Traversing the QCommerce Landscape: Challenges and Opportunities

Running out of essentials or forgetting a gift for an occasion are minor annoyances that would definitely have made you wish for a convenient and reliable delivery before you can countdown to 10. You can not have been the only one to have had this thought, otherwise the Indian Q-Commerce market wouldn’t have experienced a growth rate of 77% YoY to become a $2.8Bn opportunity in 2024!

Interchangeable with “On-demand delivery”,Quick commerce or Q-Commerce is a high-volume, low-margin business model of delivering goods within hours of ordering. That timeline has been crunched down even further to the 10-minute promise by Zepto and Blinkit!

India’s rising disposable income and burgeoning number of younger millennial and Gen-Z shoppers has contributed to the Q-Commerce boom in the country. Along with Blinkit and Swiggy Instamart who have emerged as the titans, Flipkart Minutes has joined the fray, inspiring even Amazon to test the instacommerce waters by 2025. These events signify that competition for convenience and flexibility is going to pit players against each other in the race for customer acquisition.

With Q-Commerce all set to become a USD 9.9Bn operation by 2029, this post is dedicated to examining potential blockers and opportunities for upcoming brands to tap into. Read on!

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The Domestic Q-Commerce Opportunity at a Glance

Quick commerce is a fast-growing segment of convenience shopping. It’s about improving last-mile delivery with smaller orders and fast-moving inventory which has now spread beyond specific SKUs to a more diverse product catalog. Put simply, it’s disrupting retail and general trade as we used to know it. 

The velocity at which it’s hurtling across the business landscape is positioning the Indian 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. 

By 2029, there will be an estimated 60.6mn users in the Quick Commerce market, indicating a rise in demand for convenient and coordinated last-mile delivery.

At present, the key Q-Commerce players are Blinkit, Swiggy Instamart, Zepto and BBNow. 

In 2022, measurable changes came into force,with Zomato acquiring Blinkit to foray into the Quick Commerce segment. Parallely, Zomato launched Instant but was forced to exit and shut down after its attempts to chase profitability didn’t take off as expected. Walmart-backed Flipkart trailed closely behind, piloting Minutes in Bengaluru, with launch plans for New Delhi and Mumbai in September 2024.

So, having captured 46% of the Gross Merchandise Value (GMV)market share, Blinkit leads the segment. Second and Third places go to Instamart, at 27% and Zepto at 7%. According to internal brokerage firm CLSA, Quick commerce is driving Zomato’s bullish curve, with Blinkit disrupting modern trade and eCommerce. 

The ingenuity of getting things to you instead of you going out for them has contributed to the Q-Commerce boom, with marketplayers like Blinkit, Instamart and Zepto processing ~6L,5L and 3L daily orders respectively.  

In-app purchases are more convenient, because it not only accounts for regular purchases but also factors in emergency and unplanned situations where the customer may not physically be in the position to carry out the purchase offline (for example, if they’re unwell and are living independently). It reduces peak store traffic and the battle for the same item by ensuring stock in all stores closest to the customer’s location are sufficiently replenished to meet the demand surge.Instant deliveries are appealing to shoppers emerging from the other side of the Covid outbreak, because it has emphatically replaced peak shopping hours and traffic. 

According to Statista, Q-Commerce is likely to grow 40-45% by 2026, which will drive the current penetration from 1.8% in 2024 to 3-4% in the same timeframe. While we may not be beating China penetration-wise, it’s promising that Blinkit alone had 8.8Mn visits in the first quarter of 2024, followed by Big Basket and Zepto.

If we were to turn the lens onto the financial aspect of Q-Commerce,  the average revenue per user or ARPU,has been steadily climbing.In 2017, the revenue was $78.57 and this figure will double to ~$175 in 2029.

Q-Commerce is a consumer market, and the uptick has made several more brands consider tying up with leading Quick Commerce marketplaces  to take care of the fulfillment and last-mile delivery. 

But what would a business operating in D2C, general trade and modern trade need to do beforehand in preparation, while battling customer loyalty, shopping preferences and technological upgrades? Let’s find out in the next section.

