Quick commerce companies are approaching saturation in metros and are increasingly turning to smaller cities for growth, even as questions emerge on whether the business model can scale profitably beyond large urban centres.
A Bernstein analysis based on early April deployment data showed metro dark store penetration at 106% of addressable potential, indicating that store density in large cities now exceeds estimated demand. Nearly all metro pin codes are covered by at least one player. In contrast, penetration in tier 1 and tier 2 cities stands at 51% and 48%, while tier 3 and smaller towns remain underpenetrated at 22%, with only 39% of pin codes serviceable.
Metro Plateau
Eternal’s January-March results pointed to a similar trend. Blinkit’s coverage across its top eight cities is at 80–90% of pin codes, but falls below 30% beyond these markets.
Satish Meena, advisor at Datum Intelligence, said tier 2 and tier 3 markets can support 40,000–50,000 stock keeping units (SKU), adding that deeper assortments in metros were built over time to drive higher revenue per dark store, currently plateauing at Rs 7–8 lakh a day.
“The assortment that drives metro baskets, including premium groceries, imported brands and long-tail personal care, may not find the same traction in markets where consumer preferences skew toward value and staples,” said Pradyumna Nag, founder of Prequate Advisory. He added that many smaller towns may not sustain the order densities of over 1,000 per day required for dark stores.
Profitability Paradox
Early signs of this shift are visible in metrics. Blinkit’s net average order value declined to Rs 525 in January-March quarter from Rs 547 in the previous quarter. While the company attributed this to seasonality, analysts expect a structural impact as the share of lower-value markets rises.
Competition is also intensifying. Blinkit, Zepto, Swiggy Instamart, Amazon, Flipkart Minutes and JioMart are expanding simultaneously, raising customer acquisition costs. “Seven players competing aggressively for the same customer is unprecedented in any Indian consumer category,” Meena said, adding that profitability pressures could slow growth.