admin
May 25, 2025
Gargi Sarkar, Inc42
25 May 2025
SUMMARY: Swiggy and Zomato are scaling back non-core bets such as 10-minute food delivery, private labels, and event logistics to sharpen focus on core businesses and improve profitability. Both companies are betting on platform fees and selective verticals like quick commerce and ticketing, but analysts warn that financial discipline, not endless expansion, is key to long-term sustainability. The foodtech duo is stuck in a balancing act of rationalising what works and doesn’t. However, going ahead, this rationalisation game is only going to get more pronounced as they will strive to shield their core bread and butter businesses
For foodtech giants Swiggy and Zomato (now Eternal), the last few years have been about engaging in a battle for expansion, so much so that it has become difficult to tell them apart.
From quick commerce and cloud kitchens to intercity food delivery and even selling tickets for events and concerts, the two companies appear to be aping each other’s every move to be everything everywhere all at once.
However, what began as a bold bet to dominate every possible vertical falling under the ambit of food, lifestyle and entertainment is now undergoing a major course correction.
For starters, both are reconsidering their blitzkrieg, and while at it, they are gracefully stepping away from non-core bets, diluting underperforming or experimental units to focus on core operations to drive profitability.
For context: Zomato, which once saw the future of food logistics in ultra-fast deliveries, gave up on its 15-minute food delivery service, Quick, four months after its launch in January. It has also pulled the plug on its home-made meal service, Zomato Everyday. Tailored for office-goers and budget-conscious consumers, the service was floated in January 2025.
Swiggy, too, has made similar retreats. It suspended Swiggy Genie, its courier and pick-up-and-drop service that had gained popularity during the pandemic. The company also gave up on its private label food business by entering a strategic agreement with Kouzina, a chain of virtual restaurants, granting it exclusive rights to operate Swiggy’s digital-first food brands.
So, what has triggered this metaphorical fission in strategy?
One possible reason could be the growing realisation that profitability hinges on diversifying smartly rather than untamed expansion.
A market analyst, who did not wish to be named, pointed out that the duo’s attempt to rule their customers’ wallets for everything from food to groceries and entertainment to lifestyle has been quite ambitious. “The course correction was overdue,” the analyst said.
He believes that foodtechs are now forced to burn the visceral fat in the form of non-core businesses because those have been slowing them down, also eating into the revenues of core businesses and impacting operational efficiencies.
“Moreover, the more the segments, the higher the chances of operational hiccups. Managing logistics, customer experience, and quality control across a wide array of verticals inevitably leads to fragmentation and strain on core operations,” he added.
State Of Eternal Affairs: Zomato’s Diversification Saga
Eternal’s push to transform Zomato into a broader lifestyle platform in 2024 was not only about ambition but also a strategic response to a slowing core business — food delivery, according to industry observers.
Also, a glance at the table below reveals how the company has seen a marginal QoQ increase in its monthly transacting users.
In terms of monthly transacting customers, Zomato’s food delivery growth began strong with a 6.84% QoQ jump in Q1, but momentum quickly slowed, and Q2 saw only a 1.97% sequential rise, followed by a slight decline of 0.97% in Q3. This dip signalled stagnation, and although Q4 showed a mild recovery (1.95%), overall FY25 growth of the company’s monthly transacting users (food delivery) was modest at just 2.96%
Interestingly, Eternal founder and CEO Deepinder Goyal, too, acknowledged a slowdown in the company’s food delivery business while announcing the company’s Q4 FY25 results. He said the slowdown was due to rising competition from quick commerce platforms and weak discretionary spending. Goyal added that services like Zepto Cafe, Swiggy Snacc, and Blinkit Bistro, too, were eating into demand for restaurant deliveries.
In terms of Zomato’s food delivery numbers, average monthly transacting numbers grew to 20.9 Mn in Q4 FY25 from 20.5 Mn in Q4 FY24. Net order value (NOV) growth also remained subdued at 14% YoY versus the 20% YoY growth guidance.
