New Delhi [India], September 3 : Rapid urbanisation in India is poised to change consumer behavior and the way people buy their daily essentials, and that's set the stage for the adoption of quick commerce.
According to a comprehensive report by brokerage and investment group CLSA, the quick commerce business is growing rapidly because of lower infrastructure requirements than traditional retail outlets, less time taken in the delivery of goods, and efficient price discovery options, among others.
Dark stores used by quick commerce companies only need to have basic structures and most deliveries done on two-wheelers, with space needed for parking is also significantly lower.
As soon as an order is placed, the packers in the dark store start putting different products in a packet that are then picked up by a delivery partner and delivered to the customer. While it started with grocery, quick commerce has expanded to multiple categories. However, its core strength still lies in grocery and other staple products.
"Urban areas have higher migratory populations. These customers have limited connections with retailers and hence the transition to quick commerce is much faster than in areas where deep family or social connections with local shops exist," the report by the brokerage and investment group stated.
Also, with increasing numbers of women entering the workforce, quick commerce would offer a balance between convenience, assortment, and price that traditional kiranas give "will find hard to match."
All said, Quick Commerce's success however hinges on removing layers in the supply chain and enhancing efficiencies to reduce delivery costs.
India's rapid urbanization and somewhat fragmented retail market have set the stage for the rise of quick commerce, CLSA said.
The best part about quick commerce is that it offers a wide range of products and services to the consumers at their doorstep, on the contrary, the neighborhood retail shops usually stock the highest-selling products on their shelves to maximize their incomes.
The neighborhood retail shops offer limited selection and lack pricing transparency whereas in quick commerce provides buyers with a competitive price list with a host of choices.
However, quick commerce is currently restricted to only the top cities.
"Quick commerce provides a superior alternative with better selection, lower prices, and delivery within 10-20 minutes," the report said. "Quick commerce is reshaping India's retail supply chain by flattening the distribution network, giving newer brands increased visibility and the ability to compete on price, leading to higher premiumisation."
CLSA asserts Blinkit's parent company Zomato will be the largest beneficiary in the listed space, while Marico and Hindustan Unilever face substantial risks as their distribution advantage erodes.
Currently almost USD 1 trillion in size, India's retail market is extremely fragmented, with small, unregulated retailers - referred to as the unorganized sector - accounting for about 95 per cent of the market. Food and groceries, the largest category, make up a little over 60 per cent of the overall retail market.
Historically, most players have struggled to compete with traditional kiranas on convenience or value. However, CLSA believes that quick commerce is well positioned to win market share.
As per the CLSA report, Blinkit, Zepto, and Swiggy Instamart are the key major quick commerce players. All of them have pivoted to a dark store-driven model and substantially expanded the local warehouses across geographies.
"Zomato's Blinkit, Zepto, and Swiggy Instamart are the top-three players and hold more than 90 per cent of market share by revenue, with smaller contributions from Big Basket's BBNow and Flipkart," said the report.
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