Amazon's Prime membership grows threefold as it expands into Indian towns with grocery business

Amazon India is doubling down on its fast-growing grocery business to attract more first-time buyers, mostly from non-metros and towns, an Amazon executive said.

Over the past year, the US online retail giant has noticed a sharp rise in the number of first-time online shoppers, mainly from tier-II and tier-III cities and towns . On Amazon India, about 65% of orders and more than 85% of new customers come from tier-II and other markets.

In grocery, being a relatively new category, Amazon India’s overall customer base and first-time buyers doubled on Amazon Pantry and post-COVID-19, with over 60% of new customers coming from non-tier-1 cities.

In February , Amazon set up its dry grocery service and instant fresh food service in 10 cities to create a comprehensive online store with delivery service. In the remaining 290 towns where there is currently no fresh service , Pantry will continue to provide dry goods.

“ Grocery as a subcategory has grown more than 2x and has become a gateway for new customers on Amazon.in . Over time, these customers have started shopping across categories. The online grocery market has huge growth potential but is still a small market. I expect this category to grow exponentially in the next few years, ” Manish Tiwary , vice president of Amazon India , said in an interview.

India’s nascent but thriving e-grocery sector is shaping up to be a multi-player space with major companies adopting various business fads to capture buyers outside the metropolitan cities. With Tata Digital Ltd-BigBasket and Reliance Jiomart entering the fray, e-commerce marketplaces like Flipkart and Amazon are also eyeing the online grocery market as a key development frontier this year.

Driven by last year’s strict lockdown and stay-at-home orders, the gross merchandise value of e-grocery sales jumped to $3.3 billion in 2020 from $1.9 billion in 2019, according to RedSeer data. The analytics consultancy expects the sector to reach $24 billion by 2025.

Even for Prime members, Amazon has noticed a big improvement in new members coming from smaller cities, with about three times more potential customers signing up for Prime during the holiday season last year compared to traditional weekdays, with three-fifths of those sign-ups coming from non-members.

In March, Amazon India expanded its 'Local Stores' programme to 50,000 offline retailers across 450 cities and expects to double the number of stores by the end of this year.

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