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Ola set to Enter Grocery Delivery Service

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Published Date: 01 Jul 2024Updated Date: 31 Dec 20246 mins readBy MOFSL

Bhavish Aggarwal-led Ola is once again gearing up to enter the grocery delivery market, this time leveraging the government-backed Open Network for Digital Commerce (ONDC). Currently, Ola stands as the second-largest buyer-side platform for food delivery on ONDC, trailing only behind Magicpin. The company manages between 15,000 to 20,000 food orders daily and contributes to approximately one-third of the market demand in key areas such as Delhi-NCR and Bengaluru. Notably, the last-mile delivery for this initiative will be powered entirely by electric two-wheelers. 

Ola's foray into the grocery delivery sector is not new. The company has intermittently experimented with this service over the years. In July 2015, Ola launched an online grocery store in Bengaluru, shortly after introducing its food delivery app in March of the same year. The strategy involved utilizing its fleet of cabs and drivers to deliver groceries from 9 am to 11 pm. However, both services were discontinued within nine months, with no detailed reasons provided for the cessation. In 2021, Ola re-entered the grocery delivery market with Ola Dash, initially launching services in Mumbai and Bangalore through approximately 15 dark stores. Despite this effort, Ola Dash was discontinued after a year, leading to the closure of all its dark stores. 

What is ONDC? 

The Open Network for Digital Commerce (ONDC) is a government-backed initiative in India designed to democratize digital commerce and create a level playing field for businesses of all sizes. It promotes interoperability and decentralization, allowing sellers and buyers to interact across different platforms seamlessly. By adopting open standards, ONDC ensures transparency and accessibility, fostering innovation and competition. It aims to include small and medium-sized enterprises (SMEs), local stores, and individual sellers, empowering them to compete with larger players and boosting local economies. Consumers benefit from increased choices, better prices, and improved services. The network's expansion efforts focus on bringing more sellers online, especially from underserved regions, driving economic growth and creating new opportunities. With government support, ONDC aims to transform the digital commerce landscape in India, making it more open, fair, and competitive.

Why is OLA choosing ONDC? 

The Open Network for Digital Commerce (ONDC) is nearing a significant milestone, poised to exceed 10 million transactions in June, covering both mobility and retail sectors. This marks a fivefold year-on-year growth. In May, the network achieved a new peak with five million retail orders, up from 3.59 million the previous month. Additionally, there was a record of 200,000 retail transactions in a single day in May. In recent months, ONDC has seen a shift in retail transactions. While orders for food delivery have decreased, categories such as grocery, fashion, home, and kitchen have experienced increased activity. Over the past eighteen months, several emerging companies, including Paytm, Ola, PhonePe, Meesho, Magicpin, and Shiprocket, have joined ONDC to challenge the dominance of major players like Amazon, Flipkart, Zomato, and Swiggy in India's online retail sector.  

OLA vs SWIGGY and ZOMATO

Ola's partnership with ONDC places it in direct competition with food tech giants like Zomato and Swiggy. Previous endeavours by Ola included launching Ola Cafe in 2015 and acquiring Foodpanda's India operations in 2017. Ola also ventured into quick commerce with Ola Dash, but these initiatives largely met with limited success. The ride-hailing giant discontinued Foodpanda in 2019 and closed down Ola Dash in 2022. This new initiative capitalizes on Ola Electric's expertise in the EV sector. Unlike traditional players such as Zomato and Swiggy, who have yet to transition to electric vehicles, Ola has the advantage through its sister concern, Ola Electric. This allows the company to swiftly deploy EVs and enhance competitiveness in terms of unit economics, particularly fuel costs, within the food tech industry. Ola's decision to leverage its logistics proficiency for providing electric vehicle-based services to smaller sellers on the ONDC network could potentially give it a competitive edge in the e-commerce market. The anticipated increase in ONDC transactions could also significantly benefit Ola's new initiative.  

Recently, SEBI approved Ola Electric's IPO, with the company raising ₹5,500 crore. These funds will be utilized towards the expansion of Ola Electric and their cell business. This move not only underscores Ola's commitment to the EV sector but also aligns with its strategy to integrate electric vehicles into its delivery operations, potentially revolutionizing the grocery delivery market and challenging established players like Zomato and Swiggy. As Ola embarks on this ambitious journey, the market will be keenly watching how the company navigates the competitive landscape and leverages its strengths to carve out a significant share in the grocery delivery sector.

 

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