How Q-Commerce is Becoming One of the Fastest Growing E-commerce Models?

India's Quick Commerce sector is expected to grow by 10-15 times and is expected to become a $5 billion industry by 2025.
How Q-Commerce is Becoming One of the Fastest Growing E-commerce Models?

In the past two years, Covid has augmented the digital adoption drive by consumers in the retail industry. With the shift in consumer behavior, the business of delivering essential commodities in the timespan of 10-30 minutes, popularly known as ‘Quick Commerce’ is rapidly penetrating the growing e-commerce market of India.

Taking on the lead, the grocery delivery company Grofers has rebranded itself to Blinkit while Swiggy has set up its new 15 minutes delivery platform ‘Instamart’. Even the stalwarts such as Flipkart, Amazon, Ola, BigBasket, etc. have also ramped up their operations and joined the bandwagon. 

While India is the third-largest grocery market in the world, it has the lowest (less than 1 percent) online grocery penetration compared to most of the major markets. Quick Commerce will disrupt the e-commerce market while creating a strong habit of convenience available to customers.

Two major opportunities offered by the Indian Quick Commerce market include consumables (home care, personal care, OTC drugs, beverages, fresh staples, pet supplies, packaged foods, alcohol, and tobacco) and adjacent categories such as (books, gifts, cards, small electronic items, etc.). Although many items in these categories don’t fall into quick need of being delivered in 10 minutes however looking at the shifting consumer behavior, companies don’t want to leave any stone unturned in providing the best services to the customers.

What Does The Research Say?

As per a report titled "Quick Commerce: A $5 Billion Market by 2025" by the consulting firm RedSeer, India’s Quick Commerce sector is expected to grow by 10-15 times and is expected to become a $5 billion industry by 2025. The biggest growth driver leading the rise of Quick Commerce in India is a shift in consumer behavior. Today’s customers are looking for convenience over value, weekly purchases compared to larger monthly purchases, increasing convenience of unplanned purchases, indulgence, and top-up purchases by Gen-Z customers as well as Covid-backed replacement of visiting traditional Kirana stores for safety reasons.

Sharing further insights, Mukesh Kumar, Engagement Manager at RedSeer mentioned, “Quick Commerce is emerging as one of the fastest-growing e-commerce models serving the need for faster delivery among convenience seeking customers. With high fill rates and 30-45 minutes delivery service for unplanned orders, mid-to high-income households in metros are increasingly replacing traditional Kiranas with Quick Commerce Platforms like Swiggy’s Instamart and Dunzo.”

The study also found that in India currently 20 million households can be addressed by the Quick Commerce delivery model which is around 7 percent of the overall market and expected to grow at the rate of 12-13 percent by 2025. Additionally, the exponential growth of the online consumables market will also play a pivotal role in driving this growth. Around 50 percent of this growth will come from the high-income households of metro and Tier-I cities. 

Other factors contributing to this growth are the willingness to pay minimum delivery fees for 10 minutes delivery which saves consumers time and effort, increasing demand for healthy and easy-to-cook products, nutritional products, and rising demand for newer products through global experiences.

READ MORE: Quick Commerce: A Concept That Takes Product Fulfillment to a New High

What Industry Players are Upto?

Let’s review the ramp-up plans of the major quick commerce players and decode their plans to move ahead with this new delivery model of the e-commerce industry. 

The newest entrant in this domain is five-month-old Zepto which has got the industry bigwigs talking after raising two rounds of $160 million investment and increasing its market valuation to $570 million within two months. It has received investment from investors such as Nexus Venture Partners and Y Combinator. The existing experienced players such as Grofers, Swiggy, BigBasket, Amazon followed the suit by announcing major expansion plans in coming years. 

By end of 2021, Swiggy announced to invest $700 million in its quick commerce delivery vertical Instamart and reduce the delivery time to under 15 minutes from the existing 15-20 minutes. Grofers has already experimented well in the market through its 30 minutes delivery model in the NCR region and is all set to dominate the market with its huge expansion plans by rebranding itself to Blinkit focussed on grocery delivery within 10 minutes. Earlier backed by Zomato, it has raised already raised an investment of $120 million and entered the unicorn club of start-ups. The industry heavyweights such as Tata-owned BigBasket are also contemplating scaling up full-fledged operations in the quick commerce domain through the BBNow banner which will be connected as a special feature on Tata’s new super app.

The million-dollar question is how they will achieve the delivery under a tight timeline of a few minutes. Well, most of them have focussed on setting up micro-warehouses near their point of delivery contacts. The stocks will be confined to a focused set of under 1,500-2,000 high-demand items. These mini-warehouses are known as ‘dark stores’ will be opposite their traditional well-stocked large-format warehouses, usually located on the outskirts. So instead of the traditional model of having 3-4 large warehouses servicing an entire city, these companies will set up hundreds of dark stores to decrease the delivery turnaround time. 

Zepto who is already providing this service in metro cities such as Delhi, Bengaluru, Chennai, Mumbai, and Gurugram has plans to expand its operations in other cities such as Hyderabad, Kolkata, and Pune.

Conclusion

However, retail sector analysts believe that this business model of providing deliveries in 10 minutes does not solve any of the existing supply-side problems and as a result might not end up shaping consumer behavior enough for the customers to pay for these quicker deliveries down the road. They also feel that it might not change consumer behavior to a large extent in the long term.

Speaking on the future success of the Quick Commerce delivery model Arvind Singhal, Chairman and Managing Director of retail advisory firm Technopak said, “If I don’t need delivery in 10-20 minutes, but you are delivering it in that much time, I’m not going to say no. But the cost of doing that is very high. You are not solving a real problem, where customers would be willing to pay a premium. If you analyze every R. 100 one spends on e-groceries, the top-up items that you might need in a short period are worth less than Rs 10.”

While a section of consumers is looking for quick deliveries, it will be interesting to see how the delivery of Quick Commerce will sync with their habits especially during challenging times such as rain, extreme weather conditions, lockdown, etc. when the need for quick delivery arises.
 

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