Hence, the company was under pressure to unlock new revenue streams. Blinkit’s success became the reference point, and the company started envisioning similar success stories with other verticals too, a former Zomato employee said.
This was when the company got engulfed in the wave of diversification, paving the path for Zomato’s yet another bold move (besides Blinkit) — the INR 2,078 Cr acquisition of Paytm’s movies and events ticketing business, Insider, in August last year.
The acquisition that was planned with the launch of the ‘District’ app meant but one thing — declaration of war against BookMyShow, the lone behemoth in the realm of the entertainment ticketing segment. Even the company knew the path wouldn’t be all rainbows and sunshine.
In its Q4 FY24 earnings call, the management acknowledged that while the gross order value (GOV) of the going-out vertical continues to grow at over 100% YoY, the business still operates at an adjusted EBITDA loss of -2 to -2.5% of net order value (NOV).
Besides, given that the transition of users from Paytm’s ticketing business and Zomato’s dining out platform to the District app requires sustained investment, the company doesn’t expect the business to turn profitable in the near term.
But Zomato expects losses to eventually see stability at current levels.
“However, even with plateauing losses, the company will have to keep spending on creating supply. This means: curating new event experiences, forging partnerships and acquiring new users for the District app… and all of this translates into one thing — prolonged burn,” the market analyst added.
Moving on, Zomato’s ambition to become a lifestyle super app didn’t just manifest into flashy verticals like events, entertainment, and ticketing — it also showed up in its renewed aggression in food delivery, the very space where it first made its name.
Therefore, Zomato began piloting a 15-minute food delivery service in select parts of Mumbai and Bengaluru early this year.
But the company now finds the initiative extremely difficult to operationalise as it has failed to generate incremental demand.
“Customers do not necessarily want food fast, they just want it reliably. A 10-minute turnaround without full control over the supply chain leads to poor customer experiences, operational stress, and negligible upside. Instead of delighting users, it makes the company vulnerable to inconsistent quality and frequent delays,” a Zomato insider added.
Satish Meena, the founder of Datum Intelligence, opined that without controlling the entire supply chain, delivering food items within 10 to 15 minutes cannot be a profitable proposition.
Swiggy’s U-Turns
In 2024, also the year of its public listing, Swiggy aggressively expanded its service offerings, launching several new verticals to diversify beyond its core food delivery business.
Among the most prominent launches was Bolt, a 10-minute food delivery platform. Initially launched in Bengaluru, Chennai and Mumbai, Bolt quickly expanded to over 400 cities, with over 40,000 restaurants, including KFC, McDonald’s and Starbucks.
To complement Bolt, Swiggy introduced Snacc, a separate app for instant delivery of snacks, beverages, and small meals within 15 minutes.
Continuing to diversify its portfolio, Swiggy launched Pyng, an AI-powered platform that bridges users with verified experts like yoga teachers or chartered accountants.
With this, Swiggy marked its entry into the on-demand services marketplace, making professional services easier to access.
Apart from these customer-facing services, Swiggy also entered events via Scenes and the B2B space with Assure, to keep pace with Zomato.
Interestingly, Swiggy, too, has begun consolidating its operations. The company has shut down Genie, its hyperlocal courier business, which competed with Porter, Borzo and Uber.
According to a competitor, sourcing delivery riders specifically for packages is a challenge, particularly in cities like Bengaluru. For Swiggy, which was already managing fleets for food delivery and quick commerce through Instamart, sustaining a separate rider network for Genie only added to the complexity.
In another such move, Swiggy exited its private label food business by transferring exclusive rights for its digital-first brands, including The Bowl Company and Homely, to cloud kitchen operator Kouzina.
Balance Sheet Blues
Imperative to highlight that the rollbacks by Zomato and Swiggy are rooted in the growing pressures on their respective balance sheets.
After diversifying at a breakneck speed, they are now faced with the hard realities of cost structures that don’t always align with revenue potential.
