Let’s start with the numbers first: Zepto, the poster boy of Quick Commerce (QC), raised ₹5,500 cr last week from venture capitalists, on the back of ₹1,850 cr in 2023. Industry reports indicate that Indian QC market will double revenue from ₹23,000 cr in 2023 to ₹50,000 cr in 2025. The market will exhibit a CAGR (2024-2029) of 24.33 per cent, reaching six crore Indians by 2029.

After the initial denial of needing anything in 10 minutes, customers are now embracing QC if the above numbers are any validation. Zomato’s Blinkit and Swiggy’s Instamart are the other players in this category who are also raising and deploying capital to build their share of dark stores for deeper distribution in Metro and Tier 1 cities.

The parallel with cricket: When the T20 form of cricket caught frenzy, experts predicted the death of Test cricket. They assumed that given the rising level of impatience and interest in shorter format games, Test cricket wouldn’t find many takers. They were proven wrong as a certain set of viewers – purists - watched it for the technique, tenacity and temperament of the players. Instead, T20 crippled the ‘One-Day’ format significantly, taking away its viewership. Meanwhile, T20 got a new set of female and family viewership.

So, in cricketing format terms, the current Indian retail scenario can be bucketed as:

1. Test Cricket: Physical stores as Test cricket (Players: Kirana + Supermarkets like Dmart, Spencers etc)

2. E-commerce players as One Day (Players: Big Basket, Jio Mart, Amazon, Flipkart)

3. Quick Commerce as T20 (Players: Zepto, Instamart, Blinkit)

The physical stores have by and large remained immune to the QC impact. They had already lost their share of customers to e-commerce players a few years back. Now they cater to a set of customers for whom a physical visit plays an emotional, social and financial need as much as the actual purchase needs!

The e-commerce players, on the other hand, have faced more impact, as for customers, the same purchase process with a faster delivery promise has become an attractive hook.

The new pitch

It’s not surprising to see so much uptake of QC business as it is so similar to Kirana stores. We have grown up ordering our supplies from our neighbourhood stores which we could order on the phone and get delivery quickly. Fundamentally, the QC model of operating multiple dark stores across the city, receiving orders online and quick delivery is similar and familiar.

The E-commerce model is very different. They have a couple of large warehouses outside the city where rentals are cheaper, making them further away from the customers.

Homemakers are adopting QC because despite having smaller kitchens, they stock more product SKUs. This warrants frequent, small size and quick top-ups and refills. This is a uniquely Indian phenomenon compared to our western counterparts. Millennials are opting for QC as it’s quick, easy and convenient to order and get the products.

How’s it looking from here:

For QC companies:

1. They will expand their SKUs in the dark store. From stocking 2,000 SKUs, they will constantly keep increasing them by 30-50 per cent for the next few years.

2. They will offer more product categories. Already Zepto has announced that they will offer toys, electronics and appliances, while Blinkit even home delivers printouts!

3. Direct tie-ups with FMCG companies as they garner more market share.

4. Product launches and exclusive distribution tie-ups for new products from smaller players and entrepreneurs.

5. Better profit margins as they remove middlemen, operate with less inventory and offer less discounts (customers are opting for faster delivery over higher price).

For E-commerce players:

1. E-commerce players like Flipkart and Reliance will be forced to enter this space while Tata Big Basket and Amazon will spend more on faster distribution.

2. Big players will either acquire QC companies or logistics companies to get a foot in the door and double down on investments in Tier 2 and Tier 3 cities.

3. E-commerce players like Nykaa and Croma operating in the high margin beauty/cosmetics and electronics space respectively, will lose their margins as QC companies expand.

4. They will lose advertising revenue to QC companies as customers spend more time there.

For physical stores:

1. Customers will continue to enjoy the touch and feel experience that they provide along with a larger set of SKUs to choose from.

2. Spend more time and money by further building relationships and extending credit to ensure that they still have a share of the family’s wallet for grocery products.

The poor outfield for QC

QC companies could face hostile ground conditions going forward. First, entering newer product categories isn’t as profitable as it appears. In categories like electronics and apparels, there is a high return rate which the QC biz model isn’t equipped to handle.

Secondly, grocery and FMCG products work on Pareto’s principle (80 per cent business from 20 per cent products) which suits the QC model. Customers are fine placing orders for one product SKU so long as they get the product quickly. But, in categories like electronics, apparel and toys, they seek variety and multiple options. This leads to stocking huge inventory and delivery costs for QC companies.

(Nimesh Shah is an entrepreneur – he is the founder of Windchimes, a digital experiential agency & Xebra, a fintech SaaS product)

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