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January 8, 2024
Yash Bhatia, Afaqs
8 January 2024
In the 10th episode of Zerodha co-founder Nikhil Kamath’s YouTube podcast series, WTF, Aadit Palicha, co-founder, Zepto, says that consumer goods are the fastest-growing category for its quick commerce business. Initially, quick commerce brands just focussed on serving impulse grocery needs, but now they have changed their way to serve regular planned purchases too.
Major players like Zepto, Blinkit, Swiggy Instamart, and BBNow are expanding their offerings in gifting, makeup, ready-to-eat, baby care, pet care, meat, poultry and more to cater to a wider range of consumer needs and preferences.
Through our interviews with brands like Bombay Shaving Company, Bevzilla and Plum, it is evident that Q-comm business contributes approximately 10-25% of online revenue for different brands.
Also, according to a report by Redseer, the Q-comm market is expected to reach almost $5.5 billion by 2025. The report highlights, that these platforms can up their game by going beyond just grocery and extend their offerings to other consumables, electronics, newspapers and more.
It shows that quick commerce players would focus on other categories to reach this milestone. But, are brands ready for it? If yes, how is their strategy different for this model?
Aditi Handa, co-founder of The Baker’s Dozen, an artisanal bakery, states, “In our category, once the customers figure out a product in the physical store, then they tend to buy again on the quick commerce platforms rather than visiting a store. It works well in our category, as there is no need to touch and feel the product.”
Baker’s Dozen makes 60-65% of its online sales on Q-comm platforms.
Devangshu Dutta, founder of Third Eyesight says that quick commerce has spread across various product categories and he believes, “It is driven more by buzz than customer needs. Unless we meet a core demand with a large consumer market, there’s no sustained road to profit.”
Deepti Karthik, fractional CMO, SuperBottoms, says, “In the diaper category, there are a lot of unplanned purchases. We target customers who’re buying other products, and eventually get trails from them.”
She points out that a lot of gifting happens in the quick commerce segment. “Gift packs can be a great solution our brand can leverage.”
She predicts that for the baby-care brand, quick commerce will contribute 3-5% of overall revenue, led by gifting as a category.
Apart from the reduced delivery time, is there a reason that customers are opting to shop on quick commerce platforms?
Handa answers that two factors work in favour of Q-comm platforms: discounts and convenience. “As these players are expanding their portfolio, customers will find more reasons to go on these apps.”
Is the quick commerce business driven by celebrations?
India is renowned for its diverse festivities. Quick commerce platforms capitalise on this by selling event-related or topical assortments. For instance, they offer flutes for Krishna Jayanti, Ganesha idols for Ganesh Chaturthi, Christmas decorations for the holiday, decorative items for Diwali, and gold and silver coins for Dhanteras.
These platforms are also curating special web and app pages for such occasions, even for regional festivals like Chauth Puja. In 2023, Blinkit curated a specific page dedicated to the wedding season.
Karthik states, “The major business of this sector is driven by consumables and FMCG products. On special occasions, e-commerce brands used to curate specific products, which Q-commerce is now doing. The market share of the other modes is now being taken by the quick commerce players on festivals. That’s why every e-commerce is looking to launch its version of Q-commerce, like Amazon Fresh by Amazon, and BBnow by Big Basket.”
Handa believes differently and states that quick commerce is not taking up the market share of any other modes. “Currently we’re buying more than what we need. Quick commerce is creating some new markets, and people are spending more money as it is easy to spend now.”
Will Q-commerce take over e-commerce?
As the country embraces digital commerce, the battle between e-commerce and Q-commerce is intensifying. While e-commerce has a well-established presence with a vast user base, Q-commerce offers unmatched speed and efficiency. As Q-commerce players foray into other categories, will they take over e-commerce?
Ritesh Ghosal, former chief of marketing at Croma believes that Q-comm will not replace e-commerce. He says that Q-commerce will only be a successful mode for urgently needed products like trimmers, headphones etc.
Handa predicts, “In our category, Q-commerce will replace e-commerce purely based on better service. The only advantage that e-commerce holds is a variety of stock keeping units (SKUs). Like, some products will have a presence in e-commerce only like English Cheddar cheese, it will not be there in Q-comm, a customer can only get it through e-commerce.”
She says that quick commerce also provides a fast way to experiment with new products.
Kartik, says e-commerce will always be at the main stage for the brand and believes Q-commerce will be an incremental business for them.
She has observed that in quick commerce if a product gets listed, it starts to sell faster and gets a quick start as compared to the e-commerce route.
