How is Quick Commerce Faring in India’s Instant Needs Economy?

Interchangeable with “On-demand delivery”, Quick commerce or Q-Commerce is a business model of delivering goods within an hour of ordering. At present, this mode of delivery caters to essentials and essentially smaller quantities of goods like groceries, OTC medicines, lifestyle products, stationeries, etc.

The rise of quick commerce in India is a result of consumers choosing convenience over value. Increasingly busy lifestyles have caused unplanned purchases to go up while planned trips to the grocery stores have taken a backseat. Working professionals regard quick commerce as a boon because of the speed and reliability.

Being quick on the update, Grofers rebranded itself to Blinkit while Swiggy branched out to Instamart a while back. Dunzo is one of the early adopters of this concept. The brand started out as a B2B last-mile delivery platform but quickly shifted to Q-Commerce, emerging to be one of the biggest players in the game.

Traditional eCommerce Vs Quick Commerce

Quick Commerce is basically eCommerce with an ingenious last-mile delivery. The USP of quick commerce that separates it from traditional eCommerce is the speed of the delivery. The recent quantum jump in the eCommerce industry has deeply altered consumer shopping habits. The introduction of Q-Commerce goes hand in hand with the changing consumer behavior, thereby creating the space for a billion-dollar market in the near future.

Compared to traditional eCommerce, Q-Commerce platforms offer a faster shopping experience. This means fewer purchasing steps, lighter carts, quick checkout, and an overall better experience.

The quick commerce business model comprises three components

A mother or main hub
Distribution centers and
Dark stores (commonly referred to as last-mile delivery stores)

The dark are smaller warehouses that can store between 500 to 2000 items. These warehouses are closer to the consumers to facilitate fast order fulfillment. Once an order is placed, there will be coordination between the last-mile stores and distribution centers, and delivery logistics with the distribution centers. Quick fulfillment comes at higher delivery costs (for example, if there’s a downpour, Swiggy adds an additional INR 10 to 20/- to the delivery charges to compensate their delivery agents). In such cases, Q-Commerce firms use data-led estimation models to plan for the order fulfillment process.

The State of Q-Commerce in India

The Indian Q-commerce market in its present state has tapped into small, essential, and portable product lines that include groceries, home, and personal care products, pet products, stationeries, small electronic items, etc. Now, not all of these products are required to be delivered in under 30 minutes but brands are making it a point that it is now a possibility, and they will go far and wide for an exceptional customer experience.

Consumers, on the other hand, are more accepting of the minimum delivery fees for quick deliveries as it saves them time and effort.

The RedSeer report points out that at present, the Q-Commerce model is capable of addressing over 20 million Indian households in India at present, which is only 7% of the overall market. The continuous growth of the online consumables pan India will pave the way for Q-Ccommerce expansion. Nearly half of this growth is expected to come from the metro and tier-I cities. Q-Commerce is making hyperlocal delivery the norm rather than an add-on which makes the timing just right for qCommerce players to widen their reach and market share.

Although the penetration of household commodities and eCommerce is in single digits, this could change with the launch of the ONDC project. Formerly offline sellers in neighborhood kiranas could go online and capture both planned and unplanned consumption.

The Current Q-Commerce Players in India
‍

On May 10 2022, Supr Daily CEO surprised everyone with its announcement that it was temporarily pulling the plug on its operations in Delhi, NCR,Mumbai, Pune, Chennai and Hyderabad. Swiggy Genie has also been temporarily suspended in 3 out of 68 cities. The common reason cited is the struggle to hire a sufficient number of delivery personnel from the gig pool to meet the surge in demand for hyperlocal deliveries. In fact, the imbalance in demand and capacity scales have prompted a frenzied hiring drive for delivery workers. Despite this, Swiggy has poured in $700 million to its Instamart business, indicating its long term interest in playing the QCommerce game. The other notable QCommerce players include Dunzo (which also holds the distinction of being the first in the market to roll out quick delivery), Blinkit (formerly Grofers), BigBasket and Zepto. Warpli is the youngest entrant having been launched a couple of weeks back.

Interestingly, Zomato holds an 8% stake in Blinkit and is deliberating on an INR 500 million investment to cement its hold in the QCommerce market. The rebranded Blinkit is opening a new partner store every 4 hours, and has reportedly created 12K+ jobs already. Albinder Dhindsa, Blinkit’s founder quotes,

Our new mission statement is to make instant commerce indistinguishable from magic.