The Challenges of Quick Commerce Management

Although brands don’t assign their entire inventory to a Q-Commerce marketplace, by its very nature, Q-Commerce players accept orders from D2C brands(like Moms co), modern trade (retailers like Nilgiri’s) and general trade (like Borosil) in bulk, effectively operating on a B2B model. This means that orders are consolidated according to product category, customer preferences and dark store locations. This necessitates micro warehouses to fulfill three conditions

1. It should be positioned closest to customer location by pincode to simplify order priority assignment.
2. Inventory tracking capabilities  which lets you plot a heatmap of supply-demand so that you never run low or out of staples and can reshuffle surplus inventory.
3. It should be integrated pan-location into an intelligent distributed order management and warehouse management system to forecast and execute replenishment, inwarding and outwarding functions.

Following the sound logic of not putting all eggs in a single basket, when brands first start out, only a handful of SKUs from select categories are set aside for Q-Commerce order fulfillment. This way, hyperlocal commerce doubles up as a diversified sales opportunity and revenue driver!

There's a challenge associated with this, and in case you haven’t spotted it yet; we'll tell you. 

You have multiple sales opportunities, but are not in the position to track demand by region, product performance, order value and volume. Consequently, you’re unable to see if you missed to check if any orders are pending or overdue for processing, which spills over to fulfillment errors and delayed deliveries.

(A recent case in point being how a male customer who ordered innerwear via Blinkit wound up receiving women's bikini briefs. Despite the social virality of his complaint, the man has not received a resolution till date. )

Cringe much?

The lag in the value chain causes discontent from the customer end, because you’re in breach of your own delivery SLA.

With a state-of-the-art warehouse management system like EasyEcom WMS, both legacy and emerging brands can

1.  Unify the communication between retail outlets and dark stores, equipping them at an individual-level with handheld terminals to expedite item identification and inwarding against received orders.

2. Automate order processing by raising Purchase Orders (PO) for B2B orders through the system, identifying the marketplace request, associated platform fees, customer and order details. The breakdown extends to preferred payment and delivery time slots.

3. Forecast the required quantities of inventory per location to stock the warehouse adequately before peak demand. Based on the previous 90 to 180 day history, sellers can estimate future quantities and set up reorder points accordingly to keep their inventory ready from the business standpoint.
4. Cut manpower linked to manual order processing by distributing the labor such that multiple hands aren’t required for the same activity. This reduces warehouse congestion and drives pick-pack efficiency and ship velocity.

5. Set date thresholds for expiry-sensitive items such as medicines and apply the First Expiry,First Out (FEFO) rule to ensure products in stock are correctly prioritized for pushing.

6. Organize and match quantities for a particular order against store availability and location, alerting warehouse operators to ready the required quantity without delay. Q-Commerce platforms distribute items across the dark store network, meaning that shortages in one location are compensated with availability in another location within the same pincode, expediting picking,packing and shipping. Let’s illustrate this with an example. If an order has come in for 100 items for a retail super mart in Gurgaon, this can be split across 5-6 dark stores in Noida and Delhi across varying quantities that would total to 100.

7. Track product performance matching estimates with SKU reports to optimize inventory levels with relevant and bestselling items that make the seller money.
8. Streamline fulfillment by handling and tracking in bulk across multiple locations without skipping or missing orders.
9. Aggregate courier partners based on their Q-Commerce specialization, service reliability and accuracy by location through a Carrier Masters configuration. This saves them hefty shipping fees and routes orders automatically using route optimization. Currently, delivery charges eat up 50-70% of gross margins according to a Grant Thornton report. Examples of rapid delivery partners include the likes of Zippee and Shadowfax. In fact, Zippee came to the rescue for D2C brands that wanted to tap into quick commerce and gain visibility into the competition without denting their pockets.

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

The following players are on the springboard of success:‍

Swiggy‍

Swiggy Instamart has expanded to Tier-2 and 3 cities totalling delivery to 43 cities. Instamart’s strategic partnerships with local vendors and brands has helped the platform process ~1K orders in one day in under 5 minutes. 

