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November 14, 2024
Economic Times
14 November 2024
The Swiggy IPO is making news for being the most successful in a decade in its category. The food and grocery delivery firm yesterday listed at a 5.6% premium to its IPO price of Rs 390, making it the first company with an issue size of over Rs 10,000 crore in the past decade to have listed above its offer price, ET has reported. The stock closed 17% above its issue price at Rs 455.95 in a weak market, surpassing analysts’ expectations of a tepid debut. The company’s market capitalisation at close on Wednesday was Rs 1.02 lakh crore.
Swiggy’s impressive debut also indicates the incoming deluge of cash in an emerging business, quick commerce. Swiggy plans to plough more cash into its quick-commerce business, Swiggy Instamart. Swiggy’s bigger rival, Zomato, is also planning to fatten its war chest. Zomato plans to raise fresh funds through a qualified institutional placement (QIP) despite sitting on $1.5 billion, or about Rs 12,600 crore. The money will also fuel its quick commerce business, Blinkit. Zepto, another quick commerce player, is also raising money. ET reported last month that Zepto is in talks to raise $100-150 million from a group of domestic family offices and wealthy individuals. It last raised $340 million in August. Swiggy Instamart, Blinkit and Zepto are the top three players with over 85% market share.
The floodgates of capital opening into the quick commerce sector would worry the big e-commerce platforms which have already started feeling the heat from quick commerce.
The quick rise of quick commerce
While quick commerce becomes the preferred medium for immediate needs and impulse purchases, e-commerce is favoured for more planned purchases like home, beauty and personal care. But now quick commerce firms are diversifying beyond groceries, small-value items, etc. and invading the home turf of e-commerce players.
Quick commerce is already conquering kirana, the neighbourhood small retail business, as well as hitting modern retail. As consumer preferences shift towards the convenience of last-minute grocery deliveries, quick commerce companies are outpacing traditional retailers, with 46 per cent of consumers surveyed reporting a cut in purchases from Kirana shops, a recent report has said. The quick commerce market size is expected to reach $40 billion by 2030, a jump from $6.1 billion in 2024, according to the report by Datum Intelligence.
Quick-commerce operators such as Blinkit, Swiggy Instamart and Zepto are aggressively trying to lure away consumers from large ecommerce platforms like Amazon and Flipkart by matching their prices across groceries and fast-selling general merchandise, triggering a price war in the home delivery space, ET reported a few months ago. This is a departure from the earlier pricing strategy of quick-commerce players who typically charged 10-15% premium over average ecommerce marketplace prices for instant deliveries, industry executives had told ET.
A recent ET study of prices of 30 commonly used products in daily necessities, discretionary groceries and other categories, including electronics and toys, in both ecommerce and quick-commerce platforms reveal the pricing disparity has been bridged. “The pricing premium which quick commerce used to charge for instant deliveries is gone with these platforms now joining a race with large ecommerce to offer competitive pricing to shift consumer loyalties,” B Krishna Rao, senior category head at biscuits major Parle Products had told ET.
The increasing competition is putting pressure on ecommerce majors to reduce delivery time.
“Price matching by quick commerce is to acquire market share and is part of market acquisition cost even when it might not be profitable at a per unit transaction level,” Devangshu Dutta, CEO of consulting firm Third Eyesight, had told ET. “They may have to sacrifice margins in the short term to get customers shopping more frequently.”
After challenging kirana and modern retail, e-commerce is the next frontier for quick commerce companies.
The challenge shaping up for e-commerce giants
With Swiggy, Zomato and Zepto raising a huge amount of money, the war between quick commerce and e-commerce is likely to turn bloody, besides increasing internecine competition among quick commerce players themselves.
Quick commerce, which began with the delivery of groceries and essential items, has now expanded to include a diverse range of products. This includes electronics, clothing, cosmetics, household goods, medicines, pet supplies, books, sporting equipment, and more.
E-commerce sector offers a vast opportunity for growth of quick commerce business. The Indian e-commerce market is projected to grow at a compound annual growth rate (CAGR) of 21% and reach $325 billion in 2030, as per Deloitte’s report released on Monday. This huge potential is luring big players. The Tata group’s ecommerce venture Neu is set to enter the quick commerce segment branded as Neu Flash, rolling it out to select users selling grocery, electronics and fashion, ET reported last month. Mukesh Ambani’s Reliance, leveraging its vast network of supermarkets, is expanding into the 10–30 minute delivery segment. Ambani wants to ensure quick commerce helps bolster its business ahead of an IPO of Reliance Retail, which was last year valued at $100 billion, and has backers including KKR, sources told Reuters recently.
