Feb 14, 2022.
Recently, I came across an ad of grocery delivery firm Zepto on YouTube, with which I was able to instantly connect. The ad focuses on a young couple who do not have stock of diapers and need to change the baby’s diaper immediately. An app named Zepto comes to their rescue and boom the diapers are delivered in 10 minutes. In the recent few years, I have been in multiple situations wherein my planning of groceries and baby products has been chaotic leading to a lot of anxiety. And hence I could instantly relate to the ad. My curiosity got better of me and I started researching on Zepto. What impressed me the most was the founders were some 19 year old Stanford graduates, who experienced delivery delays during lockdown which motivated them to start Zepto. But this kept me wondering aren’t there too many firms competing in this space of quick commerce? Does this mean more hard work for the delivery agents? Does this mean more delivery bikes or vehicles on the road?
What exactly is quick commerce? Quick commerce (Q- commerce or on-demand delivery) focuses on delivery of smaller basket sizes within a time range of 30 minutes – 1 hour, unlike E-commerce which can take almost a day to 7 business days or more for delivery. Unlike the big E-commerce companies the quick commerce is more geared towards becoming the consumer’s biggest kirana store. The emergence of quick commerce was led by the COVID-19 pandemic. I was wondering how much more quick can quick commerce be and lo behold players in this space were just not willing to stop at 30 minutes. Differentiation in the space of quick commerce is quite difficult, however firms like Zepto were successfully able to do so by reducing their delivery timelines drastically. How many such players are there in the market who promise shorter delivery timelines from 10 min – 20 min? Few firms like Zepto, Blinkit (median delivery time of 10 minutes), Dunzo, google (delivery within 19 minutes), Amazon fresh, and Swiggy Instamart. Other players like big basket, Ola are also targeting this segment through Big basket Now and Ola Dash. Zomato is also planning to invest $400 million in the quick commerce segment. Many players are upgrading to this ultra-fast delivery system.
As a consumer I generally opt for big basket due to its huge catalog size and extremely reasonable prices, however during the pandemic I was often pushed into a queue where I had to wait for a delivery slot. A similar situation was faced by the founders of Zepto. According to excerpts from one of the interview of the co-founders, the average delivery time of an order on Zepto was 8 min 40 seconds. One can wonder the hurdle race the delivery partners will have to finish to ensure such a record time to deliver products. But how are these companies handling such short delivery timelines? Are they exploiting the delivery personnel? The answer is no, the delivery personnel do not drive at break neck speed to achieve this feat. According to few of these firms, the average time for picking the products varies from 1 min to 2 minutes 30 seconds and this is mainly to due to the increasing number of dark stores. The density of dark stores is so high, that according to a few firms even if the delivery personnel drives at 10kmph, he will reach the destination within 10 minutes. What are these dark stores? Pre pandemic many of the online grocers relied heavily on the local kirana stores to deliver the products. One of the biggest problem faced in this scenario was the unavailability of products in these stores. Due to this, the delivery person will have to scout other stores which can be time consuming and hence cannot promise the customer an express delivery. Post pandemic, dark stores increased in number exponentially. Unlike the name which sounds suspicious and negative, “dark stores” is a bright concept that has become the savior for consumers and organizations as well. Dark stores are distribution fulfillment centers ranging from anywhere between 2000 square feet to 20,000 square feet. Generally abandoned traditional retail stores which have been turned into a center for fulfilment. Dark stores are much smaller in size than the conventional warehouses and are located much closer to the consumer location. Consumers do not have access to dark stores, these stores are used by organizations to accurately and quickly fulfil orders, and at times multiple online players use the same dark stores for delivery. Unlike the conventional warehouses, dark stores focus on an approximate 2000 priority products.
Image Source: TFIpost.com
Firms like Zepto are shaping the consumer behavior of future customers. Consumers will now be accustomed to ultra-fast and ultra-convenient mode of shopping. No longer will they walk to the nearby kirana store to buy groceries. Any consumer who is not with Zepto or any other grocery delivery firm that delivers within 10 minutes will be forced to evaluate the convenience at some point.
The conventional norm in Indian families is to buy groceries once a month. The ticket value or the basket value ranging anywhere from 5000 Rupees to 15000 Rupees, depending on the size of the family. There indeed was a transition here, many double income families facing time crunch moved to the online mode. However, when a few unplanned grocery items or Over-The-Counter medicines had to be purchased, they would still walk down to the local kirana store or pharmacy. Express delivery portals precisely targeting the second need to create a online market. In the process they breaking down the basket size to very small values, as small as Rupees 10, by making small basket online purchases equally convenient. This acts like an icing on the cake for the urban consumers who seek convenience in all formats of shopping. The traditional way of shopping, buying groceries once a month led to well-planned expenditure, cautious consumption of goods and less harmful impact on environment. With express deliveries, as consumers can buy things on need basis, caution is shortchanged for indiscretion of buying more than one needs. Due to the small ticket sizes, the number of people on road trying to deliver the same amount of products also increases, pushing north the carbon footprint. And not just the number of vehicles but also the packaging material adds to the carbon footprint. According to a study conducted by Singapore University of Technology and Design (SUTD) and published in the Journal of the Transportation Research Board, when consumers were made aware of the harm an express delivery does, of the 188 respondents, 56% of the respondents preferred to opt for slower delivery timelines. This raises a big question are these companies being impulsive? How will future relevant, environmentally conscious Gen Z consumers weigh this price of the benefit of convenience? Many of the online grocers were already functioning on wafer thin margins, will the addition of operating and maintaining the numerous dark stores dig a deeper hole in their pockets? Time will tell, but my gut says that not every provider will flock up with a me-too quick service offering like they seem to be doing right now, but will take a more measured approach even as the early adopters provide more evidence of unit economics and longer term business gains realized.
References
https://www.business-standard.com/about/what-is-quick-commerce
