It was when he was stuck at home during the Covid pandemic that Mumbai boy Aadit Palicha noticed the struggles of his elderly neighbours in getting their daily groceries. It led to a billion-dollar idea, which today has some of the biggest companies in the world, from Amazon to Reliance, playing catch-up to.
What Aadit and Kaivalya Vohra, both 18 then, kickstarted by delivering medicines and groceries to the needy neighbours on bicycle has blossomed into Zepto, a startup worth a mind-boggling Rs30,000 crore valuation, in just around three years. In the process, they have become India’s youngest billionaires, according to the Hurun Rich List released a month ago. “Quick commerce is no longer just about stocking up on necessities. It caters to diverse needs, allowing users to skip the planning phase and instantly access a wide assortment of items in one place,” said Aadit, who celebrated his 22nd birthday along with the billionaire status.
Quick commerce, as the name suggests, is an online market service which assures delivery at lightning speed. While a regular order, say on Flipkart or Amazon, may take a few days depending on the item, quick commerce promises delivery in minutes.
A lot of data crunching and predictive algorithms make it work, whereby players like Zepto and BlinkIt set up dark stores in high catchment areas and stock up on items that are likely to be ordered. “The market is shifting towards the quick commerce version,” said Srinivasa Reddy, assistant professor, marketing management, T.A. Pai Management Institute, Manipal. “And, we are also seeing a maturity because customers are willing to trust this even for an ice cream!”
Figures suggest that one in 10 ice cream orders are now through the quick commerce route. “If I could ever think of a product where it would be tough to trust being delivered fast through delivery, ice cream would be one. But when we see 10 per cent actually choosing to buy from this model, we understand that quick commerce has changed the dimension and its ability to build up,” said Reddy.
While quick commerce became a thing in the post-Covid months, it had its origin in the success of Zomato and Swiggy in the food aggregator space. “We can learn pretty much the quick commerce formula from what happened for Zomato—they were working with restaurants and sending the food out,” said Reddy. “Technologically, it is an extension of that.”
Interestingly, as its delivery chain became seamless, Zomato toyed with the idea of 10-minute food deliveries, but quickly realised there was a more feasible and bigger market in applying this supply chain technology to delivering provisions. The result? Zomato’s quick commerce gross order value in the last quarter of the last year grew 130 per cent while its core food delivery business grew just 30 per cent. Zomato’s CEO Deepinder Goyal now expects BlinkIt’s (Zomato acquired the platform in 2022) quick commerce revenues to surpass that of its food delivery business by next year.
The always-in-a-rush Indian has lapped up the concept. While Meituan in China, Getir in Turkey or even DoorDash in the US do get talked about, India apparently seems to have become the market with the biggest scale of adoption of quick commerce of late. Redseer Strategy Consultants says q-com grew about 75 per cent in India last year, five times the growth of e-commerce, despite 2023 being a year of low demand and low consumption. It estimates that 50 lakh new users will start using q-com over the next year.
More importantly, the biggies of India’s online shopping space have been forced to take note. While earlier the quick commerce bandwagon’s serious players included BlinkIt (previously known as Grofers) and Swiggy’s InstaMart, Zepto’s popularity has made the likes of BigBasket, Flipkart and Amazon respond.
Walmart-owned Flipkart threw its hat into the ring during the monsoon by launching ‘Minutes’, on an experimental basis in certain high-density localities of Bengaluru. It expanded the service to parts of Gurugram a few weeks ago.
Nobody wants to be left behind in this quick commerce rush. Amazon has reportedly pulled in Nishant Sardana, who was heading its computers, camera and large appliances businesses, to set up its q-com strategy by early next year, while Tata-owned BigBasket is completely switching over to the quick commerce model. It expects to generate two-thirds of its $1.5 billion sales through the quick delivery model. Reliance’s JioMart, which experimented with hyperlocal deliveries in Navi Mumbai and some Mumbai suburbs earlier, is also expected to scale up the quick delivery model to more areas.
It is not just the biggies, startups are also jumping on the q-com bandwagon. Bengaluru firm Origin, which started operating last month, delivers fresh produce. “The online commerce ecosystem will eventually transition to this delivery model. Initially perceived as a trend, it is now a consumer habit,” said Prashanth Vasan, CEO of Origin. Its research showed that Indian consumers are not willing to wait more than 30 minutes for fresh produce and essential supplies. “As the sector matures, it is increasingly becoming an integral part of the retail landscape, owing to its ability to address the growing demand for swift, convenient, and dependable delivery services,” he said.
The incredible run that q-com has had in the past few years has also brought it in the crosshairs of the powerful traders and small businessmen. The Confederation of All India Traders (CAIT) has been calling for a suspension of the operations of Amazon and Flipkart in India. The All-India Consumer Products Distribution Association (AICDF) recently approached the commerce ministry complaining that unchecked expansion of q-com was leading to severe disruptions in the conventional retail model.
A report by Elara Capital says that India’s three crore neighbourhood grocery stores have seen a 30 per cent fall in sales since the Covid pandemic and one in every four of these stores may be forced to shut down if q-com continues to expand in non-metro markets.
The veritable gold rush also has sceptics rushing in to question the model—can profits match the sky-high valuations?
“What is the money these people can make? I am lost!” said Reddy. “Outside of a valuation or IPO, I do not really see how they are actually going to have a money-making model.”
The issue is the cost per delivery. With some q-com players offering to even deliver small-value orders like a pencil box, a milk packet or even a single cigarette, it begs the question; how much of a margin will they have to charge to break even? “An e-commerce delivery agent starts in the morning, fills up his truck and goes delivering on a route that is already planned. But in q-com’s case, you have 1:1 delivery. There is no incremental cost of delivery; everything is a new cost,” said Reddy.
The eventual plan, perhaps, will be to expand and build up on volumes. It also explains the rush among these players to expand to tier 2 cities and beyond. That, of course, brings with it the feasibility of the model—not all cities and towns will be catchments with high-spending, affluent neighbourhoods like Gurugram or Bandra. But Aadit refuted this theory with the numbers from Zepto’s recent roll-out in Nashik, Maharashtra. “Within six weeks, our orders hit 1,000 per day, faster than metro cities, where it took 3-4 months to reach this milestone. This highlights a key insight: customers in tier 2 cities and beyond are underserved,” he said.
India’s pockets of affluence, which is not limited to big cities or even towns, could be the way out for q-com players as they go searching for newer pastures. Tying up with local stores in small towns could be another money-saver. “Other online platforms have failed to scale sustainably in this domain, but q-commerce platforms could just surprise us like last year,” said Kushal Bhatnagar, associate partner at Redseer.
Many believe this festive season has been defining moment for q-com. Already, FMCG biggies like ITC, Parle and Mondelez have tied up with q-com companies to offer gift packs across categories.
Amazon is also getting its act together. The strategy seems to be to have a superior experience in the whole shopping-to-delivery process, and it is interesting that it is presently testing out its rapid delivery capabilities with fresh fruits and vegetables. “Our strategic vision is not just about getting orders to customers’ doorsteps quickly,” said a spokesperson, “but providing an unmatched online shopping experience from product discovery to selection to delivery to customer service.”