Supply chain issues and inventory management pose a significant challenge to category expansion, beyond food, groceries and home essentials, by QuickCommerce players.
Vipul Parekh, co-founder and chief marketing officer, BigBasket told Fe recently, expansion is not be easy and may take time. Managing inventory and returns, Parekh noted, could be one of the biggest challenges. “One needs to have an optimum size of dark stores. You can’t carry 100,000 SKUs (stock-keeping units) in 6,000 square feet dark stores,” he explained.
Ankur Mittal, co-founder, Inflection Point Ventures said supply chain capabilities and logistics are often tailored to specific types of products. So, entering new categories may mean a complete revamp. “It could require the development of completely different supply chains and logistical frameworks to keep delivery running on time,” Mittal said.
Also, broader product offerings add complexity to warehouse operations and increase the likelihood of stockouts or overstocking. Sameer Gandotra, co-founder CEO, Frendy a grocery chain startup observed players will need to hold a very sharp and dynamic inventory for special occasions. Labour, additional infrastructure and compliance can strain resources and impact profitability.
While delivery of items like washing machines or refrigerators in 10-20 minutes may seem far-fetched, analysts say electronics products, small appliances, beauty and personal care, toys, and stationary, among others, are low hanging fruit.
Revenue generation may be the ultimate goal but the key driver for category expansion is customer stickiness. It makes sense to fulfil new needs to build loyalty.
Challenging horizontal e-commerce incumbents won’t be easy, say analysts. Flipkart Minutes, for instance, recently went live in certain parts of Bengaluru. Analysts sayexisting Q- commerce players would need robust strategies to counter competition.
Parekh believes that Q-commerce must be a small value item business, where the customer doesn’t mind paying a premium or isn’t bothered too much about a discount. “If you want to discount, Amazon and Flipkart will give you much better prices,” he said.
Offline retailers are also expected to also join the Q-commerce bandwagon. “They will also become savvy and build or borrow the technology to offer similar services in dense urban neighbourhoods. The omnichannel strength may give them an edge over pure dark stores,” he said.
Currently, non-grocery and non-fresh items contribute 5-6% to the revenues of q-commerce firms. This, analysts say, could be taken up to 20-25%. Players like Blinkit, Zepto, Swiggy Instamart and BBNow, are gradually increasing their stock-taking units (SKUs). A large part of this expansion has happened outside of the traditional grocery segments of FMCG, fruits & vegetables and staples.
For instance, at Blinkit, the average selection available to its customers in any neighbourhood has increased between 4-5x over the last eight quarters. It offers up to 25,000 unique SKUs to customers in some locations. Similarly, Swiggy Instamart has also been expanding the categories – it currently offers over 10,000+ SKUs across 35+ categories.
A spokesperson for Swiggy Instamart said, “We see significant month-on-month growth in categories like toys, beauty, electronics, and home & kitchen, while staples such as dairy, fruits, eggs, and vegetables remain popular. Customer demand, guided by data insights and feedback, drives our product prioritisation”.
Ravi Kapoor, partner and leader – retail and consumer sector, PwC India observed that consumers typically end up spending about one-third of their total income on discretionary categories. “That is the maximum number quick commerce players can aspire to touch — rest two-thirds will continue to come from essentials made up of food and grocery,” Kapoor said.