Walmart-owned e-commerce major Flipkart’s entry into the quick commerce space in India, may not necessarily lead to an increased competitive intensity in this segment, a report by BofA Global Research said. It has based its analysis on similar industry trends in travel and social commerce space, where Flipkart made a foray in recent years. According to BofA analysts, execution in the quick commerce space is not easy, and companies need to have a specific DNA to move to positive unit economics.
“Some of the areas that Flipkart has entered has not necessarily led to an increase in competitive intensity. For instance, when Flipkart entered the travel space by acquiring Cleartrip it didn’t lead to any increase in competition, and, when it entered the social commerce space by launching Shopsy, it didn’t materially increase competition in the space but directionally helped in expansion of the market,” said analysts Sachin Salgaonkar and Shalav Saket.
Flipkart is reportedly planning to launch a 10-15 minute delivery service in at least 12 cities in the next couple of months. This would be Flipkart’s third venture into grocery delivery after Flipkart Quick, which was phased out in 2022, and Flipkart SuperMart, which was launched in 2017 as a slotted delivery service.
EXPANDING MARKET
The total addressable market of quick commerce services in India could be around $18 billion, the report estimated, including 25 million households that can, on average, spend Rs 4,000-5,000 per month. While a regular customer usually orders 3-4 times per month, their retention rate is as high as 60-65%. Top users of such platforms can transact even 30-40 times per month.
In the next 3-5 years, these services can expand to 45-55 cities in India from the existing 25 cities, the analysts said. While the market share of the top three players – mainly Blinkit, Zepto, and Instamart – is not likely to see disproportionate gains, the focus will remain on increasing the average order value (AOV) to reach profitability, along with an ideal category mix.
Besides higher AOV, margins will also benefit from a denser network of dark stores that will also bring down operation costs by delivering an order on an electric vehicle or cycle, the report noted. Moreover, a denser network of dark stores also helps to distribute the fixed costs across all orders.
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