Besides entry of big ones like Tata and Ambani, the deluge of fresh investment into business by the incumbents such as Swiggy, Blinkit and Zepto will pose a big threat to large e-commerce players Amazon and Flipkart. Swiggy has recently hired two Flipkart executives to boost its senior leadership. They have joined two other executives that Bengaluru-based Swiggy had hired from the Walmart-owned ecommerce major in the past few months.
Swiggy and Zomato are both assessing several new services as they diversify beyond their core businesses, ET has reported a few days ago. Swiggy is all set to launch a pilot programme for a services marketplace, labelled ‘Yello’, which will host professionals such as lawyers, therapists, fitness trainers, astrologers, dieticians, according to sources. It is also testing a premium membership service called ‘Rare’, for affluent customers providing them access to high-end events such as Formula 1 races, music concerts, upscale art exhibitions, in addition to VIP hospitality and priority reservations at luxury restaurants.
Zomato has previously been bold in its diversification moves by buying Paytm’s events and ticket business for Rs 2,048 crore. It is now trying out a concierge-like service to help users place online food orders over WhatsApp. Human customer relationship agents will provide the Gurgaon-based company’s new service instead of its usual approach of deploying chatbots, a person familiar with the move has told ET recently.
Apprehending challenges by quick commerce players, Flipkart has already started its own quick commerce business Flipkart Minutes. While still far behind its established rivals, Flipkart Minutes hit daily orders of 50,000-60,000 during its Big Billion Days sales, people with knowledge of the matter told ET last month.
Further investment and bigger players entering the sector will heat up competition among the quick commerce companies even as they will grapple with new challenges such as logistics as they expand. But a bloody war could soon be seen on the e-commerce battlefield as emboldened by huge popular response the quick commerce companies start invading on the well-guarded turf of Flipkart and Amazon.
(Published in Economic Times)
admin
October 8, 2024
Nandini Singh, Business Standard
11 October 2024, New Delhi
Reliance Retail, the country’s largest retailer, has officially entered the booming quick commerce space, intensifying competition for players like Zomato-owned Blinkit, Swiggy Instamart, and BigBasket. The company began offering quick commerce services through its e-commerce platform JioMart in select areas of Navi Mumbai and Bengaluru last weekend, a move that signals its intent to disrupt the segment, as reported by The Economic Times.
Initially, Reliance would start with selling grocery items from its network of 3,000 retail stores nationwide. However, the company has ambitious plans to extend its offerings to value fashion and small electronics, such as smartphones, laptops, and speakers, according to a senior executive at the company. The quick commerce services will be fulfilled through Reliance’s existing network of stores, including Reliance Digital and Trends outlets.
Reliance plans to scale up its quick commerce operations across India by the end of this month. The company aims to deliver most orders within 10-15 minutes, with the remaining fulfilled in under 30 minutes. Reliance will leverage its logistics arm, Grab, which it had previously acquired, to facilitate timely deliveries.
Unlike other quick commerce operators that rely on dark stores or neighbourhood warehouses, Reliance will use its existing retail infrastructure for fulfilment. Analysts have pointed out that this strategy might pose challenges in delivering within the 30-minute window, especially in cities that experience traffic congestion during peak hours.
A fee-free strategy to woo customers
In a bid to attract customers, Reliance has chosen not to charge delivery fees, platform fees, or surge fees, regardless of order size. This contrasts sharply with competitors like Blinkit, Swiggy Instamart, and BigBasket, which levy additional charges for deliveries. A key part of Reliance’s strategy is targeting smaller cities and towns, where quick commerce operators are yet to make significant inroads. By focusing on these untapped markets, Reliance aims to create a strong foothold and gain a competitive edge over its rivals.
The company is also positioning itself as a provider of a more extensive range of products, linking its entire inventory to the quick commerce platform. With 10,000-12,000 stock keeping units (SKUs), Reliance’s offering will far exceed the typical range available on competing platforms.
Targeting 1,150 cities and 5,000 pin codes
Reliance’s goal is to expand its quick commerce service to 1,150 cities, covering 5,000 pin codes where it already operates grocery stores. This extensive reach, combined with its focus on smaller towns and cities, is expected to give Reliance a significant advantage over its competitors, many of which are still focused on metro areas.
“Reliance has overhauled the JioMart delivery model. Previously, deliveries took 1-2 days, with small trucks delivering multiple orders sequentially. Now, the focus is on quick commerce. Each order will be delivered individually by a bike or cycle, and each grocery store will cover a 3-kilometre radius,” the senior executive told The Economic Times.
Refining delivery processes
Earlier this year, Reliance attempted to reduce delivery times for JioMart to just a few hours, or at least the same day, as part of its hyperlocal delivery initiative. This process has now been fine-tuned further to offer deliveries within 10-30 minutes — a key market demand, according to the executive.