For example, Mangalorean local brands like Narans and Ideal Ice Creams and Thrissur’s Milma Milk are now available on the platform. The broadened scope of what can be sold via Quick Commerce has led even real estate magnate Godrej to partner with Swiggy to launch the #HomesDelivered campaign in Whitefield, Bengaluru for its Woodscape property. Using a combination of influencer engagement and hyperlocal ads, the phygital approach and QR-scan to simulate key handovers is a creative example of the reach of Q-Commerce!‍

Blinkit

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.Taking cognizance of the upcoming festival block,Blinkit is now launching operations in Kochi,Haridwar and Bhatinda even against the backdrop of challenges tier-2 cities present. After all, Insta commerce players work on low margins and rely on high-order frequencies and average order values to drive gains.

BigBasket‍

In a move towards unifying the Quick Commerce model, the Tata-owned online grocery platform has announced that it will merge its BBDaily subscription service into its main app in the coming months. The move will help the company to shrink the 2-3 hour slots down to 10-minute deliveries. With an average order value of Rs 500, piloting into Tier-2 cities like Tirupati and Bareilly are bolstering hyperlocal commerce beyond metros.

Dunzo

‍Dunzo debuted in 2016, making it one of the earliest entrants to the hyperlocal delivery market with the backing of Reliance Retail. Despite investing $400mn into expanding its network with 130+ dark stores, the company’s lucky streak began dipping from 2021.Fast forward to 2024,cultural misalignment with their bankrolling partner and failed deals threw the company into a financial and operational crises, forcing them to cut 75% of its workforce.

Zepto

According to a study by AI-platform Bobble, Zepto holds the record for user growth( 946% within 90 days). Following Buy-Now,Pay-Later startup Simpl partnering with Zepto in April 2024, the latter is venturing into postpaid and has raised $340Mn in a funding round led by General Catalyst. With this cash infusion, Zepto is planning on doubling its count of dark stores to 700 by 2025 from 300 in June 2024. In a parallel vein, sports retailing giant Decathlon has teamed up with Zepto to sell sportswear in 16 major cities including New Delhi, Hyderabad, Bengaluru from September 2024 onwards.

Flipkart

‍Walmart-backed Flipkart has launched Minutes in August 2024, which delivers a wide range of items spanning electronics and groceries within 15 minutes. It leverages scores of dark stores to expedite deliveries, with the aim to set up 100 by the festive season. The existing business model uses competitive lower pricing and loyalty strategies such as TBBD, Flipkart Plus(loyalty program) and AI-powered Flippi to drive customer engagement. Flipkart Minutes is now being rolled out to New Delhi and Mumbai.

Amazon Fresh‍

Amazon which partners with More Retail Stores for its pantry division is in approval discussions from its head office to roll out a QCommerce offering in India by the first quarter of 2025 to compete with Flipkart Minutes. It will continue to use slotted deliveries for select SKUs.

B2B platforms leveraging qCommerce

Udaan

Founded in 2016 in Bengaluru by entrepreneurial trio Amod Malviya, Sujeet Kumar and Vaibhav Gupta, Udaan is the nation’s largest eB2B platform. It operates across diverse categories like FMCG, fruits and vegetables and pharmacy/healthcare. With a strong focus on B2B trade, Udaan has utilized micro warehouses and fulfillment centers to ensure inventory delivery to their retailer network within 2 days, ensuring timely stock replenishment and optimal capacity.

Jumbotail

Jumbotail is a leading B2B marketplace and retail platform for the grocery value chain in India that connects general trade with supermarts, encompassing mom-and-pop stores, kiranas and brands. 

They have established micro fulfillment centers in urban areas to facilitate quick grocery replenishment for high-demand, fast-moving products. Being up against the likes of Udaan and Ninjacart, the eGrocer recently secured Rs150Cr in funding from investors like Kalaari and Heron Rock in line with its objective of upscaling services to emerging brands using the quickest route-to-market (RTM) strategy.

Moglix

Moglix is a B2B eCommerce platform for industrial goods. Just a week back, Moglix announced the rollout of its Next-Day Delivery service to bring down the delivery timeline to 12-24 hours from its standard 3-4 days. This makes Moglix the latest entry into the q-Commerce market!

