How to Start an Online Grocery Store with Low Investment? [A Complete Guide]

. 7 min read
How to Start an Online Grocery Store with Low Investment? [A Complete Guide]

An online grocery store sells a huge variety of products - starting from spices, seasonings, and packaged products, to beverages. In the past year, first-time online shoppers, mainly from Tier 2 and Tier 3 cities and towns, have been increasingly purchasing online.

In the past year, several social commerce start-ups have reached household essentials as well as dry and fresh groceries to the doorsteps of Indian customers. The market has seen established eCommerce giants as well as newbies who have made incredible business growth by venturing into the grocery segment. As per industry reports, the grocery division of Amazon Fresh has almost doubled at the time of the Covid19 pandemic.

The main reason for the rise in popularity of online grocery stores in India is the increased usage of smartphones. This enables people to order from the comfort of their homes. The growth prospects are so huge that many foreign companies are investing in this segment.

Market Opportunity

An online grocery store business model in India typically operates with multiple vendors. One example is Big Basket, which is one of the leading grocery stores in India. Due to the outbreak of the coronavirus, more and more people are ordering online. This business offers many opportunities to small individual players who wish to set up their grocery store online to cater to a more localized customer base.

Why start an online grocery store?

Daily expenses on groceries are the biggest and most steady share in the budget of any Indian family. Most people don’t want to spend hours shopping from the local grocery store and like to indulge in online grocery shopping.  So, an online grocery has tremendous prospects of growth. As per a report by the consultant Praxis Global Alliance, the online grocery market in India is set to reach $ 7.5 billion by 2022, growing at a staggering CAGR of 70 percent.

How to start an online grocery business in India

In this article, we are going to learn how to start an online grocery business in India. It is quite easy, provided you have an understanding of the business and have a team of web solutions providers to help you on the online front. While starting a grocery store online, you have to keep in mind the following:

Order collection.

This is the first step for a customer to establish a long-term relationship with your store. It should be easy for a buyer to place an order either through his mobile or a computer. You can develop an app or build a website for your store. Another option is to register with an eCommerce platform. You can also take orders over the phone.

Order execution.

A report by Fabric, a micro-fulfillment company specializing in grocery operations, says that 65% of customers would change their grocery supplier if they could not provide same-day delivery. So, it is very important to streamline the supply chain.

Payment collection.

You should have online and mobile payment facilities for customers that should be fast and also prevent fraud. If you want to involve local delivery boys, you can add additional shipping fees while the customer is placing an order.

The following steps are involved in starting an online grocery business:

1. Register your business

You can register your grocery business either as a sole proprietorship firm or a partnership. To complete the registration process successfully, you can get in touch with any tax consultant or chartered accountant. The following licenses and permits are required to start an online grocery business in India:

  • FSSAI Licence and Registration-Your online grocery store will sell food products and processed items, so you must procure a Food Safety and Standard Authority of India (FSSAI) license.
  • Shop Act Registration- Every retail counter, shop, or store must have this license, which regulates the wages, the number of hours worked, etc. of the employees.
  • GST Registration-It is an indirect tax covering goods as well as services. All existing central, as well as state indirect taxes, are now covered under GST.

2. Identify a target audience

Identify the eating habits of the people who live in your zone of operation. It will help you to select items that have a high demand and stock them well in advance. Other important data includes the number of households having young and educated members.

3. Decide the delivery region

Customers are now veering away from the stress associated with shopping for daily essentials, and can often be found searching for “grocery delivery near me”. An online grocery business heavily depends on the delivery modules. You should select your preferred delivery location in such a manner that it will be possible for you to send the grocery supplies quickly.

Since most customers insist on same-day delivery, you must arrange for a fleet of vehicles. Or, you can employ delivery boys with two-wheelers. The range of your delivery area should not have more than a 5 km radius. Otherwise, the cost will become unviable.

4. Arrangement of inventory

To run a grocery business it is important to work on inventory management. There are two ways to manage your inventory. First, you can keep your stock ready in your warehouse, or secondly, you can tie up with local grocery stores and wholesale suppliers.

You can use the warehouse to store the products for which you might get online orders. It should be located as close as possible to your area of operation.

5. Funding

Grocery businesses usually work on wafer-thin margins, usually between 2 to 5 percent. So, your funding capital should be enough to cover all costs. Since you have to deliver the items to the homes of customers, you must factor in the delivery charges also.

6. Choose a method of payment

If you have a reliable doorstep delivery system in place, the best option for you will be the Cash on Delivery (or COD) for accepting payment from customers. This will ensure a hassle-free flow of cash for you. An added incentive is that you will not have to wait for the payment as is the case with many credit/debit card payment gateways. You will also get to save on the additional 2.5 percent payment deducted by them as transaction fees.

7. Pick-up at store facility

You can have a convenient pick-up facility for your customers. It will enable them to order and pay for the goods in advance, and later pick them at a suitable time. This can minimise shipping costs and reduce person-to-person interactions.

8. Marketing

The internet can reach a very large audience. You can launch online campaigns to make your grocery store look more creative and innovative. You don’t have to spend on high-profile celebrity campaigns like the big players. You can market your online grocery store using effective local avenues like:

  • Put an advertisement in the local newspaper.
  • Distribute pamphlets.
computer monitor on table displaying web development

9. Develop a website

Grocery is the largest retail category in the world, yet it is still not digitised. An online presence will help your business to grow and connect with new customers. A website will be the face of your online grocery business. A domain name is the virtual address of an online store, like, You can buy an appropriate domain name from a domain registrar. It should have a relation to grocery and be SEO friendly.

You should hand over the development of your grocery website to an experienced web design and development company.

10. Grocery Mobile Apps

E-grocery apps offer tremendous value and convenience to shoppers such as the ability to order from a single interface and live order tracking. You can also increase the sales of your online grocery store by creating an amazing app. Grocery mobile apps can be of the following types:

  • Ecommerce apps-These allow buyers to browse through a wide variety of items and schedule the delivery as per their convenience. This type of app is mainly used by online retailers like Amazon and Big Basket.
  • In-store grocery apps-They is a perfect blend of e-commerce functionality and independent grocery app, and you can display all your products along with their specifications.

If you want to be financially independent and live the life of your dreams, it is a great idea to start an online grocery business. Globally, grocery is a $ 1 trillion industry, and online grocery is just 10 percent of that. There is a huge prospect of growth; so, go and chase that dream!

Also read:

1) Grocery Stores In Lucknow
2) Grocery Stores In Jaipur
3) Grocery Stores In Bangalore
4) Grocery Stores In Chandigarh
5) Grocery Stores In Kolkata
6) Grocery Stores In Mumbai

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Q. Can I open a business account for my online grocery store?

Ans. Yes, Once your registration process is complete, you can open an account at any bank of your choice.

Q. What is the biggest challenge in the online grocery business?

Ans. Since some products are perishable, storage is the biggest challenge.

We hope our article helped you with your research. You can also find detailed list of grocery stores in these cities:
Grocery Stores In Surat Grocery Stores In Gurgaon Grocery Stores In Ludhiana
Grocery Stores In Hyderabad Grocery Stores In Kanpur Grocery Stores In Chennai