Challenges
While the benefits of quick commerce are evident for customers, these players in the backend face a lot of challenges including warehousing, labour expenses, and, most importantly, the orders are low-value, therefore the margins are less.
Balasubramanian Narayanan, vice president, of Teamlease services points out that the consumer preferences and buying patterns in the quick commerce segment evolve rapidly, making data collection and analysis a crucial aspect.
“Balancing data collection with user privacy is a key challenge. The data insights can help to create personalised experiences, predict demands, and improve operational efficiency. But this can be a challenge in this mode.”
Handa says in quick commerce, the biggest challenge is the stock keeping unit (SKU) mix, SKU selection is critical.
“Brands like Amazon, and Flipkart allow a plethora of SKUs, while quick commerce just allows a limited number, due to limitation of warehouse space and delivery time. The SKU selection by the brand becomes a critical aspect.”
In the physical realm, shelf presence plays an important role in reaching customers, in the online world, optimising the online presence is crucial to get the customers’ attention. She highlights that in quick commerce, the fight is to be at the top of the search bar.
“To be at the top, the brand should generate organic sales, secondly it’s about keyword bidding. A keyword that would search customers to find the product from the brand. The brand pays quick commerce players for this.”
Ghosal also agrees with this and states, “In the Q-commerce arena, most searches are by category rather than by brand. The brands have to tick more boxes in terms of categories/searches so that customers tend to look at them.”
(With additional inputs: Ruchika Jha)
(Published in Afaqs)
admin
June 16, 2023
Sharleen D’Souza & Shivani Shinde, Business Standard
June 8, 2023
Why are companies finding it difficult to sustain the supply-chain business?
Experts point out that gross margins in supplying fast-moving consumer goods (FMCGs) are very low.
While it does look attractive because it is the largest part of the consumption market, the last-mile supply chain and retailer are not making money.
“FMCG brands have ensured high margins for their businesses by streamlining and smoothing their supply chains over decades and making them cost-efficient,” said Anshuman Singh, founder and managing director, Stellar Value Chain Solutions.
Singh said in rural markets, the costs of supply chains were proportionately high due to lower volumes.
He added: “The low margins in the last leg of the FMCG rural supply chain make it difficult for new-age rural distribution players to offset the high costs.”
Devangshu Dutta, chief executive officer, Third Eyesight, a consultancy firm, said modern B2B (business-to-business) players had tried to step in to replace the traditional links in supply chains with price incentives and a large selection of products.
“Traditional distributors and wholesalers don’t just add costs but also add value, including aggregating demand for brands, disaggregating supplies for small retailers, providing market intelligence to both ends of the chain, and giving credit to retailers and a sort of financial guarantee for manufacturers,” Dutta said.
He said for their business models to work — online or offline — B2B businesses needed a significant concentration of demand, which had been tough to get in many locations.
On July 6, 2022, the Competition Commission of India (CCI), in the dispute between biscuit manufacturer Parle and B2B player Udaan, upheld the plea of the former, saying it did not violate competition laws. Parle had refused to sell its products directly to Udaan.
Udaan was the first B2B start-up to have a run-in with a well established brand, which was not interested in moving away from the traditional distribution model.
What has that meant for Udaan? It has meant tweaks to its business.
It further diversified its product portfolio so that its access to the market was not impacted.
It forayed into the mobile accessories segment as local brands tapped into its network of over 3 million retailers.
Earlier, this year it expanded its reach in the miller segment, which supplies staples like pulses, grains, wheat, rice, and oil.
Udaan aims to take on board about 100 miller partners per quarter.
It works with over 500 miller partners, supplying over 10,000 SKUs (stock-keeping units) to retailers and kirana owners, according to the company in an interaction with Business Standard.
The other company that recently had to tweak its business or go back to its focus on rural India is Pune-based ElasticRun.
B2B start-up ElasticRun has decided to focus on the core business and wind up its new expansion plans.
Backed by SoftBank and Prosus Venture, ElasticRun, which typically runs distribution for FMCGs in rural areas, decided to expand and also cater to retailers within city limits, i.e. tier 1 and tier 2 markets that had a strong distribution owing to companies having direct distribution in those areas.
“We initiated a pilot for urban markets. But through the year, as the macro changed, we decided not to pursue the urban pilot and focus on our core of rural business … we have to part ways with almost 2 per cent of our employees,” said Sandeep Deshmukh, co-founder and chief executive officer, ElasticRun, in an earlier interaction with Business Standard.