With 25% of their orders coming from 12 urban cities, Moglix Founder and CEO Rahul Garg realized that the company will need to tap into the quick commerce segment to drive conversion by broadening the reach of its services. Present in 12 cities, the startup plans to extend its operations to 40 cities by 2025, offering its NDD for 10,000 SKUs. They are positioning their warehouses within the extensive logistics network such that they can expedite order fulfillment.

Ninjacart

Agritech Startup Ninjacart has plans, big plans for 2024, aiming to close the year with a Gross Merchandise Value of Rs 5000 Cr.It expanded its fulfillment services 1.4x to increase its GMV value 1.6x, according to Kartheeswaran K, Founder and CEO.

Ninjacart initially piloted as a B2C qCommerce model to transport fresh produce from retail outlets to customers within an hour. However, the stack of grievances mounted, from middlemen undercutting farmers to supply-demand mismatches. They then pivoted from B2C to B2B in 2015 to help retailers purchase from farmers directly.

Rising above the main challenges of buy-in from retailers to go online and for farmers to trust digital intermediaries,Ninjacart  is now a commerce discovery and financial credit distribution platform that is active in 70 cities, and profitable in 8 cities. Through Instamart, it connects buyers to sellers by delivering fresh organic produce from farmers to retailers in under 12 hours while the credit platform helps farmers earn by crediting the due after the produce reaches the trader. 

Food For Thought

In light of Diwali (pun unintended) heralding the festive season, several platforms are upscaling their Q-Commerce offerings beforehand by expanding to 20K products. Quick commerce is all 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, which can cast a wider net geographically to enable Q-commerce companies to service formerly inaccessible localities. Although 40% of qCommerce sales comes from online grocery orders, consumer electronics, entertainment subscriptions and other categories are going to contribute to the discovery boom, having helped the segment balloon to 230% in the last three years. 

The future roadmap will see delivery lead times being standardized to 45 minutes to offset dark store set up cost while reducing last mile costs.  

We’re curious, what are your thoughts on the burgeoning Quick Commerce model and how have you experimented with it? Automate your eCommerce business with hyperlocal commerce integrations for a frictionless start-to-finish experience!

FAQs

1.What technology interventions are required for QCommerce readiness?

‍ From both a technical and business perspective,D2C brands considering QCommerce will need an omnichannel order management system and an app-based warehouse management system that 

1. Forecasts, tracks and reorders inventory on-time.

2. Scans and matches order and item details for accurate fulfillment.
3. Fulfills only orders marked as Quality-compliant to avoid losses from high and misplaced returns.
4. Routes orders by pincode, time slot and customer to avoid breaching the time promise.
5. Optimizes pick-paths to drive batch processing and picker efficiencies at individual levels.

2.What role does WMS play in driving qCommerce profitability?

Through WMS, brands can gain box and item-level visibility, leading to

1. 99.99% inventory accuracy
2. 100% inventory throughput with an improved flow rate.
3. Zero-error, zero delay fulfillment.
4. 100% SLA adherence by plugging revenue leaks. 

3. What is the estimated value of the Indian QCommerce market?

The Quick Commerce market in India has touched USD 3.34 Bn in 2024, with a forecasted growth of USD 9.95Bn by 2029. That same year, the number of users in the segment will touch 60.6 Mn users quadrupling the penetration rate to 4%.

4. Is Q-Commerce  compatible with eCommerce enablement solutions?

Yes. QCommerce integrations with leading market players like Blinkit, Zepto, BBNow and even eB2B players like Ninjacart allow sellers to raise POs from a centralized panel and track shipping statuses from any dark store added to the system. This helps sellers unify sales potential seamlessly and categorize orders by marketplace, order value,customer location and pincode. 

5. Will quick commerce survive in India?

While the total addressable QCommerce market is at an estimated $45Bn, at 7%, the penetration is still in single digits. Quick Commerce's survival in the nation hinges on the measures undertaken to resolve the major challenges that larger and established players and late entrants face, i.e. lack of sufficient automation capabilities that cuts out excessive manual involvement and streamlines order and warehouse operations.

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