The result surprised me.
How frequently do you use 10 min delivery services?
— Aviral Bhatnagar (@aviralbhat) 1648534388000
More than 65% had never used a 10-minute delivery service. This is in a group of more than 1,500 tech-first, digitally savvy folks. I’d imagine that this number is even higher among the general population.
Around the world, more than
$10 billion has been put to work on delivering stuff in under 10 minutes – a phenomenon that began in sync with the pandemic and reached India almost instantly.
In ecommerce, you have a trifecta of Cs – cost, convenience, and catalogue. Every ecommerce player becomes known for one C and has to compromise on the other two. Amazon is known for convenience, Meesho for cost and BigBasket for catalogue.
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Ten-minute commerce is a convenience play. Players have limited catalogues and charge high prices for the convenience. A deeper
dive into the market in India puts it at around $15 billion.
The question everyone asks is: “Is this even needed?” It’s a fair question, especially with the potential life-threatening irony of getting hurt while delivering potatoes in 10 minutes.
Jeff Bezos once observed that if you want to predict the future, ask what will
not change. People will always want things faster, cheaper and better.
It’s clear that people will want stuff delivered in 10 minutes instead of 20 minutes. It’s clear from the amount of interest in 10-minute delivery services.
Why, then, are so few people using it? While it may solve for convenience, it is compromising heavily on cost.
Ten-minute delivery is as hyperlocal as it gets. And for hyperlocal to really work, you need density of demand. As the crash of 2016 has taught us, if demand is not dense enough, it rarely works.
Few people are willing to pay steep delivery fees. Demand is thus depressed and few pockets of demand are available. Supply, therefore, is limited.
For 10-minute delivery to take off, costs will have to fall and that may end up being its constraint. The economics for 10-minute deliveries do not work today. US-based services lose tens of dollars on a single order, and my guess is that Indian services are also losing money today. They have been able to raise large amounts of money despite this, until now.
There’s a joke amongst VCs that the sign of a bubble is when delivering groceries becomes hot. It happened in 1999, it happened in 2016, and I believe it’s happening now, too.
I do not think there is a need or an economic rationale for multiple 10-minute services to exist. Due to demand-supply dynamics and network effects, there will likely be one winner. The others will fold or shut.
I expect that to happen very soon.
I am not writing off the concept, mind you. Even the hyperlocal winter of 2016 gave birth to multi-billion dollar unicorn Swiggy. Each bubble engenders a few successes, but you can’t tell which one it’s going to be.
Many people believe that 10-minute delivery is simply a feature, a switch to turn on for a large player. If you remember the trifecta of 3Cs, 10-minute delivery solves for convenience. The large player may be solving for catalogue or cost and not have the organisational muscle to solve for convenience.
What this means is that building a 10-minute service requires an entirely different kind of organisation. This is both an opportunity for new players and a threat to the older ones.
Zomato was spot-on in its assessment that 10-minute delivery firms could indeed disrupt their business if they didn’t act. If someone can scale enough to solve the cost problem, this could end up being a fairly large mode of commerce.
There are obviously other more pressing issues to solve. Getting medication or key supplies in 10 minutes is one.
But I think we have a tendency to underestimate innovation and overestimate our model of the future. My hope is that companies will eventually try to move a variety of goods and services in this 10-minute flow.
What on the surface seems like a marketing tool is more deeply an operational/technological innovation.
If done safely, that is a good thing.
Aviral Bhatnagar is an investor at Venture Highway, an early-stage seed fund. He is the founder of
A Junior VC
, a platform that democratises insights into startups in India and Southeast Asia. Views are personal.
