In 2024, quick commerce growth boomed. Players now eye the sweet spot of profitability
With consumers looking at quick commerce players like Zepto, Blinkit, and Instamart for everything, from eggs to iPhones, the companies now aim for profitability and expansion.
In 2024, the spotlight was on quick commerce. The wind was behind its sails as the sector saw rapid growth propelled by widespread consumer adoption in metros and capital flooding to support innovation as investors found a new gold rush.
Initially marketed to fulfil last-minute grocery needs, quick commerce’s use case expanded this year beyond daily essentials and groceries to even clothing, footwear and electronics, stepping on the toes of ecommerce players like Amazon and Flipkart. This prompted the giants to introduce their own quick delivery offerings to protect their turfs.
This reflects changing consumer patterns as the demand blew up for instant grocery delivery as an alternative to physically visiting a kirana store or a supermarket. By offering a bigger assortment of products like toys, fashion basics, beauty items etc, players like Zomato-owned Blinkit, Swiggy Instamart, and Zepto—which established themselves as formidable players in the sector—also gave consumers the option to do last-minute shopping.
The exponential growth in the sector has attracted newer ventures, and at the same time, brought in scrutiny and competition checks.
The holy trinity
Zepto, Blinkit, and Swiggy Instamart are dictating the terms of growth in the sector.
Sriharsha Majety-led Swiggy went public this year with a Rs 11,327-crore initial public offering (IPO) and has since made a gain of 49% (as of December 19, 2024) over its issue price. The foodtech giant looks to turn its quick commerce business profitable by September 2026.
Meanwhile, quick commerce’s golden child, Blinkit, managed to achieve EBITDA breakeven less than six months into the year. The only profitable player on the scene, it is now expanding beyond metro cities and making inroads with new categories. Its parent Zomato earlier raised $1 billion, or Rs 8,500 crore, through qualified institutional placement for Blinkit's store expansion.
Zepto, which is eyeing an IPO in 2025, plans to double down on food delivery with a renewed focus on expanding Zepto Cafe, adding more categories, and tapping on monetisation to improve unit economics. The unicorn is flushed with cash after raising $1.35 billion this year.
Profitability and growth
In March, Zepto started charging a platform fee of Rs 2 per order on top of a variable handling fee. The firm also levies restaurant charges on Zepto Cafe orders on top of taxes and occasional overhead fees like late-night charges, surge costs, and rain charges. Both Swiggy and Zomato hiked their platform fee to Rs 10 over the year from Rs 5 at the beginning of the year, citing a surge in orders during the festive season.
This is not unusual as the expensive nature of hyperlocal delivery operations drives quick commerce platforms to rely on delivery charges, along with supplemental revenue coming from advertising and additional channels.
“Brands are now spending more on making sure that their products are displayed to customers on quick commerce apps because they are more competitive than kirana shops … Brands are spending just like they were spending on Amazon and Flipkart,” notes Satish Meena, Founder at Datum Intelligence.
A big part of the advertising revenue comes from D2C brands that find an overlap with the target group and see higher conversions on quick commerce platforms than any other channels.
“What’s particularly noteworthy is that it’s the Tier I customers that are driving this shift toward quick commerce—the same cohort that also gravitates toward D2C brands,” explains Keshav Biyani, Co-founder, The Good Bug, elaborating that the company has already reallocated ad spending towards newer quick commerce players.
Swiggy too expects growth in advertising as a key driver for improving take rates for Instamart, with its contribution margin projected to expand to 9%.
However, upcoming players like ex-Flipkart executive Ayyappan R's startup FirstClub, an omnichannel and quick commerce retailer, want to prioritise customer trust and transparency over advertising. The firm will operate on a subscription model to bring in additional revenues.
For Zepto, some of these additional revenues come from Zepto Pass launched earlier this year. However, Zomato CFO Akshant Goyal, during the company’s September quarter earnings call, had said that the company doesn’t plan to introduce a loyalty programme for Blinkit yet.
The next areas of monetisation being developed are sampling services and private labels, however, there is a need to cultivate the infrastructure.
10-min food delivery x quick commerce
Platforms are expanding SKUs in a bid to improve order frequency and bring up average order value.