In Q4 FY25, Zomato and Swiggy both reported robust top-line growth. Zomato’s revenue surged to INR 5,833 Cr, largely buoyed by its three core pillars — the food delivery business (INR 1,739 crore), Blinkit’s quick commerce arm (INR 769 Cr), and Hyperpure, its B2B supply chain vertical, which posted a 99% YoY growth in revenue to INR 1,840 Cr.
However, despite the momentum, the company’s net profit declined sharply to INR 39 Cr in the quarter, largely thanks to ongoing investments in Blinkit and newer bets like the ‘District’ lifestyle app.
Meanwhile, Swiggy clocked INR 4,410 Cr in revenue in Q4, up 45% YoY, but saw its net loss nearly double to INR 1,081 Cr. The widening losses were fuelled by surging operational expenses.
“All of this explains the strategic pullbacks witnessed lately, Swiggy exiting Genie and private labels, Zomato pulling the plug on services like Quick and Legends. The rationalisation marks a reset, indicating that while growth via diversification was necessary, financial discipline and profitability are in the spotlight,” the market analyst said.
Platform Fee To The Rescue… But For How Long?
While it won’t be easy for Zomato and Swiggy to suddenly change course, the future of these two foodtech giants is all about heading towards a more focussed set of revenue streams driven by value rather than FOMO.
In the process, both foodtech giants appear to have struck gold with the platform fee, which has grown from just INR 2 in 2023 to INR 10 today.
But the real question is: Can rising platform fee help the duo neutralise the impact of aggressive expansion? Or is rationalisation the only way forward?
Devangshu Dutta, the founder of Third Eyesight, thinks otherwise. He believes that the companies will not stop looking for new revenue streams, even as they will continue to amputate the ones that offer little value.
“All of these companies have to look for growth, which is a given. If their existing businesses are not delivering the kind of growth they need to justify their stock price or valuation, then they have to look at new avenues.”
According to him, we are bound to see a flurry of experiments, trials of different services and new verticals as these companies attempt to expand their addressable markets.
At the end of the day, the foodtech duo is stuck in a balancing act of rationalising what works and doesn’t. However, going ahead, this rationalisation game is only going to get more pronounced as they will strive to shield their core bread and butter businesses.
[Edited by Shishir Parasher]
(Published in Inc42)
admin
May 19, 2025
Aakriti Bansal, Medianama
May 19, 2025
Zepto has launched Zepto Atom, a paid analytics product for consumer brands. The tool offers live dashboards with minute-level updates, PIN-code level performance maps, and Zepto GPT, an in-house Natural Language Processing (NLP) assistant trained on internal data.
While Blinkit and Swiggy Instamart have not announced comparable offerings, Zepto is pitching Atom as a first-of-its-kind play in quick commerce data access.
The launch comes as Zepto gears up for a public offering. The company is in talks to sell $250 million in secondary shares to Indian investors to boost local ownership ahead of its IPO. With a $5 billion valuation and a presence in just 15 cities, Zepto is seeking new ways to expand both revenue and market influence.
A strategic product in the lead-up to IPO
Zepto’s push to monetise platform tools comes at a time when it is attempting to raise its domestic shareholder base to 50%, reportedly as part of regulatory preparation for a future IPO. CLSA, in its 2024 App-racadabra report, estimates Zepto holds 28% of India’s quick commerce market despite a limited presence, trailing Blinkit at 39%.
With Zepto Atom, the company appears to turn its data infrastructure into a service layer for brands. This raises questions about how user behaviour transforms into brand-facing insight.
Zepto’s Multi-Lever Margin Play
Zepto’s cost structure is divided into warehouse transport, dark store operations, last-mile delivery, and corporate overheads. According to CLSA’s App-racadabra report, the company has achieved measurable efficiency gains across each of these categories. For instance, long-haul warehouse transport costs fell from Rs 1.7 per order in March 2022 to Rs 0.8 in February 2024. Handling costs inside dark stores declined from Rs 11 per order in June 2023 to under Rs 10 by January 2024. Last-mile delivery expenses dropped 20% between December 2023 and February 2024, from Rs 50 to Rs 40 per order.
