The Quick Commerce Labyrinth: Retrospecting the 10-min Delivery Model and its Economics

The advent of the COVID-19 pandemic brought about seismic shifts in consumer behavior and market dynamics worldwide, and India was no exception. In the wake of lockdowns, social distancing measures, and the ubiquitous fear of contagion, traditional modes of commerce were swiftly eclipsed by the rise of quick commerce, heralding a new era of convenience and expediency for Indian consumers.

Quick commerce, characterized by its promise of lightning-fast deliveries (often within minutes), emerged as the panacea for consumers grappling with the challenges of lockdowns and restricted mobility. What was once brushed off as a marketing ploy, has swiftly become the cornerstone of customer growth for quick commerce players worldwide, in what can be called a whirlwind of transformation. The tantalizing promise of 10-minute deliveries has not only captivated consumers but has also reshaped the competitive landscape of the industry.

Spearheaded by players such as Zomato-owned Blinkit, Zepto, Swiggy’s Instamart, and Big Basket’s BBNow, the concept has swiftly gained traction, capitalizing on the burgeoning demand. Yet, beneath the surface of this seemingly unstoppable momentum lies a labyrinth of economic uncertainties and operational challenges.

The genesis of this paradigm shift can be traced back to December 2021, when Blinkit (formerly Grofers) and Zepto thrust themselves into the quick commerce arena, each vying to stake a claim in the burgeoning market. However, initial forays were marred by logistical hurdles, as the nascent infrastructure struggled to keep pace with the rapidly rising demand. Issues ranging from insufficient dark store networks to technological inefficiencies plagued the industry’s early endeavors.

Fast forward two years and the landscape has undergone a profound metamorphosis. Blinkit now boasts delivery times as swift as six to seven minutes in most major cities, while Zepto remains steadfast in its commitment to the illustrious 10-minute deadline. The exponential surge in customer adoption is palpable, with Blinkit’s order volume skyrocketing from 22.2 million in Q1FY23 to a whopping 55.8 million in Q3FY24.

Financial figures paint a picture of unparalleled growth and potential. Blinkit, under the stewardship of Zomato since August 2022, reported a monumental revenue surge, catapulting from Rs 164 crore in Q1FY23 to a formidable Rs 644 crore in the December quarter of the current fiscal year. Similarly, Zepto’s revenue ascended to unprecedented heights, scaling a remarkable 14x increase to Rs 2,024 crore in FY23, a testament to the insatiable appetite for rapid delivery services.

Despite these triumphs, lingering apprehensions persist regarding the long-term viability of the quick commerce model. Analysts caution against the perilous path of unsustainable economics, underscored by the glaring absence of profitability across the industry. The staggering losses incurred by market leaders only serve to amplify these concerns, with Zepto’s losses ballooning to Rs 1,272 crore in FY23 and Swiggy’s mounting to Rs 4,179 crore, reflective of the inherent challenges embedded within the high-burn business model.

On the other side of the playground, BBNow, the quick commerce arm of BigBasket, finds itself grappling with the daunting task of matching the pace set by its counterparts. Hindered by delivery times ranging from 10 to 20 minutes within a limited radius, BBNow stands at a crossroads, facing formidable obstacles on the path to sustainable growth.

In fact, Hari Menon, the Co-founder of BigBasket, recently voiced skepticism regarding the unit economics of 10-minute deliveries, emphasizing the imperative of prioritizing profitability over fleeting trends. As the industry navigates the turbulent waters of uncertainty, strategic pivots emerge as a beacon of hope amidst the storm.

Businesses need to apply a multifaceted approach to operations, and dark stores should be transformed into hybrid retail hubs. By augmenting traditional delivery models with brick-and-mortar storefronts, quick commerce players can diversify their revenue streams and cater to a broader spectrum of consumer needs. The convergence of physical and digital realms offers a potent formula for sustained profitability, providing a lifeline amidst the tempest of uncertainty.

As the saga of quick commerce continues to unfold, one thing remains abundantly clear: while the allure of instant gratification may reign supreme in the short term, the path to enduring success lies in navigating the intricate nexus of innovation, efficiency, and profitability. Only time will tell whether the industry’s rapid ascent heralds a new era of commerce or merely a fleeting phenomenon in the annals of retail history.

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