Zepto, among the first to introduce the 10-minute delivery concept, aced the category as it ultimately launched its standalone app for food delivery with Zepto Cafe. The service already clocks close to 30,000 orders a day and is estimating an Annual Run Rate (ARR) GMV of Rs 160 crore.
Now, the company is focusing on expanding the segment. If it grows significantly, it could move beyond just 10-minute quick food deliveries, potentially onboarding restaurants and competing directly with full-scale food delivery models, noted Meena.
Swiggy’s Bolt—its take on the 10-min food delivery service—already accounts for 5% of the company’s total orders and the share is likely to grow as Swiggy scales it beyond top cities. Zomato has also started pilots for Bistro by Blinkit, along with players like magicpin and Ola Consumer entering the fray. Tata Digital’s BigBasket is also in the process of launching food as a category, while new startups like Zing and Swish have started delivering in select pincodes of Delhi-NCR and Bengaluru, respectively.
Higher average order values help offset the high cost of logistics and warehousing, prompting players like Zepto to launch SuperSaver, which takes in a minimum order value of Rs 1,000 to attract price-conscious consumers and place itself as a grocery stock-up service rather than just a top-up service.
Stretching the limits of quick commerce
Categories like gourmet foods, premium beverages, and small electronics are expected to see growth as platforms refine their delivery capabilities, explains Ninad Karpe, Founder and Partner of 100X.VC.
Both Blinkit and Swiggy have initiated pilots for a large order fleet, with the latter setting up separate infrastructure for extended delivery timelines for some Instamart categories. Swiggy plans to increase the average size of its stores by 30-35%, and at the same time, is rolling out megapods—stores which can house over 50,000 SKUs—to improve the size and selection of its categories.
“It will be difficult for challengers (newcomers) to disrupt the existing market, given the customer isn’t price conscious and hence doesn’t look out for multiple options (unless the current platform under delivers),” notes Kushal Bhatnagar, Associate Partner at Redseer Strategy Consultants.
FOMO brings new entrants
According to the Datum Report, the Indian grocery market is expected to add about $250 billion in sales by 2028, driving everyone in the hunt for a share of the slice.
Vertical marketplaces like Myntra and Nykaa have also launched 30-minute delivery for select assortment under their M-Now and NykaaNow initiatives, respectively. Tata Digital’s ecommerce app, Tata Neu, has also launched its quick commerce arm under the name Neu Flash to offer apparel, beauty and personal care, and electronics, along with daily essentials.
Walmart-backed Flipkart launched Flipkart Minutes in Bengaluru this year, with plans to scale to other cities. Amazon, through Tez, expects to enter the race as soon as the end of this year.
Ecommerce players like Amazon's edge in quick commerce lie in strong sourcing integration with brands, since a larger chunk of its business comes through slotted commerce, and expertise in non-grocery categories, remarks Bhatnagar.
“This will be a multiplayer market. Everybody is approaching it from different perspectives; somebody will fight on price, somebody will fight on assortment, somebody will fight on speed etc,” believes Vipul Parekh, Co-founder of BigBasket.
Channel shift and regulatory scrutiny
However, with so many players entering the retail market, companies are looking at a channel shift rather than a market creation opportunity.
The economics of the quick commerce platforms make matters worse for kirana stores and offline supermarkets as these platforms are able to offer better pricing since there are few intermediaries. On the producer side, major FMCG giants like HUL, Tata Consumer, Dabur and Parle Products have flagged better-than-average growth in their quick commerce channels mix, with higher contributions expected in the near future.
While unorganised retail holds a whopping 93% share in the Indian grocery market and quick commerce holds less than 1% as of CY2023, according to a Datum Intell Report, analysts expect the quick commerce contribution to grow as much as 3% by 2028, with the sector turning into a $40 billion market by the end of this decade.
“Quick commerce has largely taken share from the slotted ecommerce players in the top cities (and not so much from the offline stores), as QC has targeted the evolved big-city customers who were already purchasing their groceries online from different modes,” believes Bhatnagar.
This rocket growth is bound to attract regulatory scrutiny, with major quick commerce players gearing up to change or already executing changes in their captable structure to include higher representation from domestic investors to comply with FDI regulation on holding inventory.
Edited by Kanishk Singh