As quick grocery delivery becomes the talk of the town, industry experts question the limited number of transacting users in the segment.
Vaibhav Agrawal, Partner, Lightspeed, told BusinessLine that Indian audiences have gotten accustomed to paying convenience fees for commerce but this audience is still under 15 million monthly transacting users and relatively more premium. However, Agrawal believes that in the long term, smart founders will find a way to make the economics work.
Similarly, Anup Jain, Managing Partner, Orios Venture Partners also noted that it is unlikely that a concept like quick grocery delivery will appeal to all income bands and all neighborhoods even in top-tier cities.
“There will be no free ride as companies such as Gullynetwork are now enabling neighbourhood stores to offer the same service by placing their inventory live through their platform,” Jain added.
Growing competition
Competition in the quick commerce space has also been growing rapidly. In addition to the entry of grocery delivery companies like BigBasket and Grofers, food delivery players like Swiggy, and Zomato have also placed major bets in the quick commerce segment.
While Swiggy committed a $700 million investment in its quick commerce vertical Instamart, Zomato has invested over $100 million in Grofers and is reportedly in talks to invest another $500 million in the company. Horizontal players like Ola are also taking a second shot at grocery delivery with a 15 minutes grocery delivery play.
Vertical players like Zepto and Dunzo argue that companies will need to have a deep verticalised focus to win in this category. “Executing 10-minute delivery is an operationally and technically complex endeavour. So, players that want to win need pure vertical focus and undistracted execution to perfect this model,” said Aadit Palicha, Founder and CEO, Zepto.
Adding to this, Kabeer Biswas, CEO, Dunzo noted that the same landscape is playing out globally; quick commerce players are dominating, despite food delivery players diversifying into consumables. Horizontal players with adjacencies are struggling in this category, as it requires a deep verticalised focus. The company plans to soon expand its Dunzo Daily offering of 19 min delivery of consumables and essentials, to several more cities.
Market Leader
Talking about the parameters that will define the market leadership in this category, Agrawal said that to get mass-market customer wallet share and order frequency, succeeding in fresh fruits and vegetables is important.
“Fresh has remained unsolved due to tough supply chain dynamics – fragmentation and middle-men, lack of quality standardisation, and perishability of products. Whoever solves this category will have a big advantage,” he added.
Initially, speed, quality, design choices (such as what geographies, which customer segment, what categories), and capital-raise will help players break out in this category. But in the long term, Agrawal believes that demonstrating a path to positive economics per dark store will be important and for that throughput of GMV per rider or store per hour will matter most.
