Quick-commerce vs e-commerce: Ready for the new pricefight in town?

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August 24, 2024

Writankar Mukherjee & Navneeta Nandan, Economic Times
24 August 2024

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.

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 said.

The strategy now is to win consumers from large ecommerce at a time when urban shoppers increasingly prefer faster and scheduled deliveries, they said.

An 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,” said B Krishna Rao, senior category head at biscuits major Parle Products.

It seems to be working. Quick commerce is the fastest growing channel for all leading fast-moving consumer goods companies, accounting for 30-40% of their total online retail sales, according to company disclosures in earning calls.

These platforms are also expanding their basket with larger FMCG packs to cater to monthly shopping needs but also non-groceries such as electronic products, home improvement, kitchen appliances, basic apparel, shoes and toys amongst others.

“Consumers have all the apps on their phones and all they want is quick deliveries at the best price,” said Rao of Parle Products.

The increasing competition is putting pressure on ecommerce majors to reduce delivery time.

‘Market acquisition cost’

Flipkart is even eyeing a quick-commerce foray by piloting a 10-minute delivery service called Minutes in some parts of Bengaluru.

Jayen Mehta, managing director of Gujarat Cooperative Milk Marketing Federation that owns the Amul brand, said now that people are buying regularly from quick commerce with an increase in their assortment, legacy ecommerce platforms like Big Basket and Amazon are trying to deliver faster and same day, which has increased competition pressure.

“At the end of the day, consumers compare across channels before buying. So, pricing equality has become important,” Mehta said. “But then, quick commerce has a delivery charge if the order is below a certain value,” he added.

But does their business model allow quick-commerce players to wage a sustained price war against ecommerce platforms?

Quick commerce model requires multiple dark stores to be set up in close vicinity in each market, while ecommerce players mostly make deliveries from centralised warehouses.

But then, quick commerce platforms right now are at a phase where ecommerce was 7-8 years back, said Devangshu Dutta, CEO of consulting firm Third Eyesight.

“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,” he told ET. “They may have to sacrifice margins in the short term to get customers shopping more frequently.”

Blinkit chief executive Albinder Singh Dhindsa earlier this month said the advent of quick commerce has made people want things faster than they would have otherwise got from ecommerce.

“This has led to a direct share shift of a number of non-grocery use cases to quick commerce where customers were primarily reliant on ecommerce for buying these products,” he said in the Zomato-owned quick-commerce platform’s June quarter earnings release.

Dhindsa said quick-commerce platforms are gaining sales by incremental growth in consumption, shift in purchases from next day ecommerce deliveries and mid-premium retail chains.

Citing an example, he claimed the demand Blinkit has generated for online-first oral care brand Perfora is a testament that such brands’ growth and adoption on quick commerce is much faster than on ecommerce.

(Published in Economic Times)