While fast commerce startups are withdrawing, consolidating or closing in many parts of the world, the model is showing encouraging signs in India. Consumers in urban cities are embracing convenience to receive the purchase at the door of your house in just 10 minutes. The companies that make those deliveries (Blinkit, Zepto and Swiggy’s Instamart) are already charting a path to profitability.
Analysts are intrigued by the potential for 10-minute deliveries to disrupt e-commerce. Goldman Sachs recently estimated that Blinkit, Zomato acquired in 2022 for less than $600 millionthat’s it more valuable than its parent food delivery company decacorn.
At the beginning of this year, Blinkit had a 40% share of the fast commerce market, closely followed by Swiggy’s Instamart and Zepto, according to HSBC. Walmart-owned Flipkart plans enter the fast trading space as soon as next month, further validating the industry’s potential.
Investors are also showing great interest in the sector. Zomato has a valuation of $19.7 billion despite minimal profitability and processes around 3 million orders a day. By comparison, Chinese giant Meituan, which processes more than 25 times as many orders daily, has a market capitalization of $93 billion. Zepto, which achieved unicorn status less than a year ago, is finalizing new financing at a valuation of more than $3 billion, according to people familiar with the matter.
Consumers are also buying the convenience of fast commerce. According to a recent Bernstein survey, adoption was highest among millennials ages 18 to 35, with 60% of those ages 18 to 25 preferring quick commerce platforms over other channels. Even the 36+ age group is adopting digital channels, with more than 30% preferring quick commerce.
While India’s rapid urbanization makes it a prime target for rapid trade, the industry’s unique operating model and infrastructure needs could limit its long-term growth and profitability. As competition intensifies, the impact of fast commerce is likely to be felt more keenly by India’s e-commerce giants. But what makes India’s retail market so attractive to fast-commerce players and what challenges lie ahead?
The opportunity for rapid trade in India
India’s e-commerce sales amounted to between $60 billion and $65 billion last year, according to industry estimates. That’s less than half of the sales generated by e-commerce companies on China’s last Singles Day and represents less than 7% of India’s overall $1 trillion-plus retail market.
Reliance Retail, India’s largest retail chain, posted revenue of around $36.7 billion in the financial year ended March, at a valuation of $100 billion. The unorganized retail sector: neighborhood stores (popularly known as kirana) that dot thousands of Indian cities, towns and villages – continues to dominate the market.
“The market is huge and, on paper, ripe for disruption. Nothing done so far has made a significant dent in the industry. That’s why whenever a new model shows signs of working, all stakeholders shower it with love,” said a seasoned entrepreneur who helped build the supply chain of one of the leading retail companies.
In other words, there is no shortage of room for growth.
Quick commerce companies are borrowing many features from kirana stores to become relevant to Indian consumers. They have devised a new supply chain system, establishing hundreds of modest warehouses, or “dark stores,” strategically located miles from residential and commercial areas from where large quantities of orders are placed. This allows companies to make deliveries within minutes of purchasing the order.
This approach differs from that of e-commerce players such as Amazon and Flipkart, which have fewer but much larger warehouses in a city, usually located in locations where rent is cheaper and further from residential areas.
The unique characteristics of Indian homes further contribute to the appeal of fast commerce. Indian kitchens tend to have a higher number of SKUs compared to their Western counterparts, requiring frequent refill purchases that are better served by local stores and quick trade rather than modern retail. Additionally, limited storage space in most Indian homes makes monthly bulk grocery purchases less practical, and customers tend to favor fresh food purchases, which convenience stores can easily accommodate.
According to Bernstein, quick commerce platforms can price products 10% to 15% cheaper than mom-and-pop stores while maintaining gross margins of around 15% due to the elimination of middlemen. Dark fast-trade stores have rapidly expanded their SKU count from 2,000 to 6,000, with plans to further increase it to 10,000 to 12,000. These stores replenish their stock two to three times a day, according to store managers.
Fighting e-commerce
Zepto, Blinkit and Swiggy’s Instamart are increasingly expanding beyond the grocery category and sell a variety of items, including clothing, toys, jewelry, skincare products and electronics. A TechCrunch analysis finds that the majority of items listed by Amazon India on its bestseller list They are available on fast trading platforms.
Fast commerce has also become an important distribution channel for India’s leading food brands. Consumer goods giant Dabur India expects fast commerce to drive 25-30% of the company’s sales. Hindustan Unilever, Unilever’s Indian subsidiary in the UK, has identified fast trading as an “opportunity we will not pass up”. And for Nestlé India, “Blinkit is becoming as important as Amazon.”
While fast commerce does not need to expand beyond the grocery category, which itself accounts for more than half a trillion dollars in the Indian market, its expansion into electronics and fashion is likely to be limited. Electronics generate 40-50% of all sales on Amazon and Flipkart, according to analyst estimates. If fast commerce can penetrate this market, it will pose a significant and direct challenge to the e-commerce giants. Goldman Sachs estimates that the total addressable market in groceries and non-groceries for quick-commerce companies in the top 40-50 cities is about $150 billion.
However, selling smartphones and other expensive items is more of a gimmick and not something that can be done on a large scale, according to an e-commerce entrepreneur.
“It does not make any sense. What makes fast trading good is forward trading. But smartphones and other big-ticket items tend to have a not-so-insignificant rate of return… They don’t have the infrastructure to accommodate reverse logistics,” he said, requesting anonymity as he is an early investor in a major company. Fast trading company.
The current infrastructure of fast commerce also does not allow the sale of large appliances. This means that you cannot buy a refrigerator, air conditioner or television in convenience stores. “But that’s what some of these companies are suggesting and analysts appreciate it,” the investor said.
Falguni Nayar, founder of skincare platform Nykaa, highlighted in a recent conference that fast commerce is gaining share mainly in kirana stores and would not be able to maintain as much inventory and assortment as specialized platforms that educate customers.
The story of fast commerce in India remains an urban phenomenon concentrated in the top 25-30 cities. Goldman Sachs wrote in a recent analysis that demand in smaller cities likely makes it difficult for the fresh food economy to function.
E-commerce giant Flipkart will launch its quick commerce service in limited cities next month, seeing an opportunity to attract Amazon India customers. Most of Flipkart’s customers are located in smaller cities and towns in India.
Amazon – more and more descending about its e-commerce investments in India, it has so far shown no interest in fast commerce in the country. The company, which offers same-day delivery on some items to Prime members, has questioned the quality of products from companies that provide “fast” delivery in some of its marketing campaigns.
As brands increasingly focus on express commerce as their fastest-growing channel and more consumers embrace the convenience and value proposition of 10-minute delivery, the stage is set for a fierce battle between e-commerce fast and e-commerce giants in India.