Quick commerce players focus on profitability, expansion in Tier 2 cities 

Quick commerce (10-30 minute grocery delivery) companies have had a mixed bag of a year. While the prominent, well-funded players such as Swiggy Instamart, Dunzo and Zepto grew multifold in 2022, smaller companies such as Fraazo shut down operations amid the funding winter.

The year also saw giants such as Flipkart exiting the space as they don’t see the quick grocery delivery model sustainable. In 2023, quick commerce companies such as Zepto and Dunzo turned the focus on making dark stores profitable, and are foreseeing customer order sizes to grow as quick deliveries become the norm. Further, Swiggy Instamart is also expecting to see growth in demand from Tier 2 cities.

“Instamart has witnessed 16-fold growth between June 2021 and June 2022, and continues to see strong growth month-on-month, with a majority of the orders being from the metro cities. In 2023, we expect the customer base to grow and foresee a rising demand from Tier 2 cities as well,” said a company spokesperson. She added that the company expects competitive intensity across the categories it operates in, and believes it is always good in accelerating the overall growth and maturity of the category. 

“We believe that we have only scratched the surface of quick commerce in India and there is plenty of headroom for us to grow and delight our users. As we head into the new year, our focus remains to offer unparalleled convenience to our consumers and improve efficiencies around our operations as well as using technology and automation effectively,” said the Instamart spokesperson. 

Adding to this, a Dunzo spokesperson said: “Next year, we need to carve a path to profitability. We are already moving towards this goal, with over 15 per cent of the oldest stores turning profitable, and as more micro fulfillment centers turn profitable, we will invest these profits back into the business, leading to growth across other centers at higher profitability.”

She added that the company will also focus on employing innovative solutions aimed at improving efficiencies in the dark store as well as optimizing supply chains. Dunzo said its quick commerce offering Dunzo Daily is its fastest-growing service, registering a 25x growth and contributing to 70 per cent of its revenues.

“Next day deliveries will be dead in five years. Gone are the days when customers preferred to wait a day or two for fulfilling their shopping needs. Beyond groceries and fresh categories, customers want almost all their shopping needs to be met as soon as possible,” the Dunzo spokesperson added. 

Dunzo recently launched books category on its platform with the “War of Lanka”. Customers can place the order and get their books delivered within minutes, similar to groceries. “We see customers warming up to the idea of having newer categories of products coming to them through the quick-commerce route,” the spokeseperson added. Similarly, other players like Zepto and Blinkit have also been adding newer categories to quick commerce. While Zepto has launched Zepto Cafe, Blinkit has expanded into categories like print services and electronics. 

Aadit Palicha, the co-founder of Zepto, also noted that he expects customers to engage with newer categories in quick commerce as the order frequency grows and users become more mature. “Zepto continues to grow and has recorded 100-150 per cent growth in the past six months. A couple of dozen of Zepto’s dark stores has also turned cashflow positive. Going ahead, Zepto, too, is focusing on profitability and adding newere categories,” he added.

According to Redseer, the market penetration of Quick commerce is expected to touch $5 billion by 2025. Around 20 million households are addressable by quick commerce in India, as per the report. The major drivers for this market are the users from Metro and Tier 1 cities who belong to Mid to high-income households, are convenience-seeking, and spend across consumables sub-categories.