Quick commerce is on its path to become the new e-commerce. Recently, Zomato found itself in headlines, as did Zepto, regarding foraying into e-commerce territory. Zomato-owned Blinkit and Zepto are set to expand their quick commerce offerings into the e-commerce industry by adding categories like fashion, beauty, electronics, toys, home and kitchen, among other segments. Reportedly, the platforms will add thousands of new SKUs in the next two months, taking the number to over 10,000 as they see consumers coming for frequent purchases driving commerce through the platform.

If this strategy works out, eventually it could make the two companies a part of the big league, where they will have to compete with the likes of existing e-commerce giants like Amazon, Flipkart, Nykaa etc.

exchange4media has reached out to Zepto for their response, but awaits reply. Zomato declined to comment.

A major part of this e-commerce expansion is supposed to be through a D2C route, say sources, with both the players having been in talks with D2C founders. However, with established giants in the e-commerce category, one might wonder how viable the strategy is in the long run.

According to brand experts, the move has the potential to shake up the D2C industry a bit. “I wouldn't call it a game changer right away, but I think it's a big play in D2C given that they were doing groceries and now they're going to get into much, much larger categories, everything from lifestyle to fashion to mobile phones,” said brand and business strategist Lloyd Mathias.

According to Statista, in 2023 the revenue generated by the e-commerce market amounted to more than 63 billion USD in India. This was a 10% jump as compared to the 57.45 billion USD generated in 2022.

With rising internet penetration and smartphone usage, the category witnessed an exponential growth. The Indian e-commerce sector is anticipated to reach approximately 350 billion USD by 2030, and the digital buyer base in India is expected to touch 370 million by 2025.

A deeper dive

A subscription-based model, for example, has been the e-commerce mantra for the longest time, to build customer retention. Panning out, Zepto Pass, the membership program by Zepto, has amassed 1mn sign-ups since its launch on 29 February, according to Elara Capital’s recent report. The company claims subscribers have increased their monthly spend on the app by more than 30% during the pilot phase. It expects the subscription program to increase frequency and average order value (AOV), which may offset cost of discount through company and brand funding, the report added.

The move aligns with strategies employed by e-commerce giants, such as Amazon (Prime) and Flipkart (VIP), utilizing subscription programs for customer retention.

Rashi Bhushan AVP, Mudramax points out that the platforms’ success would hinge on a multitude of factors, including market dynamics, competitive landscape, customer behavior, demand & supply dynamics, and operational challenges. “Transitioning to e-commerce demands a meticulous assessment of these variables and the formulation of a comprehensive long-term strategy,” she said.

The recently released quarterly financial report of Zomato showed Blinkit emerging as a star, amidst Zomato's other businesses. Its ad revenue grew at double the pace of GOV growth over the last one year (up 220% YoY in Q3’FY24 vis-à-vis 103% YoY GOV growth). Blinkit’s founder Albinder Dhindsa had also mentioned that quick commerce is one of the most transacted categories online, and hence the massive growth. Reportedly, Zepto too hit a $1 billion gross sales run-rate.

The Elara Capital report pointed out that with convenience-led ordering across products, there is a possibility that the q-commerce segment would give tough competition to the likes of Amazon, Flipkart, Myntra, Nykaa and other larger e-commerce firms; however, the share of q-commerce firms within e-commerce may not scale up beyond a point, due to limitations of assortment across product categories.

The Q-Comm Challenges

Reliance Retail’s JioMart had to stop the operations of JioMart Express, the quick commerce delivery arm of JioMart launched last year. Dunzo had to start pushing for 60-minute deliveries compared to the 15-minute deliveries it was focusing on earlier and also had to shut down some dark stores to focus on profitability rather than rapid geographical growth.

Ola Dash is another player that made a quick exit from the market. The quick commerce space, which saw a boom in investor interest in 2021, saw a crash as the funding winter set in. The challenges went on the rise.

Bhushan highlighted that this is a business model with non-diversification and limited product range and has a heavy dependency on hyper-local demand.

“A narrow product range hinders customer retention and stifles average order value and relying solely on local demand leaves the platform vulnerable to market fluctuations,” she explained.

Increasing product range with more SKUs, therefore, seemed like a viable play to experts.

E-commerce: A bright light for advertisers

Digital experts over the past two-three years have time and again noted how e-commerce is the next big digital advertising revolution. Right from eating into traditional search revenue to having an ad revenue growth rate higher than giants like Google & Meta, e-commerce seems to be the way forward for advertisers. And hence, they add, this is another motivator for companies like Zomato & Zepto to venture into this booming space.

“E-commerce is attractive and I think this is scheduled to grow because a lot of businesses want performance marketing, they want to see the advertising convert to sales. They recognize that being on an e-commerce site, where people are coming to purchase something, makes sense,” Mathias added.

Bhushan says, “This shift offers advertisers an expanded scope to reach targeted audiences, tapping into a broader and more diverse customer base. With access to innovative ad formats and partnership opportunities, advertisers can create more engaging and immersive experiences for their audience. Furthermore, the introduction of direct response ads can drive website traffic, boost sales, and increase conversions.”

Experts point out

However, experts also note that a potential drawback is the risk of overstretching resources and diverting attention from the platforms’ core business, which is primarily focused on grocery delivery and related services. The Elara report further noted that groceries and FMCG still account for approximately 75% of gross merchandise value (GMV) for key q-commerce platforms despite expanding into product categories, such as beauty & personal care, gifting, and apparels, as the former remains a major driver in frequency.

Sajal Gupta, Chief Executive, Kiaos Marketing, says that no matter what one calls it, q-commerce or e-commerce, by nature these firms are going to be synonymous with grocery.

On the brighter side, Gupta adds, this is a niche that the larger e-commerce giants do not cater to, to a big extent. Even though Amazon Fresh is a similar segment, one normally doesn’t relate the ‘Amazon’ tag with daily needs.

Mathias highlighted that this strategy seems viable for the long run, considering it is an adjacent space to where Blinkit & Zepto already operate in and also because there already exists a fully sorted and large delivery network.

The existing e-commerce heavyweights are also in for an impact to some extent at least, experts feel. Like Mathias says, “The market will get a little crowded, with one more major player entering. So, the pressure will automatically come on the existing e-commerce giants, even though they have a large and well trenched network.”