Although a spokesperson for Reliance Retail declined to comment on the developments, industry experts believe the company’s aggressive push into quick commerce could significantly alter the competitive landscape.
Blended delivery model could be the future
Devangshu Dutta, chief executive at consultancy firm Third Eyesight, told The Economic Times that Reliance might adopt a blended approach in the long run, offering quick commerce deliveries in areas close to its stores and scheduled deliveries in areas further away.
“Reliance is clearly in market share acquisition mode in the quick commerce space, and waiving transaction fees while offering higher discounts is part of that strategy. There is ample opportunity for deep-pocketed players like Reliance to dominate this fast-growing segment. Their track record in retail suggests that they are willing to experiment aggressively once they find a model that works,” Dutta said.
For fast-moving consumer goods companies, quick commerce is rapidly becoming a vital channel, accounting for 30-35 per cent of total online sales, making it a lucrative area for major players like Reliance to tap into.
(Published in Business Standard)
admin
October 7, 2024
Writankar Mukherjee, Economic Times
7 October 2024
Reliance Retail has initiated efforts to enter the thriving quick commerce market in a move that is set to escalate competition for Zomato-owned Blinkit, Swiggy Instamart and BigBasket, among others. The country’s largest retailer has started offering quick commerce services in select areas in Navi Mumbai and Bengaluru through its ecommerce platform JioMart since last weekend.
It will initially sell grocery items from its retail stores totalling about 3,000 nationwide, eventually adding value fashion and small electronic products such as smartphones, laptops and speakers, a senior executive said. All orders will be fulfilled from its own network of stores including Reliance Digital and Trends.
The retail arm of Reliance Industries plans to rapidly scale up its quick commerce venture pan-India by this month-end with the aim to deliver most orders in 10-15 minutes and the rest within 30 minutes, the executive said. The company will use its acquired logistics service Grab for the fulfilment.
Reliance, however, doesn’t have any plan to set up dark stores or neighbourhood warehouses, unlike other quick commerce operators, the executive said. Analysts said this may become a challenge in delivering orders within 30 minutes in large cities where traffic is high during peak hours.
To entice customers, Reliance won’t charge any delivery fee, platform fee or surge fee irrespective of the order value, and keep a major focus on untapped smaller cities and towns where quick commerce operators like Blinkit are yet to enter, the executive said. Other platforms have a delivery fee and platform fee.
Reliance plans to offer a wider choice of products of 10,000-12,000 stock keeping units by linking its entire store inventory to the quick commerce business, which too is much more than rivals.
Eventually, the company aims to cover 1,150 cities spanning 5,000 pin codes where it runs grocery stores. The executive said the company would target a bigger share of business from towns and smaller cities hitherto untapped by quick commerce firms.
“Reliance has reworked the way orders are delivered for JioMart. Earlier, orders had a scheduled delivery taking 1-2 days by small trucks who would take multiple orders and deliver them one by one. Now, all grocery orders will be quick commerce where one delivery bike or cycle will deliver one order. Each grocery store will cover a 3 KM radius,” the executive said.
Earlier this year, the company tried to reduce JioMart delivery timings to a few hours or at least the same day under its hyperlocal initiative. It has fine-tuned the process further to 10-30 minute delivery. “This has become a top-of-the-kind requirement in the market right now,” the executive said.
A spokesperson for Reliance Retail didn’t respond to ET’s queries.
Devangshu Dutta, chief executive at consulting firm Third Eyesight, said Reliance can ultimately use a blended approach of quick commerce deliveries in areas near its stores and scheduled deliveries a bit far away.
“Since they are in a market share acquisition mode in quick commerce, charging no transaction fees and offering higher discounts on products is a given. There is significant scope for deep-pocketed players like Reliance to strengthen presence in quick commerce. They have aggressively backed other experiments in the retail business once they worked, and may do it again,” said Dutta.
For fast-moving consumer goods companies, quick commerce is the fastest growing channel, accounting for 30-35% of total online sales.
(Published in Economic Times)
admin
August 31, 2024
MG Arun, India Today
Aug 31, 2024
Nearly five years after the Centre brought in norms to rein in multinational e-commerce companies operating in India, Union commerce minister Piyush Goyal sparked fresh controversy by raising concerns over the rapid expansion of e-commerce. He also drew attention to the pricing strategies used by some e-commerce firms, questioning what he termed “predatory pricing”.
“Are we going to cause huge, social disruption with this massive growth of e-commerce? I don’t see it as a matter of pride that half our market may become part of the e-commerce network 10 years from now; it is a matter of concern,” Goyal said at an event in New Delhi last week.