Dunzo has a similar growth curve. Currently operational in 6 cities, Dunzo plans to expand its presence to 25 more locations within the year following a $200 million funding deal from Reliance Retail. Dunzo’s CEO Kabeer Biswas guesstimates that the platform users order between three to five times a week. In 2022, Dunzo plans to fulfill 75 million orders across the cities currently in their remit. Even a year-old Zepto has ambitious expansion plans. They’ve secured $160 million already in two separate funding rounds and are focusing their energies on sustaining their 220% MoM growth.

Ola too has dipped its toes into the instant commerce market in 2021 but has experienced teething troubles in contrast to their expansion plans to launch a network of 500 stores across 20 cities. They’re facing stiff competition in a space that’s mushrooming contingent on the funding secured from investors.

How is Q-Commerce Impacting Indian Retailers?
‍

The velocity at which it’s hurtling across the business landscape is positioning the Indian instant commerce market to grow 15 times by 2025. This places it ahead of China, which according to a Redseer report, predicts that India’s market size will achieve a valuation of $5.5 billion.

The same report said that Q-Commerce has a higher net promoter score than eGrocery stalwarts, which suggests that customers are more likely to recommend a player to their friend. Considering how it’s changing purchasing behaviors and delivery expectations, instant commerce players will need to turn to an inventory management solution to expand their network of dark stores. In India, only 20 million households are addressable by Q-Commerce companies. Increased internet penetration and democratization of eCommerce platforms with the government’s launch of the ONDC project can help Q-Commerce players to fulfill just-in-time expectations.

So where does this leave local Kiranas who offer smaller, in-demand products and a select distance-based delivery network? (think free deliveries within a 5km radius, for example).

To quote the honorable Prime Minister Narendra Modi

When each and every Indian is vocal for local, it does not take long for the local to become global.

The good news is, hyperlocal commerce is not going to obliterate Indian mom-n-pop stores anytime soon. If such Kiranas tie up with quick-commerce platforms to advertise their wares, a profitable partnership could emerge. After all, these stores are familiar to the customers within that neighborhood, meaning that a familiarity bias is in their favor already. Add to which is the fact that quick commerce speeds up the shopping experience and shortens the time to complete the checkout process.

Gaps exist, of course, and one that Q-commerce players cannot afford to overlook is the one between last-mile delivery and the delivery partner network. The pressure to deliver in shortened timelines comes at the cost of personal risks to the drivers making these deliveries. In March 2022, Chennai cops logged 978 traffic violations by delivery executives who worked for Swiggy, Dunzo and Zomato collectively. Multiplying the dark network stores to expand them to both rural and urban locations can kill two birds with one stone; more availability and rider safety.

What’s The Outlook for Q-Commerce in India?

In descending order, the following players are on the springboard of success:

Zomato and Swiggy: both grocery and food delivery platforms boast of a large fleet which has high utilization rates. They offer membership benefits to their customer base to keep the customers they acquire.
BigBasket and Blinkit(ex-Grofers): BigBasket and Grofers had an early start in expanding their warehouses. Some of these can convert to mother hubs that communicate with the dark store network. Unlike Swiggy and Zomato, however, their rider fleet is considerably smaller despite stocking a more diverse catalog of household staples.
Zepto, Dunzo: According to a study by AI-platform Bobble, Zepto holds the record for user growth( 946% within 90 days). In terms of the time spent on the app, Dunzo beat all the other q-commerce players, Zepto included.

With the entry of food and grocery-delivery players such as Swiggy and Zomato, India’s gaining on its American counterparts, i.e.Uber Eats and Gopuff. Put simply, the idea of convenience shopping is shaping up. To quote Pranay Jain, who serves as Avendus Capital’s Director,

Do customers need something in under 15 minutes? Not really. But it is available, should the need arise.

It’s about improving last-mile delivery with smaller orders than a diversified product catalog that is associated with traditional retailers. There’s even talk of companies piloting drone deliveries in the endeavor to expand their delivery fleet. Drones can cast a wider net geographically and enable Q-commerce companies to service formerly inaccessible localities. While grocery remains the focus product under quick deliveries, this is expected to change with the inclusion of electronics, stationery items and pharmaceuticals.

In India, convenience stores are closer to people than the mom-n-pop stores in North America and Europe. Given fleet insufficiencies, order processing and location feasibility, the jury’s still out if the success Indian Q-commerce companies is long, or short-lived.

What do you think is going to happen?