Quick Commerce: Is It Time For A Change?

Quick commerce

When the COVID-19 pandemic hit the shores of India, one demand felt by all the people stuck at home was fast shopping and even faster delivery. And this trend gave birth to a new buzzword called “fast trade,” which has brought in huge amounts of money. Over the past 12 months, the same investors who advocated burning money have poured cold water on their plans. 

A report published by ET quotes Zepton’s Aadi Palicha as suggesting that funding has evaporated in 2022 and will taper off in 2023 given the tough capital environment and uncertain terms that some of these VCs are facing. 

He believes that much higher unit economics and better execution would be the keys to recovery. Zepto itself has not raised any money, although it has appointed investment banking firm Avendus Capital to defend the case. Of course, the company raised $200 million in May to bring its valuation to around $900 million. In fact, Palicha’s mantra seems to be in vogue, as Dunzo, Blinkit, and Instamart have followed suit in improving unit economics. Is there any light at the end of the tunnel of burning money?

The ONDC chapter

Of course, they understand how local warehouses have responded to these fast-trade players. Lacking a delivery mechanism, many have gone out of business, especially in and around Bengaluru, giving entities like BigBasket and Blinkit more opportunities to improve unit economics. However, the arrival of the government-backed ONDC in local businesses may cause some butterflies in the stomach because the open network experiment works on the very principle of separating the functions of the seller from the payment and delivery functions. 

This means that VCs may spend more money in 2023, preferring to wait and see what ONDC and its network participants can come up with. And how does the ONDC story play out here? We noted in an earlier story that VCs are not really rushing with the ONDC method, but things seem to have changed since then. Vani Kola, Managing Director of Kalaari Capital, described ONDC as a revolutionary initiative to digitally empower small businesses in the retail sector and said it would undoubtedly have far-reaching implications. In a LinkedIn post, Vani Kola said, “

India’s e-commerce market is growing rapidly and is projected to triple from $38 billion to $120 billion by 2026.” 

The e-commerce sector is dominated by a few large players. ONDC aims to “level the playing field and democratize digital commerce in the country,” providing new opportunities for local e-commerce businesses, which is good news for tech startups that need to rethink their products to support those businesses. Finding new users is not easy in small towns. 

New user hunt

According to an ET report, Swiggy’s Instagram account grew to 300,000 users but slowed down after that. BigBasket believes that the main goal could be higher user density in dark shops, which need at least 800 orders per day to be profitable. The challenge in both scenarios is that such population density cannot be expected outside the major metropolises and perhaps some others like Kochi or Lucknow. 

This means that carriers cover longer distances, resulting in higher costs. Companies like Blinkit have already reduced the number of blind stores in Bangalore from 60 to 50, with most of the closures coming from non-residential areas of the city, a key driver of brisk retail demand. It’s a Catch 22. In fact, market researchers believe that the convenience store user base faces a Catch 22 because they have to replace the current, unplanned number of shoppers with a new batch. 

Transition time

Those who do today will transition to a more planned approach as they settle into their careers and lives, meaning multiple models will be delivered and ordered the next day. Some convenience stores have already tried to improve their gross merchandise value by encouraging customers to place higher-value orders, and some are even designing mini-trucks to deliver them and adding larger shopping bags to their stores. This looks like a quick fix for the retail mess of 2023. 

How many of the existing customers would jump to larger orders if these companies took market share by promising the exact opposite is anyone’s guess. At the same time, some companies are also playing with increasing the number of SKUs, which could mean closing dark stores and opening new ones as well as increasing delivery times. 

It seems that fast-growing commercial companies would need major reform to even aspire to profit. Things can get strange when VCs aren’t sure what they’re doing with their money.
Read more: https://www.cxotoday.com/news-analysis/is-quick-commerce-slowing-down/

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