HDFC Securities highlights three key levers for e-commerce profitability: raising average order values via premium or bundled products, improving take rates through ads and private labels, and reducing last-mile costs through better routing. Zepto has pursued these through initiatives like Zepto Café, Relish (in-house food and meat brands), the Zepto Pass loyalty program, and now Zepto Atom—signaling a multi-pronged approach to expand margins beyond logistics.
Whether brands will act on the data that Atom delivers, remains an open question.
Granular offtake data is rarely made available to brands, whether it is by offline retailers or by online platforms; so far brands have been largely flying blind, especially when it comes to marketplaces. In that sense, Zepto’s Atom can be a huge enabler and gamechanger,” Devangshu Dutta, Founder, Third Eyesight, told MediaNama.
Not All Brands May Be Ready
Zepto Atom lets brands monitor impressions, conversions, share of voice, and customer retention in near real-time.
“While having access to real-time geographical and time-stamped sales data is potentially an absolute goldmine for any brand, how useful it is will depend much more on how ready or capable the brand is to use the analysis and make adjustments to its strategy,” said Dutta.
Brands can use Zepto GPT, the NLP assistant embedded in Atom, to query platform data conversationally—for instance, to identify under-indexed Stock Keeping Units (SKUs) in a specific PIN code or analyse what’s driving category sales. However, it remains unclear how brands interpret or act on these insights in practice.
The company has not disclosed Atom’s pricing model. It also hasn’t confirmed whether access will be open to all brands or restricted to high-volume partners. These details will likely determine adoption.
How Atom Fits into the Margin Strategy
Zepto Atom’s real-time sales metrics, SKU-level performance data, and customer retention patterns align closely with the margin levers identified by HDFC Securities. By providing granular insights, Atom enables brands to fine-tune pricing, reposition products, and run targeted campaigns, potentially increasing order values, improving take rates, and optimizing delivery routes. Such adjustments could boost volumes and conversions, benefiting Zepto through higher commissions and ad revenues.
“For Zepto it is certainly a differentiator and could be a driver for additional revenue not just in terms of the subscription fees that they would charge but the incremental impact it could make on the brand partners’ sales and, by extension, on Zepto’s own overall fees/revenues,” said Dutta.
Still, widespread adoption may depend on how well Zepto supports brand onboarding and data literacy. “It may make sense for Zepto to even assist brand-side personnel in understanding how best to use the new tools and also help them create tangible operational changes on their side using the insights.”
Search behaviour and profiling concerns remain unresolved
Earlier this month, Zepto used search behaviour to curate mood-specific product categories such as “Crampy” and “Hangry,” in response to searches related to premenstrual syndrome (PMS)—a recurring condition affecting many women before menstruation. Critics told MediaNama that this kind of emotional profiling could occur without user awareness or consent.
Zepto’s privacy policy states that it collects lifestyle, health, and behavioural data for personalisation and internal analysis. However, the company does not explain whether it stores inferred data, shares it with brands, or applies it to pricing and promotions.
Whether Atom makes any of this data visible to brands remains unclear.
Why This Matters
Zepto Atom signals a shift in how quick commerce platforms are looking to generate value—not just from delivery, but from the data their ecosystems produce. With tools like real-time dashboards and search-linked behavioural insights, Zepto is turning user interactions into assets for brand partnerships.
The move raises larger questions about where platform growth is coming from. Is the business of quick commerce becoming the business of behavioural data? As brands gain new visibility through Atom, the balance between consumer experience and commercial analytics becomes harder to separate.
MediaNama has reached out to Zepto with these questions:
What specific types of consumer behaviour and purchase data are made available to brands through Atom?
Does Zepto Atom include inferred metrics such as user intent, repeat behaviour, or emotional tagging in its brand-facing dashboard?
Are brands shown real-time access to individual-level trends, or only aggregated cohort-level insights?
Are users informed that their platform activity may be used to generate commercial insights for brands?
Can users opt out of this data being shared with third parties via Atom?As of publication, Zepto has not responded. We will update the story when we receive a response.
(Published in Medianama)
admin
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
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)