His comments come at a time when the ecommerce business in India is growing exponentially. Estimated at $83 billion (around Rs 7 lakh crore) as of FY22, the market is expected to grow to $150 billion (Rs 12.6 lakh crore) by FY26. The growth will be due to multiple levers: a growing middle class, rising internet penetration, the proliferation of smartphones, convenience of online shopping and increasing digitisation of payments. The overall Indian retail market was pegged at $820 billion (Rs 69 lakh crore) in 2023, according to a report published by the Boston Consulting Group and the Retailers Association of India. E-commerce still comprises only about 7 per cent of that, as per Invest India.
The Indian e-commerce market is dominated by global giants, including Amazon and Walmart (which took over Flipkart in 2018). They, along with domestic players, offer huge discounted prices compared to retail prices, which drives online sales significantly. In FY23, Amazon Seller Services and Flipkart posted Rs 4,854 crore and Rs 4,891 crore losses, respectively. Goyal’s argument is that these losses are due to their predatory pricing.
“Is predatory pricing policy good for the country?” Goyal asked, while stressing the need for a balanced evaluation of e-commerce’s effects, particularly on traditional retailers such as restaurants, pharmacies and local stores. “I’m not wishing away ecommerce—it’s there to stay,” he said. Later, he said e-commerce uses technology that aids convenience. But there are 100 million small retailers whose livelihood depends on their businesses.
The Centre has specific laws that permit foreign direct investment (FDI) in e-commerce exclusively for business-to-business (B2B) transactions. However, according to Goyal, these laws have not been followed entirely in letter and spirit. Currently, India does not allow FDI in the inventory-based model of e-commerce, where e-commerce entities own and directly sell goods and services to consumers (B2C). FDI is permitted only in firms operating through a marketplace model, where an e-commerce entity provides a platform on a digital or electronic network to facilitate transactions between buyers and sellers (B2B).
The country’s laws also stipulate that in marketplace models, e-commerce entities cannot ‘directly or indirectly influence the sale price of goods or services’ and must maintain a ‘level playing field’. Entities in the marketplace model re allowed to transact with sellers registered on their platform on a B2B basis. However, each seller or its group company is not permitted to sell more than 25 per cent of the total sales of the marketplace model entity.
Goyal said certain structures have been created to suit large e-commerce players with “deep pockets”. Algorithms have been used to drive consumer choice and preference. For instance, several pharmacies have disappeared, he said, and a few large chains are dominating the retail space. He invoked the importance of platforms like the Open Network for Digital Commerce where small businesses can sell their products.
E-commerce firms counter the argument on predatory pricing. “It is the sellers’ discretion as to what price they should sell at,” says an industry source. The e-commerce player who provides the platform seldom has a role in it, he explains. “Sellers could be doing clearance sales or liquidation of old products at cheaper prices. Some sellers also source products at manufacturing cost and park it with e-commerce firms instead of involving warehousing agents. This helps cut their overhead costs and allows them to offer lower prices on the platform,” he adds.
Some experts are of the view that the government should not step in with controls and allow the market forces to play their role in determining prices. Price controls may lead to shortages, inferior product quality and the rise of illegal markets. Moreover, the Competition Commission of India (CCI), which is mandated to act against monopolies, may be given more teeth. It is ironical that, on the one hand, the Centre wants more FDI to flow in, but places more and more controls on foreign players on the other hand. At the core are the interests of small traders and retailers, a key section of the electorate.
Others argue that the government has a role to ensure that there is fair competition. “It is not just small retailers the government would be speaking for, but for large domestic players too,” says Devangshu Dutta, founder of consultancy firm Third Eyesight, emphasising that the government’s role should be to establish laws and practices that promote fairness.
According to him, it is no secret that e-commerce has grown through discounts. “For large e-commerce firms, market acquisition happens by acquiring a share of the consumer’s mind and through pricing. When a large sum is spent on advertisements, it is for acquiring the mind share of the consumer,” he says. “Pricing matters in a big way too. Whether you call it predatory pricing or market acquisition pricing depends on which side of the fence you are.”
(This article was originally published in the India Today edition dated September 9, 2024)
admin
August 30, 2024
In a startup world, founders are typically creators first while investors see themselves as the monitors. Therefore, conflicts between the two are almost a default feature of a relationship that in effect funds a dream. From ‘off’ chemistry to differences of opinion to what some founders see as shackles on entrepreneurial freedom, the reasons could be any or a mix of all. Watch this discussion, with a mega-panel of intense start-up founders on the one hand and investors with VC funds on the other, addressing the pain points on Cash, Control, Creativity, Chemistry and Culture in a supercharged encounter. Session Anchor, Devangshu Dutta (Founder, Third Eyesight) reflected, “Those who have heard classical music jugalbandi or witnessed jazz musicians jamming will appreciate the creative tension, the give and take that was the thread throughout this discussion, reflecting the reality of the relationship between entrepreneurs and VCs.”
Watch the video
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