Future of Quick Commerce
I am Aarihant Aaryan! Welcome to the Iron Sharpen Iron newsletter,
I share my weekly homework on building businesses, learning about human behaviour, and sometimes decoding industries and business models for fun.
I can’t control my curiosity :)
I wrote a post on quick commerce in Dec 2021 - my prediction on how these companies will be D2C enablers, building a tech vertical and pushing into electronic categories turned out to be true :)
Since then quick commerce has scaled very well, just giving you some context on the scale
It took 2/3 years for quick commerce players to get to their first 2000 crore in revenue, and Big Basket took 5/6 years to reach there. Dmart took around 9/10 years to reach revenue of 2000 crore.
Zepto & Blinkit are on their way to do 2x in revenue in FY24, Instamart by Swiggy should see some level of growth.
If Big Basket and Dmart don't pivot - Quick commerce will grab their market share before they realise
Damodar Mall, CEO of Reliance Grocery Retail said something interesting - there are 3 types of Indian buyers
Consumers who buy premium stuff
Consumers who buy in small units to save money
Consumers who buy in large units to save money ( this was the core insight for them to launch smart bazaar)
So for quick commerce to become large, they will ideally want to increase the frequency of orders - or will be launching interesting combined deals
They have already started doing it in a bunch of categories, selling 4 cokes for 108rs instead of 120 bucks
Another unique challenge is the dark stores are placed in high-traffic areas + places that have higher per capita income. If they’re placed in better per capita income locations, the better frequency of orders and Average order value
But to scale, they need to launch a lot of dark stores across the country, dark stores’ performance will become better as per capita income increases of that location
Another way to tackle the solution is to launch company-owned dark stores in promising areas, that have high order value, and order frequency ( so that they can consume the entire margin)
And launch franchise-owned stores in mediocre areas, that have medium frequency and AOV and own commission on revenue
A Few predictions I would love to make before I share my thoughts on this:
1. There will be only 2 brands who will be ruling this space, the other brands will get acquired or merged. Amazon and Flipkart will double down here, and we will probably get to see a similar acquisition like Flipkart :)
2. 5 years down the line, Quick commerce players should be making $ 5 billion in revenue
3. Quick commerce will be the new e-commerce in 1-2 years. I'm extremely bullish on quick commerce, it's a pure Delta 4 experience and we all know how consumers love to jump towards the next step of efficiency
As per capita income and consumption increases, this will become more promising.
Once the fashion category, gets into Quick Commerce it will be Christmas for everyone. Anyone who launches the fashion category and executes very well is the winner of the market
Quick commerce will launch its own fintech vertical
Quick Commerce will make $100M+ in revenue from their ad tech vertical in 2 years
If you have any thoughts or questions share them in the comments :)
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