ElasticRun extends the reach of the brands’ direct distribution networks to deep rural markets. It enables access to a set of net new stores and customers, who were not accessible through traditional distribution networks.
The need to spend in order to get market share has caused well-entrenched players like Amazon to pull out of some of its distribution business.
Amazon India has decided to shut down Amazon Distribution, according to sources. This follows its recent decision to close down its food delivery and edtech offers. The moves are part of the annual operating planning review process amid global macroeconomic uncertainties. The e-commerce giant is looking to focus on its core businesses, sources said.
Amazon Distribution operates a platform where sellers sell FMCGs and apparel products from companies and distribute them among kiranas and small neighbourhood stores.
However, this unit operated in only three cities of Karnataka — Bengaluru, Mysuru, and Hubbali.
(Published in Business Standard)
admin
May 24, 2023
Shambhavi Anand, Economic Times
New Delhi, May 24, 2023
Retailers and shopkeepers will soon not be allowed to seek phone numbers of their customers while generating bills, according to a diktat by the department of consumer affairs, a senior government official said.
Taking the numbers of customers without their “express consent” is a breach and encroachment of privacy, said the official, without wanting to be identified.
The official added that such a move will be classified as an unfair trading practice defined as any business practice or act that is deceptive, fraudulent, or causes injury to a consumer.
Most large retailers mandatorily take down buyers’ phone numbers while generating the bill for their purchases and use them for loyalty programmes or sending push messages.
The move has come after the department received several complaints from consumers about retailers insisting on getting their phone numbers. This will be communicated to all retailers through industry bodies representing retailers soon, the official added.
While the implementation of these new rules may require some adjustments and initial costs for retailers, it is seen as a necessary step towards protecting consumer privacy and ensuring fair business practices in the retail sector, said experts.
While retailers will have to rework their systems in case this becomes a regulation, this won’t stop them from asking for phone numbers of consumers as their loyalty programmes run on these numbers, said Devangshu Dutta, founder of Third Eyesight, a retail consultancy firm.
He added that retailers also use numbers for sending e-invoices and so this could have a cost impact and environmental impact.
(Published in Economic Times)
admin
April 24, 2023
Samar Srivastava, Forbes India
April 24, 2023
A board meeting scheduled for May 2 promises to be the start of the value unlocking process for Reliance Industries [Disclaimer: Reliance Industries is the owner of the Network18 group, which publishes Forbes India]. Shareholders of India’s largest company, which has a presence in industries as diverse as petrochemicals, retail and telecom, will each receive shares in its financial services unit—Jio Financial Services.
User data—what consumers search for, their demographic profile as well as their likes as dislikes—are available to India’s largest telecom company with 426 million users. If it can use that data to underwrite credit for consumers, it has a winner. Jio Financial is in a unique position.
Loans to India’s middle class have grown at three percent in the last year. Compare that with credit to industry that has grown at a mere seven percent and it becomes clear why the company is keen to spin this off an independent entity and list it separately on the bourses. A successful listing could result in telecom and retail being eventually listed separately.
An analysis by Jefferies, a brokerage, shows that loans to India’s consuming class present a large market opportunity. Home loans account for about ₹25,00,000 crore, auto loans for ₹471,400 crore, consumer durable loans for ₹37,000 crore, and microfinance for ₹280,000 crore. And there is the rapidly growing personal loan segment at ₹79,000 crore. These all present a large whitespace for the company to tap into. Jeffries also points out that a key advantage of the business would be their access to low-cost capital due to the high credit rating to Reliance Industries.
The step also marks an important milestone in Chairman Mukesh Ambani’s aim to cement his position in the world’s list of billionaires. At $83.4 billion, Ambani is rank 9 on the 2023 Forbes list of world billionaires. Since the pandemic in March 2020, the second-generation entrepreneur has started work on a new energy business, strengthened his retail operations with the acquisition of Metro Cash and Carry, and broadened Jio’s subscriber base with the launch of 5G services.
As he sets out to independently grow his businesses, Ambani finds himself occupying the largest retailer spot by revenue. In the last year, store count is up 52 percent to 17,225 stores while revenues are up 17 percent to ₹67,000 crore and profit up six percent to ₹2,400 crore.
Reliance Retail has adopted a multi-format approach. There is Ajio.com and JioMart that make up its online offering. Digital plus new commerce accounts for 18 percent of sales, according to CLSA, a brokerage. Reliance Trends is its cut price fashion format. There is the soon-to-be-launched Azorte to compete against the likes of Mango and Zara, as well as Reliance Brands that houses global names like Burberry, Armani Exchange, Canali and Jimmy Choo, among others. Add to that its private label business with brands like Campa Cola and Independence and the growth drivers for the next decade are in place.
