New Delhi, Jan 7 The Indian quick commerce industry is estimated to reach $50 billion in gross order value (GOV) by FY30, which implies 60 million customers ordering eight times per month, according to an HSBC Research report on Tuesday.
This is a significant share of the total addressable market (TAM) captured in five years. While not an impossible target, it will not be easy to achieve, said the report.
“We continue to believe in the potential of quick commerce in India. But Street expectations look no more undemanding. We think the TAM (total addressable market) is much smaller for this industry than broadly understood,” it added.
Based on the bottom-up analysis, grocery TAM for the top 30 cities is not more than $125 billion. This assumes Rs 30,000 spend per month per household. Also, smaller towns are not easy to scale up, with their tendency to pay for delivery lower too.
“This may not matter in the near term as growth likely stays solid with continued supply expansion in 2025, but worries may start to emerge in 2-3 years,” the report mentioned, adding that delivery charges are a must to make the business viable.
To expand margins further, delivery charges and take-rates may have to rise (operating leverage for corporate costs will help as well).
“This should compress the TAM quite a bit. Delivery charges on grocery (unlike food delivery) will likely trim the target audience as we expect much of the Indian market to stay price conscious. This will likely be a headwind as companies expand beyond the top cities,” the report noted.
“Pace of expansion to non-grocery and migration from e-com to quick commerce is key. Most companies are expanding beyond grocery to general merchandise. The number of stock-keeping units (SKUs) have expanded from 2,000 (two years ago) to 15,000-20,000 now,” said HSBC Research.
Furthermore, top e-com companies like Flipkart and Amazon are aggressively moving into quick commerce, which will likely lead to value migration from e-com to quick commerce in the near term.
This should help provide growth for the industry beyond grocery and achieve the expected GOV growth, providing some comfort to at least near-term growth, said the report.
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