The newly forged sub vertical in the online grocery segment called Quick Commerce, or q-commerce with its USP of delivering goods within 10-30 minutes of ordering is seeing newer players wading into the space that is already being tapped by industry leaders like Grofers, Swiggy and Dunzo.
The newest entrant in the space is the Mumbai-based Zepto, a start-up founded by two 19-year-old entrepreneurs. Zepto currently offers its grocery delivery services in Mumbai, Bengaluru, Chennai, Delhi and Gurugram, and plans to expand to Kolkata, Pune and Hyderabad and recently announced a $60 million fundraise on November 1, which it plans to invest in expanding the number of ‘dark stores’ as it has to offer 10-minute grocery delivery to its customers.
Older players with established delivery infrastructure like Grofers and Swiggy have also set up dark stores to decrease the turnaround times on delivery of goods.
Dark stores or micro-warehouses are located in close proximity to the point of delivery,are fewer in number and manage a focussed set of 1,500-2,000 SKUs. Only 3-4 such large warehouses service an entire city, instead of hundreds of dark stores being set up in a large city like Delhi.
Consulting firm RedSeer in a report said that the quick commerce segment is estimated to clock $5.3 billion in gross merchandise value (GMV) by 2025, compared to just around $300 million as of 2021.
“Market growth will be driven by rising adoption of quick-commerce among convenience seeking customers with unplanned ordering behaviour,” the consulting firm noted in a report.
Looking at the promising growth, BigBasket one of Indias’ leading grocery player is also shifting its business model and considering its own 10-minute delivery service under the BBNow banner — a feature that will be made available on its parent Tata Group’s super-app Tata Neu.
As per the consultancy firm, for q-commerce players, the shift in consumer preference for instant delivery of top-up purchases and the convenience-seeking behaviour has created an addressable market.
While we see a growing market for q-commerce, retail analysts believe that the business model does not really solve any existing supply side problem and as a result might not end up shaping consumer behaviour enough for the customers to pay for these quicker deliveries down the road.
Globally, markets like Europe has founded traction in the q-commerce model on the back of the pandemic. Europe is already witnessing a dozen companies who are operating in the space including the UK-based startups Dija, Jiffy, and Zapp, and Germany-based Flink and Gorillas. In China, companies such as Miss Fresh, Meituan Maicai and Dingdong Maicai have competed with established players like Alibaba, JD and Pinduoduo for their share in the $400 billion online grocery market.
It is evident from the experiences from the global markets that q-commerce business models not only operate on wafer-thin profit margins but also address a very small part of the addressable consumer demand.
At present companies maintain their focus on building their customers and altering consumer behaviour. However, to cash on the business model heavily and move on the path to profitability companies are dependent to a great extent on whether the consumer becomes ready to pay a premium for the quick services.