“Reliance has been clear about dominating the landscape in any sector it has entered in the last 30 years, whether it is petrochemicals, telecom or retail,” says Devangshu Dutta, founder and CEO of Third Eyesight, a retail consultancy. He believes the company is getting into many sectors or formats to capture a larger share of the consumer wallet.
At Jio, its strategy to add subscribers (mainly from Vodafone Idea), increase average revenue per user as well as spread the 5G network has paid off. At 426 million users, it is now the largest telecom operator in the country with an average revenue per user (ARPU) of ₹177. The business has delivered a topline of ₹29,195 crore and profit after tax of ₹4,881 crore. CLSA expects the launch of its portable 5G device, Jio AirFiber, as well as an affordable 5G smartphone to drive growth.
Add to this the synergies that could play out with Jio Financial Services. The business starts with a net worth of ₹1,07,200 crore, giving its balance sheet the strength to leverage and make loans. Even a conservative gearing of five times net worth would make its loan capacity ₹6,00,000 crore—or twice the size of Bajaj Finance—today.
In the new energy business, the company is working on plans to commence production at its new gigafactory in Jamnagar. The company is yet to share updates on progress on this front.
These developments have prompted upgrades by brokerages who believe Reliance Industries offers a favourable risk reward as the downside is capped on account of strong profit growth. In a recent report, CLSA termed Reliance Industries a ‘bargain buy’. In the last 12 months, sales were up 36 percent to ₹2,17,164 crore, while profits were up 16 percent to ₹70,782 crore. Still, the stock price is down eight percent to ₹2,346 per share, and its market capitalisation stands at ₹15,87,500 crore, making it the most valuable company in India.
They point to key monitorables being the rollout of its green energy ventures as well as the execution in its 5G rollout. For now, the company has a comfortable position with regard to leverage. In the quarter ended September 2022, Reliance Industries had reserves of ₹7,83,283 crore and borrowings of ₹3,16,030 crore, leaving it with scope to borrow if new business opportunities come its way. Ambani usually uses the Reliance AGM to announce new plans. Expect the next meeting in a few months to possibly come up with some.
(With inputs from Varsha Meghani)
(Published in Forbes India)
admin
September 20, 2022
New Delhi: The launch of online shopping experience by WhatsApp, along with Jio platforms, the holding company for the digital services businesses of Reliance Industries (RIL), will help these companies to take on e-commerce behemoths such as Jeff Bezos-controlled Amazon and Walmart-owned Flipkart.
Experts are of the view that the partnership will give JioMart, the e-commerce platform of RIL, around 48.7 crore WhatsApp users in India. At present, the total annualised active e-commerce users in the country are only 20 crore.
Rohan Agarwal, partner at research firm Redseer, told Business Standard: “WhatsApp is the primary messaging app for most Indians and the partnership shows the level of access JioMart would have to reach out to them.”
He went on add that it would help in expanding the reach of the e-commerce to users who might not be accessing online retail platforms.
To recap, speaking at the 45th AGM of RIL on Monday (August 29), Isha Ambani, director, Reliance Retail Ventures Ltd (RRVL), gave a presentation on placing online grocery orders using Meta-owned WhatsApp and making payments.
In a global first, JioMart on WhatsApp will aid users in India, including first-time online shoppers, to have a new shopping experience in ordering a wide range of groceries on WhatsApp. They will be able to shop via JioMart’s entire grocery catalogue by easily selecting their favourite items. Also, they will be able to add these products to the cart and pay without leaving the WhatsApp chat.
Mark Zuckerberg, founder and chief executive officer (CEO), Meta, said the association with JioMart would enable people to buy groceries from JioMart in a single chat.
Agarwal highlighted that most of the online grocery businesses generate from big cities and this alliance will be an opportunity for small cities and towns.
The financial daily quoted Devangshu Dutta, CEO, Third Eyesight, as saying that the partnership will have a big impact on the entire e-commerce industry.
He told the publication: “Reliance is the largest retailer in the country and with deep pockets. It wants to (tap) not just the big cities but small cities and towns as well. Given the fact that WhatApp is something consumers are comfortable with, and grocery is related to high-frequency purchases, they are firing on all cylinders.”
Dutta added that the crucial thing for both companies to be successful is to create a delivery process that is quick and cost-effective.
Source: timesnownews
