Key highlights: Online grocery market in India is on track to reach $1 billion in sales in 2017

Driven by a strong growth in transactions and steady growth in average order value

e-FMCG market is expected to see a 60% year-on-year growth

After a challenging year in 2016, the online grocery market in India is on track to reach $1 billion in sales in 2017. This will be driven by a strong growth in transactions and steady growth in average order value (AOV), according to a RedSeer Consulting report.

The online grocery or e-FMCG market is expected to see a 60% year-on-year growth likely by the end of the year. While the annual gross merchandising value (GMV) or sales was $600 million in 2016, it will now grow to $960 million in 2017, close to the $1 billion mark.

Source: RedSeer Consulting

The annual transactions of online grocery players have increased by 30-35%, from 35 million in 2016 to 46 million in 2017.

While the average order value has grown by 20% in a year from $17 in 2016 to $21 to 2017.

“Sales have been driven largely by volume growth- which points to growing acceptance and penetration of online grocery amongst consumers,” said the report.

It further added, “Additionally, AOV growth has also been significant, driven by increased share of cosmetics and other premium products in shopping basket.”

More the 50% respondents said they started ordering grocery products online after demonetisation and another 25% said they would like to start soon, according to survey carried out by discounts and coupon site, CashKaro's survey.

While the market has been tough for the food delivery start-up market, the grocery delivery start-ups have seen an upswing in investment from venture capitalists (VCs).

Even as deal activity in the food delivery sector as a whole continues its downward trajectory, grocery delivery startups continue to pull ahead of meal delivery startups in both deals and dollars. Grocery delivery start-ups have raised almost $600 million more than food delivery start-ups so far in 2017, according to a CB Insights report.

Grocery delivery start-ups have raised globally have raised $713 million in 2017 till date from 36 deals. It is expected to grow to $2 billion by the end of the year from 106 deals.

This comes after a tough year in the grocery delivery environment had resulted in many start-ups such as PepperTap, LocalBanya, AskMeBazaar, among others shutting down and others struggling.