Want to quickly top up your groceries or want something last minute? You would typically rely on your trusted neighbourhood kiranawala. But now you have another option - quick commerce. Order anything through apps like Blinkit or Swiggy Instamart or Zepto among others, and usually within 10 to 15 minutes, the products are delivered at your doorstep. More and more consumers opting for the app-based convenience is putting the kiranas at risk, says a new report.
There are estimated to be 30 million mom and pop kirana stores in the country and they have been a quintessential part of Indian shopping scene. Even the advent of modern supermarkets failed to make a dent. But the surge in quick commerce is beginning to bite.
"The kirana stores have been hard hit due to adoption of quick commerce, as sales declined 25-30 per cent versus pre-COVID and almost 20-25 per cent of overall outlets may shut if quick commerce continues to grow and expand in the non-metro markets," Karan Taurani, senior vice-president at Elara Capital said in a report.
Quick commerce companies like Zomato-owned Blinkit, Zepto and Swiggy Instamart have been doing brisk business now. Zomato reported a 130 per cent year-on-year rise in quick commerce gross order value (GOV) in the April-June quarter. This growth is significantly more than the 30 per cent compounded annual growth in GOV in its core food delivery business.
Rivals like Zepto, Swiggy Instamart and Big Basket's BB Now too have clocked strong growth. According to strategy consultants Redseer, the gross merchandise value (GMV) of quick commerce companies jumped 73 per cent $3.3 billion in 2023-24 from $1.9 billion, a year ago and is projected to grow further to $6 billion in the current financial year. This growth has also recently prompted Walmart-owned Flipkart to launch its own quick commerce service Minutes.
So far, the top 10-12 metro cities account for almost 90 per cent of the quick commerce pie. Blame it on the hectic work schedules or the poor urban infrastructure that leads to huge traffic jams, or just the sheer ease and comfort of ordering sitting on your couch and getting it delivered in minutes.
E-commerce companies already derive close to half of their sales from non-metro markets. Taurani feels with a superior user experience, there is high likelihood that quick commerce companies may see success in the non-metro markets too.
"Adoption of quick commerce beyond non-metros with sustainable profitability will drive growth rates of 70-80 per cent for the medium to long term," he noted.
The All-India Consumer Products Distribution Association (AICDF) had last month approached the Commerce Ministry stating that unchecked expansion of quick commerce platforms was leading to severe disruptions in retail ecosystem. It had threatened livelihoods of millions of small retailers and distributors, they had said.
Union commerce minister Piyush Goyal too had recently voiced concerns over predatory pricing by ecommerce companies. Later he had clarified that while he was not against online platforms, such entities needed to be fair and honest in their conduct.
"Kirana stores have seen a dip in profitability, as margin by FMCG companies has come off sharply to 10-12 per cent versus 18-20 per cent in pre-Covid era, which has hurt growth prospects," Taurani of Elara said in the report.
Share of e-commerce and quick commerce for FMCG products is at 10-12 per cent currently versus 4-5 per cent in the pre-COVID era," the report added.
However, Taurani also pointed that implementation of any kind of regulation on minimum selling price or pricing will have a negative impact on quick commerce companies.
"For select consumers, user experience and lead time are major priorities than discounts, as mere 8-10 per cent of their monthly wallet spend (grocery) is routed on quick commerce platforms. This impulse buying behaviour of customers is limited to select verticals and categories only. However, there are multiple D2C (direct-to-consumer) brands across categories, which offer discounts and see increased adoption only due to discounts," he said.
He added that in case the quick commerce industry remains restricted only to metros in the near term, the revenue growth rates for this segment could converge towards 35-40 per cent year-on-year post 2026-27 financial year, from 116 per cent currently.