The quick commerce segment is buzzing with new entrants
Quick commerce has quickly become the mode of choice for consumers seeking convenience — products are delivered within 25-45 minutes of placing the order — during the pandemic. As per a RedSeer report, the penetration of quick commerce within the online consumables market is 7% this year, and is expected to grow to 12-13% by 2025. The online consumables market, meanwhile, is worth $3.8 billion and is expected to exceed $30 billion by 2025, with metros and tier I cities contributing 50% to this market, the report adds.
Platforms like Swiggy, Dunzo and Grofers are enabling instant deliveries through micro-fulfillment centres and dark stores. Big Bazaar, too, plans to foray into this segment.
Dunzo, a pure quick commerce platform, launched Dunzo Daily in July this year to deliver high-demand products in nine areas of Bengaluru within 15 minutes. Kabeer Biswas, CEO and co-founder, Dunzo, says, “Since last year, we have been witnessing a shift in consumer behaviour; users are no longer willing to wait for the products they want. The definition of convenience has also shifted from one or two-day delivery to an on-demand, 15-35-minute delivery.”
Leveraging its hyperlocal delivery capabilities, Swiggy launched Instamart last year, and is now operational in Delhi, Gurugram and Bengaluru. Although it launched quick commerce through tie-ups with marketplaces, due to availability and other fulfillment challenges, Swiggy soon launched its own dark stores. It stocks an average of 500-2,000 products in each of the stores.
Biswas says that quick commerce is a “natural extension” of the offline retail experience — as shopping at a kirana can now be done online through quick commerce. The metros and tier I cities are the primary growth drivers for this type of delivery mechanism. Biswas foresees that the growth of Dunzo Daily will happen by expanding its high-demand SKUs from 2,000 currently to 5,000 in the next 24 months, and an extended two-hour delivery timeframe. The company has plans to open 250 micro-fulfillment centres across metros in 2021.
Big Bazaar is eyeing a piece of the quick commerce pie, too. It claims to deliver an average of 50,000 orders daily across the country, since the launch of its online platform in April 2021, within two hours. Pawan Sarda, marketing, digital and e-commerce head, Future Group, says, “With an average ticket size of Rs 1,200, the top 10 metros contribute 50% of the overall deliveries.” With its 285 stores, which double up as fulfillment centres, Sarda believes deliveries within 25-30 minutes “isn’t a problem for Big Bazaar.”
Younger consumers and bachelors, who tend to make unplanned purchases, were the early adopters of the quick commerce model during the lockdown last year. “Ambitious millennials are the driving forces for the quick commerce segment as they seek convenience,” says Mukesh Kumar, engagement manager, RedSeer.
Quality of inventory plays a crucial role, something these platforms realised while dabbling in quick commerce last year. “Instamart’s model is lucrative as it holds 100% control over inventory with standardised products,” says Sanjeev Kumar, forecast analyst, Forrester.
Besides, the lack of discount offers make this model sustainable, as the margins do not get affected, Kumar adds. The rationale being that consumers seeking impulse-based or emergency products (like medicines, baby products, groceries, etc) will buy with or without discounts.
Kumar of RedSeer says that platforms require multiple capabilities to succeed in the instant delivery market. For newer players, acing delivery speed, building a robust supply chain and ensuring quality products will be imperative. In that sense, he says, food delivery companies are most well-suited to enter this market, given their hyper-local presence.