Quick Commerce: Hype or is it time up for offline retail?

By N Jayalakshmi | October 10, 2024

Many recent industry and media reports point to the growth of Quick Commerce in the country, as more and Indians seek the convenience offered by these players,and there are growing expectations of the segment driving higher sales for FMCG brands. So, what does this mean for India’s lifeline - General Trade- and possibly also for Modern Trade? Is the growth projection for QC a product of media hype or is it really a cause for concern for offline retail and its associate businesses?

Quick Commerce (QC) seems to be the flavour of the season for Indian media in recent times, grabbing headlines almost on a daily basis.

Retail giant Reliance Retail’sentry into the Quick Commerce space, competing against key players such as Blinkit, Instamart, and Zepto, obviously was among the key developments in this space, which quite obviously generated even higher buzz around QC.

Reliance has reportedly already started quick commerce service in select areas of Bengaluru and Navi Mumbai through via e-commerce platform, JioMart. According to media reports, Reliance, which has around 3,000 retail stores, will try to focus on delivering most of their products in 10 to 15 minutes, while other products will be delivered within 30 minutes.

A FICCI-Deloitte report unveiled at a FICCI event recently further pointed to some trends showing increasing consumer preference for Quick Commerce and how Quick Commerce constituted 35% of online sales for FMCG brands. The report adds that with internet penetration rapidly expanding—projected to reach 907 million users by 2023—online platforms now account for 17% of overall FMCG consumption, particularly among affluent and evolved buyers.

The report findings, as cited in media reports, also added that 16% of consumers prefer to purchase foods and beverages via Quick Commerce, compared to 14% via E-commerce. While this is certainly an interesting trend, does it justify saying ‘Indians are turning to Quick Commerce for their foods and beverages’ as some media reports have said? Also, 16% represent the number from those surveyed for the report. In a country like India this is a miniscule number.

Hard to ignore

But having said that, QC is certainly something to watch out for if corporates like Reliance are stepping into it in a big way. An extensive report in Business Today points out that Quick Commerce in the country has grown from a gross merchandise value (GMV) of $0.10 billion in FY20 to $3.3 billion in FY24 (data attributed to Redseer). It further says the total addressable market for quick commerce is $45 billion, according to investment banking firm JM Financial. Of course, GMV is just one aspect and may not necessarily give a complete picture of the business performance. But the fact is that investors are reportedly eyeing this space in a big way. Reportedly, Zepto raised $665 million in one of the largest rounds this year; Zomato put in Rs 300 crore into Blinkit; and Swiggy’sInstamartis readying for an initial public offering (IPO).

Also, most of these players are fast lining up plans to expand to tier 2 and tier 3 cities, where they see a growing demand. So, what does all this mean for India’s retail lifeline –General Trade, which was the sustaining factor across the country during the Pandemic? Remember, it was the neighbourhood Kirana store that stepped up and made sure there was a continuous supply of essentials delivered to our homes.Since then,many Kirana/GT stores have upgraded themselves with their own innovations – home delivery being almost a regular feature. So, will the shift behaviour in consumer behaviour with its skew towards the convenience afforded by Quick Commerce affect the future of GT?

It is too early for Quick Commerce to adversely impact GT for some obvious reasons:

Pricing: QC service obviously comes with a cost attached to the convenience. In a price sensitive market like India, even marginal price variation can make a difference

Many neighbourhood Kirana stores have a loyal clientele and with a home delivery service to boot and friendly pricing, and they may not see any immediate threat.

QC is still pretty much an urban phenomenon, confined to the Metros/smaller cities

Some possible scenarios

However, the emergence of Quick Commerce could possibly usher shifts in business models in the whole eco-system.

Also, it is increasingly becoming evident that Quick Commerce will no longer be restricted to essentials, as consumers used to this convenience are also looking at it to buy their apparels and lifestyle products now on these platforms. And this means, it’s not just the FMCG segment, but fashion, lifestyle and other categories that would be entering the Quick Commerce space. Already U.S. Polo Assn. recently announcedits collaboration with Zepto to bring its exclusive collection to the platform, marking a new milestone in Quick Commerce.  It’s only a matter of time before other brands in this category follow suit.

Given all these developments around Quick Commerce, we could possibly expectthese trends (some of which are already underway) to pan out in the entire retail eco-system:

More and more GT stores emerging as fulfilment centres for QC brands

Greater collaborations between GT and tech players for streamlining of operations, supply chain and inventory management

Dark stores as a growing opportunity for retail solution providers, particularly those in the tech and fixtures/fitout segment. Solutions for efficient management of storage, distribution, racking systems, and overall automation, besides good store layout for faster and easy pickups,and innovative packaging are all need of the hour in this space and therefore offer new business avenues.

The emergence of niche/premium/specialised stores in Modern Trade (MT) which took a bigger hit during Covid, compared to GT and may be impacted by the growth of Quick Commerce too. But the segment is also seeing the rise of newer categories such as Organic/Health foods/Pet foods – categories that are community centric. So MT stores could emerge as niche community hubs positioned as awareness and interaction centres with activities and engagements connecting stakeholders in the space.

Just as the pandemic or the rise of ecommerce did not really seal the future of brick and mortar retail as was expected and instead offline and online learnt to co-exist with brands drawing up new omnichannel strategies, QC too might usher in newer kinds of synergies for retail and its associate businesses.