Dunzo to Zepto, quick commerce deliveries may not be as fast in future | The Financial Express

Dunzo to Zepto, quick commerce deliveries may not be as fast in future

As Naveen Malpani, partner, Grant Thornton Bharat, pointed out that with a limited basket size, multiple players competing in a limited catchment area and high costs of operations, profits are some time away

Dunzo to Zepto, quick commerce deliveries may not be as fast in future
A recent report from Entracker, a news website, noted that Dunzo Daily was losing Rs 230 per order. (Illustration: Pixabay)

The promise of ten-minute deliveries at low charges to consumers is fast fading as quick commerce companies find they are not really making a quick buck. Instead, they are upping the charges for speedy deliveries hoping the services will become more remunerative even if it means the number of orders falls.

Reliance Retail-backed Dunzo and Zepto have begun charging customers Rs 3-7 per order, depending on the location, as handling charges in addition to delivery fees. They have also increased the threshold for free orders from Rs 149 earlier to around Rs 249 now.

Also Read: Do we really need quick commerce?

As Naveen Malpani, partner, Grant Thornton Bharat, pointed out that with a limited basket size, multiple players competing in a limited catchment area and high costs of operations, profits are some time away. “The business models need to be tweaked to include a reset of delivery time expectation. Therefore, we expect the players to settle for slightly higher delivery time in the future for most orders, around 40-60 minutes,” Malpani said.

A founder at a large quick commerce company conceded the 10-minute delivery was something of a gimmick and the speed of orders would slow down and also become more expensive. “There is a lot more sobriety in quick commerce now and from now on, no specific delivery time will be mentioned. Companies will instead promise quick delivery,” he said. “About 40% of our customers are now opting for slower deliveries since they get an additional discount on that.”

A recent report from Entracker, a news website, noted that Dunzo Daily was losing Rs 230 per order.

Also Read: E-grocery express: Quick commerce upgrading delivery system!

The management at another quick commerce business said given customers are now accustomed to ordering on quick commerce platforms, companies will try and ensure the transactions are profitable. “These could either be through loyalty programmes or by charging Rs 15-20 on deliveries. Most of us do not have enough room in our margin structures to waive off delivery fees anymore,” the CEO said.

In fact, companies say a good proportion of customers – around 40% – are now opting for slower deliveries since they pay less.

Swapnil Potdukhe, AVP, JM Financial Institutional, observed that on an average, orders take about 15-20 minutes and customers are satisfied. “Many of these companies have been burning money and as funds dry up, we will see some consolidation happening with about four players remaining,” Potdukhe said.

According to media reports, Walmart-owned Flipkart was already scaling down Flipkart Quick, its quick commerce platform. This was after Ola Dash, another quick commerce portal, had already shut shop.

Some are not making the shift just yet. Zepto’s CEO and co-founder Aadit Palicha said the company was sticking to 10-minute deliveries. “We’re working internally to further reduce the delivery time. We have seen that the average revenue per user (Arpu) increases as the delivery time reduces and we want to continue to benefit from that,” Palicha said.

Swiggy, which operates Instamart, believes quick commerce will continue. “We have only just begun and there is a huge opportunity to improve. The delivery time on Instamart can vary from 10-30 minutes across different zones in a city. We’re working to continuously improve our delivery time which has been improving month-on-month,” the company said.

Swiggy had earlier rolled out its subscription programme which allows customers to order without being charged for delivery. Its “contribution of orders from Swiggy ONE users has doubled ever since Instamart has been added to Swiggy ONE”. Palicha at Zepto said the Zepto Cafe business was throwing up margins that are 2X higher than what the company earns from traditional non-fresh grocery since it is a higher-ticket purchase. Over the coming years, we think Zepto Cafe could contribute to an additional 20-30% to the company’s value,” he said.

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First published on: 23-11-2022 at 05:00 IST