rate.

With offline players like Big Bazaar, More megastore, Easy Day, Everything Grocery, Godrej Nature’s, etc, who have already established their presence in the Indian market and are expanding rapidly, many brands are foraying into the segment. For Instance, Walmart-controlled online retailer Flipkart is planning to open brick-and-mortar stores in India to sell food items. Also, the world’s largest chain of convenience stores, 7-Eleven, will make its India debut later this year with Future Group as their master franchise.

With many brands foraying into the grocery market via a franchising model, has opened up profitable franchise opportunities for aspiring entrepreneurs.

Business Model

There are various grocery chains that are franchising their business model. You can opt for any franchise grocery chain which fit your budget and interest. For instance, the franchise of Everything Grocery brand will require an investment of 15-30 lakhs depending upon the area requirement which ranges from 500 sq. ft. to 2000 sq. ft. The anticipated return on investment would be 65% with a payback duration of 16-20 months.