Will q-comm fade away quickly in 2023?

In early 2022, many q-comm startups reduced their offerings, as some of them were unable to stick to the 15-min delivery time.

The last-minute needs of consumers witnessed quite a growth this year. People who’d never used quick delivery platforms, are now increasingly using them to fulfil their daily needs.

Quick deliveries were unimaginable two years ago, but today, the consumers are willing to pay more for them. The quick commerce (q-comm) market in India will be worth $5.5 billion by 2025. Only about 7-8 players are currently operating in the market. The major ones include Swiggy's Instamart, Blinkit, Dunzo and Zepto that together make up more than 80% of the market.

Amritansu Nanda, CMO, Zepto, says, “The demand for quicker deliveries has certainly skyrocketed. We’re seeing more and more customers experience value, and fall in love with the convenience of getting over 5,000 products delivered to their doorstep in 10 minutes throughout the day.”

“Our customers have shown an appetite for quick deliveries for categories that range from daily necessities such as dairy, fresh fruits, vegetables and cooking essentials, to last-minute needs like charging cords, and lifestyle picks such as beauty products and mobile accessories.”

Keeping the category sustainable

Even when the craze for q-comm was at its peak in late 2021 and early 2022, the hype died down for some startups. Q-comm, as a business model, raised quite a few eyebrows this year. While some brands had to shut down, other major players had to reduce their offerings, as they couldn't deliver quick enough.

This year, leading cab booking app Ola kicked off a 10-minute grocery delivery service in Bengaluru, and e-commerce major Flipkart scaled down Flipkart Quick, consolidating the business with its next-day grocery delivery platform Flipkart Supermart. Instamart claims to deliver orders in 15-30 minutes. Dunzo promises to deliver in 19 minutes via Dunzo Daily and had plans to expand to 20 cities. BigBasket has the BB Express, which claims to deliver essentials within 60 minutes.

As per reports, many q-comm companies have scaled down their stores, and some are also reducing their offerings. Will q-comm category be able to sustain success over the long haul, or will it ‘quickly’ fade away in India? Also, how are various brands keeping the category sustainable?

Mrunmayi Oke, vice president, category and growth, Dunzo, shares, “As pioneers in this space, we can say it’s been a long time since the q-comm game has gone beyond just ‘quick deliveries’. There is high organic interest from consumers for online delivery of groceries and daily essentials, because of factors like convenience, product selection and availability, and price. To make categories sustainable, beyond delivery time, building the right pricing, selection and quality, is equally important."

“In order to build a robust business model, we encourage users to opt for minimal delivery fee orders, which take a little longer than 20 minutes to deliver. This allows us to batch (smaller) orders together for delivery in one trip.”

“Additionally, we have strategically located our micro-fulfilment centres in neighbourhoods, where the distance between the customer and the centre is minimum. We also allow our users to opt for competitive charges on delayed deliveries.”

The q-comm industry witnessed a slowdown in early 2022, says Lloyd Mathias, a business strategist and angel investor.

“Q-comm got a big boost in 2021, as many customers realised that a way to order groceries, was by ordering them online. But there was a slowdown in early 2022. Post-COVID, the consumers started going out and engaging in more personal interactions, which forced some brands reduce their offerings.”

“To overcome this challenge, major players like BigBasket and Dunzo started creating different/speciality products, such as bakery products (artisanal bread), etc. Today, these brands are trying to bring speciality offerings to make this category far more relevant for the consumers."

To become sustainable over a long run, brands are increasing cart size by increasing average order value. Apps like Zepto, dunzo are pushing for combination items like Big basket's-otp (onion tomato potato combination), says Sai Ganesh, brand consultant, former brand head, dunzo.

Shift in consumer patterns

Post-pandemic, a consumer’s buying behaviour has taken an organic turn. During the pandemic, when cities went into lockdown, consumers needed essentials urgently.

Oke of Dunzo comments, “Users who had never used delivery platforms, are now using Dunzo to fulfil their daily needs. Over the last two years, a consumer’s trust in on-demand delivery services has increased significantly, leading to an evolution of the q-comm ecosystem.”

“We’re observing a shift in user behaviour towards unplanned purchases. With services like Dunzo Daily, the need for planning, is considerably reduced. We believe this behavioural shift extends beyond younger age groups such as Gen Z/millennials. While early adoption happened with a younger demographic (20-27 years), who have quickly adapted to the platforms, we have also witnessed a growing acceptance from other age groups, especially the 36-50 year olds."

Dunzo marked May as the month for mangoes, August as big on festivities, with gift boxes being sought after for Raksha Bandhan, fruits and flowers for Varamahalakshmi, and ‘modaks’ for Ganesh Chaturthi. Based on the seasons and months, the brand observed an increase in demand for different products. Dunzo saw a 7x jump in the orders for sweets and gift packs during Diwali.

"With this category, there is a huge value of convenience and freshness. The major shift in consumer behaviour that we observed in 2021 and 2022 is that after the pandemic, people have started focussing more on diet, healthy food and eating fresh." Comments Ganesh.

Trends to watch out for next year

As observed by major players like Dunzo and Zepto, the consumers are increasingly seeking convenience in their daily life. They’re looking for a seamless experience, while interacting with the offline world. Many new experiments will take place in the coming year.

Oke mentions, “The definition of convenience has shifted, from one or two-day delivery to on-demand, 20-30-minute delivery windows. Users no longer have to wait in order to get what they need. We have figured out that delivery needs to be done in line with an offline transaction of 30-45 minutes, but we are actively encouraging users to pick slower delivery times so that we can build a robust business model.”

Category expansion into segments such as pharma, cosmetics, fashion, etc., are also some of the trends to watch out for next year. Dunzo recently introduced signed copies of Amish Tripathi’s novel, ‘War of Lanka’. It’s clearly looking beyond daily essentials.

Zepto’s Nanda adds, “Being a segment-focussed player, with a solid focus on unit economics, flawless execution and capital efficiency, has definitely been our advantage, enabling us to outperform other legacy and new players in the market.”

“In the coming year, we’re optimistic that the need for quicker delivery times will only continue to grow. We aim to double down on our proposition to lead by example, through our range, quality, accuracy and consistency.”

While the original q-comm players are tweaking their strategies, new categories are setting out to experiment with the quick delivery promise. Domino's which was known for its 30 minutes delivery promise in India is now offering 20-minute delivery. The brand will now deliver pizza in 20 minutes across 20 zones in 14 Indian cities.

Another big shift observed in 2022 was that major industry players started following the Reliance JioMart model, by working closely with neighbourhood/local stores. Initially, these brands tried to create dark warehouses or biker networks, which couldn't fulfil the delivery time promised, says Mathias.

Even though, the category has raised a few eyebrows this year, but with enormous potential in this industry, the Indian q-comm sector will only continue to grow further in the coming years.