Tier II cities pick up quick commerce adoption: Emkay report
Quick commerce gains traction in Tier II cities as larger assortments, lower rents cut dark store breakeven to 800 orders/day, noted the brokerage.
Quick commerce is gaining traction in Tier II cities, particularly due to a wider assortment of groceries, according to a report by brokerage Emkay.
The surge is driven by a greater variety in offerings, with dark stores stocking about 8,000 SKUs compared to local grocery stores, which usually store around 1,000 SKUs.
Moreover, lower rent and wage costs have also pulled down the break-even mark for dark stores to 800 orders per day from 1,300 per day per store. However, challenges like higher logistics costs, lower order density, and smaller average cart sizes continue to persist, noted the brokerage in a report dated July 9.
The note also remained cautious on the hybrid model for quick commerce, with retail stores using the existing store network to fulfil quick commerce orders.
"While the management prioritises scaling up this business, we maintain a sceptical outlook on the long-term viability of a hybrid model, given significant execution challenges inherent to its design and QCom availability limited by store timings," stated the report.
Reliance Retail, in its latest earnings call, outlined its plans to fulfil quick commerce services through its existing network of stores, including Reliance Digital and Trends outlets.
Besides Reliance, Amazon Now has also entered the quick commerce fray, and is currently offering its services in select pincodes of Delhi and Bengaluru.
"Overall, the pace of dark store additions by these ecommerce players remains slower than that of dedicated QCom players, primarily due to such demanding compliance requirements," stated the note.
While Amazon Now has managed assortment expansion and competitive pricing, it is still off to a slow start as compared to incumbents in the game.
"Its assortment of affordable items has also been good vis-a-vis q-com incumbents, though it needs to ramp up on the premium listings. Flipkart Minutes, on the other hand, continues to lag on assortment (based on our basket) despite its launch almost ten months back in Bengaluru," shared Axis Capital in a note dated July 15.
Edited by Kanishk Singh