Quick commerce to contribute $1B in GMV to festival sales: BofA Research

Quick commerce is projected to generate $1 billion in gross merchandise value (GMV) during the festival season, as consumers increasingly shift from traditional offline shopping to faster, on-demand channels, according to a research note by BofA Global Research which cited a survey done by Datum Intelligence.

Online commerce platforms are expected to generate $12 billion in GMV during the festival season, reflecting a 23% increase compared to the previous year, according to the research note. This growth surpasses last year’s 16% rise. 

Quick commerce platforms are projected to contribute nearly $1 billion to the total GMV.

GMV represents the total sales value and does not account for discounts, returns, commissions, or other fees.

“With increased dark stores, wider assortment, and improving popularity we expect the festive season growth to be strong for these companies (quick commerce) leading to a stronger y-o-y growth (hardly any sales last year),” the report said. 

Festival consumption is fueled by shoppers eager to take advantage of offers and deals, with many holding back their spending for 2-3 months in preparation for purchases during this period, sometimes even opting for credit, BofA said in the note. Citing the survey by Datum, BofA noted that around 65% of online buyers plan to increase their spending during the festive season, with 60% intending to spend over Rs 50,000.

The note highlights that non-grocery online sales, such as smartphones and furniture, typically occur during the first wave of the festive season, with quick commerce playing a lesser role. However, in the second and third waves, around Dussehra and Diwali, quick commerce platforms are expected to become more prominent as consumers shift to ordering groceries and other festival essentials like gold coins, utensils, and gifts. Quick commerce platforms began delivering gold coins earlier this year during Akshaya Tritiya, a festival traditionally marked by gold purchases.

Changing consumer spending patterns

“Consumers are spending on discretionary items like entertainment and travel and that is coming at the cost of retail purchases as overall income is not rising material.” cited the report based on an investor call with Datum intelligence consultant Satish Meena. 

Smartphones, including the latest models now available on quick commerce platforms, are experiencing longer replacement cycles due to the trend of premiumisation, which encourages users to invest in more expensive devices upfront, according to the note.

However, depending on inventory access and model availability, smartphones could become a growing category in the quick commerce space, the note said.

Grocery and beauty and personal care (BPC) are expected to witness much faster growth compared to other categories, driven by quick commerce players. This trend could challenge vertical ecommerce platforms like Nykaa, Tira, and Purplle, which are increasingly focusing on expedited same-day deliveries to stay competitive.

In 2023, the online grocery market stood at $317 million, and it is projected to grow to $800 million during the 2024 festive season as consumers opt to avoid traffic and shop online.

Groceries are expected to contribute 13% of festive ecommerce sales this year, up from 10% last year, with quick commerce platforms driving over 50% of this growth as consumers shift their planned stock-up purchases online. This shift is further supported by platforms offering super saver and wholesale pricing options, along with slotted delivery, to attract monthly stock-up orders.