Quick Commerce firms have leveraged their existing digital platforms, supply chains, and data analytics to tap into the quick commerce market, which focuses on delivering a wide range of products, including groceries, within minutes to hours of the order being placed. The competition is fierce, with each company trying to capture market share through strategic partnerships, technological advancements, and expanding their dark store networks.
Zomato owns Blinkit (formerly Grofers), which is one of the leading quick commerce platforms in India. Blinkit has been pivotal in Zomato’s strategy to expand beyond food delivery into grocery and other daily essentials with promises of ultra-fast delivery. Through Swiggy Instamart, Swiggy provide quick grocery delivery services, competing directly with Blinkit. Swiggy is also a listed entity, having gone public, and Instamart has been a significant contributor to its growth in the quick commerce domain. Reliance Retail operates JioMart, which has ventured into quick commerce with services like JioMart Express. JioMart leverages Reliance’s extensive retail network to offer rapid delivery options. Tata Group – Via Tata Digital, they are pushing into quick commerce with BigBasket’s service BB Now, offering fast delivery. BigBasket, which is part of the Tata Group, is one of the pioneers in online grocery in India and has adapted to the quick commerce trend. Flipkart – An e-commerce giant, Flipkart has entered the quick commerce space with “Flipkart Minutes”. This service aims to provide 10-15 minute delivery in select cities, leveraging Flipkart’s existing logistics and supply chain. Amazon has been experimenting with services like Amazon Tez in India, aiming to offer faster delivery times to compete in this growing market. Amazon’s global presence and infrastructure give it a significant potential in this area.
Platforms have been accused of undermining local kirana stores by offering aggressive pricing strategies and rapid delivery services, potentially leading to an uneven playing field. This has prompted calls for regulatory measures to protect small retailers, which could mean new rules or restrictions on how quick commerce operates. Quick commerce platforms are capturing a significant portion of the market traditionally dominated by Kirana shops. Reports suggest that up to 46% of consumers have reduced their purchases from Kirana stores due to the convenience of quick commerce. This shift is particularly evident in metro cities where the market share of Kirana stores has decreased from 95% in 2018 to a projected 88.9% by 2028. The immediate convenience of quick commerce, offering delivery in 10-30 minutes, has led to a decrease in impulse buying from Kirana stores. High Percentage of Indian consumer have shifted significant portion of their grocery spending to quick commerce platforms. The aggressive expansion of quick commerce is reportedly responsible for the closure of around 200,000 Kirana stores over the past year, with the highest impact seen in metro cities (Source: All India Consumer Products Distributors Federation (AICPDF) Report).
Kirana stores struggle with competitive pricing due to the deep discounts offered by quick commerce platforms, which can operate on lower margins thanks to direct sourcing and streamlined delivery systems. This has led to reduced profitability for traditional stores, especially in cities
The quick commerce sector, characterized by its promise of ultra-fast delivery, faces potential regulatory risks that may impact its operations and growth. With the sector’s rapid growth, there’s an increased likelihood of regulatory scrutiny to ensure fair market practices. This includes monitoring for monopolistic behaviors or any practices that might stifle competition, which could lead to new compliance requirements or even market restructuring.
Allegations of predatory pricing and deep discounting have been raised against quick commerce firms. Such practices can be seen as anti-competitive, leading to potential investigations by bodies like the Competition Commission of India (CCI). The CCI has been approached by various stakeholders to look into these practices, which might lead to regulatory intervention if proven to create an unfair playing field or to affect traditional retail negatively.
In the Western market, the Quick Commerce growth has not been easy. In the U.S. and parts of Europe, the market is already saturated with established grocery delivery services from giants like Amazon, Walmart, and Costco, which have integrated quick delivery options into their existing logistics networks. New quick commerce startups struggle to compete with these established players on price, selection, or delivery speed without significant investment Labor costs in Western countries are significantly higher than in places like India, making the economics of maintaining a fleet for ultra-fast deliveries less viable. The cost of maintaining dark stores and rapid delivery personnel in urban areas can lead to high burn rates, which many startups found unsustainable. The demand for ultra-fast delivery outside of emergencies or special occasions might not be as pronounced in Western markets where traditional retail infrastructure is well-established, and consumers have access to a variety of convenient shopping options including supermarkets with online ordering and curbside pickup. In the U.S. and parts of Europe, the market is already saturated with established grocery delivery services from giants like Amazon, Walmart, and Costco, which have integrated quick delivery options into their existing logistics networks. New quick commerce startups struggle to compete with these established players on price, selection, or delivery speed without significant investment.
Quick commerce platforms in India have been scrutinized for potentially breaching Foreign Direct Investment (FDI) norms, particularly around inventory-based models versus marketplace models. Indian regulations prohibit e-commerce entities from holding inventory if they operate under the marketplace model. There are concerns that some quick commerce platforms might be blurring these lines, which could lead to regulatory action if found non-compliant. Western markets often have more stringent regulations regarding labor, zoning for dark stores, and consumer protection, which can complicate operations and increase costs. The regulatory scrutiny on gig economy jobs can also affect the business model’s viability.
This poses a threat to the traditional growth trajectory of Kirana shops, particularly in urban centers, it’s not a uniformly detrimental scenario. The impact varies by region, with urban areas experiencing more pressure. However, opportunities for growth exist through adaptation, innovation, and targeting markets where quick commerce has less penetration. The survival and potential growth of Kirana shops will largely depend on their ability to evolve alongside or integrate with new retail models.
There’s an increasing focus on ensuring consumer safety, particularly with the sale of near-expiry goods through quick commerce platforms. This has led to demands for clearer labeling and transparency in stock management, potentially resulting in new regulatory standards for product quality and consumer rights.
The model of quick commerce heavily relies on gig workers, and there’s growing regulatory attention towards their welfare, including calls for better benefits, insurance, and regulation of working conditions. This could increase operational costs for quick commerce companies if new laws or regulations are implemented.
On the positive side, it has led to huge value creation in the society by creating job opportunities, especially for gig workers. However, ensuring fair wages, working conditions, and job security will be crucial for long-term value creation. It has driven higher sales volumes for suppliers through faster inventory turnover. It can benefit local businesses by integrating them into their supply chains or by providing a platform for their products. However, there’s also the risk of undermining local retail if not managed responsibly.
The sector has attracted significant investment due to its growth potential. However, as initial hype settles, investors are looking for profitability pathways. Companies that can demonstrate sustainable business models, perhaps through diversified revenue streams like advertising (as seen with Zepto’s ‘Jarvis’ ads platform), will continue to create value. The sustainability of value creation for stakeholders by quick commerce companies depends on several factors, including market dynamics, operational efficiency, and strategic adaptability. There’s an expectation that only a few players will dominate due to the high costs of scaling. This could mean high returns for investors in successful companies but losses for those in firms that fail to scale or achieve profitability.
Many quick commerce firms are not yet profitable, with high operational costs. Streamlining operations, possibly through tech like AI for demand forecasting, could be key to turning a profit and focus on Government welfareand protectionist policy will be key to long term growth. IT is one such sector which impacts a large number of small retailers, hence Regulatory Challenges could either hamper or shape long term value creation impacting stakeholder value.
Galactik Views