Quick Commerce Cashes In On Retail, But Scalability Remains An Issue | CNBC TV18

Summary

The rise of quick commerce in India has been meteoric, with companies like Blinkit, Zepto, and Instamart revolutionizing how consumers shop for groceries, personal care, and home appliances. Despite impressive growth, scalability remains a key challenge, with a focus on increasing average order value and expanding operations. Experts predict that as the market grows, competition will intensify, leading to consolidation within the next five years. While consumer demand for instant deliveries is high, profitability and sustainability depend on maintaining efficient operations, especially in tier 2 and tier 3 markets.

Takeaways

• 😀 The rapid rise of quick commerce (QC) in India is driven by the demand for instant deliveries, with customers wanting everything from groceries to home appliances delivered quickly and conveniently.
• 😀 Blinkit, Swiggy Instamart, and Zepto are major players in the QC industry, with Blinkit leading the way with over 20 million orders in FY24 and plans for rapid expansion.
• 😀 The Indian QC market is valued at $3.5–4 billion and is expected to grow at 25-30% annually over the next five years, outpacing traditional e-commerce growth.
• 😀 The scalability of QC remains a key challenge, as businesses must balance fast delivery times with maintaining profitability and growth.
• 😀 Investors and established e-commerce giants like Flipkart, Amazon, and Reliance are showing increasing interest in QC, reflecting confidence in its long-term potential.
• 😀 QC players must overcome challenges related to unit economics, particularly maintaining sustainable margins with low average order values (AOV) around ₹500–550.
• 😀 The expansion into tier-2 and tier-3 cities is crucial for growth, with players like Blinkit successfully achieving rapid order volumes in smaller markets.
• 😀 Offering a wide selection of products under one app has become a key strategy for QC platforms to attract and retain consumers, even in less urbanized areas.
• 😀 While there is intense competition in the QC space, experts predict a consolidation in the next 5 years, with only 3–5 dominant players remaining.
• 😀 As more players enter the market, a shakeout is expected, with those unable to scale effectively or meet consumer expectations likely to exit the industry.

Q & A

What is the primary driving force behind the rapid growth of the Quick Commerce industry in India?

The main driving force behind the rapid growth of Quick Commerce in India is consumers' increasing desire for instant deliveries and the convenience of shopping from home. People are seeking everything from groceries to home appliances delivered quickly, fueling the demand for these services.

How have companies like Blinkit, Zepto, and Swiggy Instamart contributed to the quick commerce boom?

These companies have significantly contributed to the quick commerce boom by scaling rapidly and offering millions of orders. Blinkit, for example, clocked 20.3 crore orders in FY24, while Swiggy Instamart grew its orders by 58% to 17.6 crore. Zepto has also shown impressive growth, with sales crossing 5,000 crore rupees in FY24.

What is the estimated size and growth rate of the Quick Commerce industry in India?

The Quick Commerce industry in India is estimated to be worth 3.5 to 4 billion USD, with a growth rate projected at 25 to 30% over the next 5 years, which is five times faster than traditional e-commerce.

What challenges do Quick Commerce businesses face in scaling their operations?

The key challenge is scalability, especially increasing the average order value and maintaining efficient operations. The math suggests that dark stores are likely to break even with 2,000 orders per day, and scaling this to higher numbers is essential to ensure profitability.

How are e-commerce giants like Flipkart, Amazon, and Reliance Retail responding to the growth of Quick Commerce?

These e-commerce giants are entering the Quick Commerce space, seeing the sector's potential. They now aim to capture a share of this fast-growing market, with Reliance Retail, Flipkart, and Amazon competing alongside players like Blinkit and Zepto.

What has been the reaction of traditional e-grocers like Big Basket to the Quick Commerce industry?

Big Basket, initially skeptical about the unit economics of Quick Commerce, has now changed its stance. The success of newer players has prompted Big Basket and others to reconsider their strategies and potentially invest in this fast-paced sector.

How does Quick Commerce differentiate itself in terms of product range and consumer experience?

Quick Commerce platforms have focused on expanding the variety of products available under one app, offering consumers a wider selection. Additionally, they have entered new markets, providing customers with access to products and quality control that may not be available locally.

What role do smaller markets and tier-2/tier-3 cities play in the expansion of Quick Commerce?

Smaller markets, particularly tier-2 and tier-3 cities, are playing a crucial role in the growth of Quick Commerce. Companies have found that these markets can offer high demand, with consumers often unable to find the same level of selection and quality control elsewhere.

What potential risks exist for Quick Commerce businesses as more players enter the market?

As more players enter the market, a shakeout is expected, with less nimble businesses struggling to scale quickly. This may lead to consolidation in the industry, with only 3 to 5 key players remaining in the market over the next five years.

What impact is the growing competition in Quick Commerce likely to have on consumers?

Consumers are likely to benefit from the growing competition, as it will drive improvements in value and service. However, this competition may eventually lead to fewer options as weaker players exit the market, leaving only a few dominant companies.