The Rise of Quick Commerce in India: Revolutionising Retail and Last-Mile Delivery

Quick commerce, altering India's retail and last-mile delivery landscape, stands out as a prominent trend in the country's e-commerce sector leveraging the widespread availability of mobile internet and the rise of e-commerce Quick commerce is challenging traditional retail concepts with a focus on rapid deliveries.

COVID-19 and the subsequent measures, such as lockdowns and social distancing, pushed consumers towards online purchases, especially in perishables and groceries, as they redirected their spending from non-essential to essential categories. As such, the rise in demand, coupled with an urge for instant delivery, has driven the rapid growth of the quick commerce segment. Due to this rapid growth, the gross merchandise value (GMV) of quick commerce in India reached US$ 2.3 billion in 2023, rising by more than 70% over the previous year. A number of players have emerged from such quick growth, including the extensions of established platforms like Zomato-owned Blinkit, Swiggy Instamart, Dunzo Daily, and Country Delight, and newcomers such as Zepto. Projections indicate a robust compound annual growth rate (CAGR) of 27.9% for the Indian quick commerce industry between FY22 and FY27. As quick commerce continues to reshape retail and last-mile delivery in India, its impact will likely be game changing, offering convenience and efficiency to consumers while challenging traditional retail models.

Process flow of instant delivery platforms

Technology plays a significant role in the quick commerce process in the following ways:

• Advanced algorithms predict consumer demand
• Data analytics optimise inventory management
• Route optimisation software shortens delivery time
• Automation and robotics enhance the speed and accuracy of warehouse operations

Overall, technology serves as the backbone of quick commerce platforms, enabling them to fulfil the promise of ultra-fast deliveries and unique customer experiences.

Rise of quick commerce in India

Quick commerce has recently reshaped the e-commerce landscape in India. The concept of instant deliveries has expanded beyond traditional ready-made meals to include various items like groceries, medicines, cosmetics, and electronics, combining the speed of instant market purchases with the convenience of home shopping. This innovative model caters to consumer demand for daily essentials, including groceries, vegetables, fruits, etc., promising to revolutionise the market. Key factors such as convenience, urbanisation, and busy lifestyles have influenced consumer behaviour, prompting companies to prioritise shorter delivery times. The pandemic further accelerated these needs as social distancing and work-from-home measures discouraged in-store visits.

The quick commerce industry in India has experienced rapid growth since the pandemic. It is projected to touch US$ 5.5 billion by 2025, as per a RedSeer report. Quick commerce platforms' contribution to the online grocery market is expected to rise from 10% to ~45% in the coming years. To adapt to this evolving landscape, the market has shifted from a singular central warehouse model to an advanced network of micro-warehouses or dark stores strategically located in proximity to delivery points, emulating the role of neighbourhood 'Kirana' stores. This model ensures a focused selection of high-demand items, typically within a two-kilometre radius. Notably, platforms such as Dunzo, Swiggy Instamart, and Blinkit have established 20-30 micro-fulfilment centres in major cities, facilitating 10-20 minute delivery services.

Source: RedSeer

Beyond consumer convenience, quick commerce offers considerable advantages to retailers in the following aspects:

• In an era of rapid online market expansion, increased consumer expectations for superior service intensify competition among e-commerce entities, and providing better value propositions to customers through expedited delivery services gives e-commerce firms a competitive advantage in the retail arena.
• Customer loyalty arises from consistent positive experiences with product offerings, quality, and delivery on the chosen quick commerce platform. Satisfied customers remain loyal, which also helps to attract new customers and accelerate customer acquisition.
• Advanced customer data becomes increasingly valuable as the platform draws more consumers, enabling retailers to gain deeper insights into consumer behaviour. A better understanding of consumer behaviour allows to predict their buying patterns related to seasonality, regional influences, and various demographics.

Growth drivers of the quick commerce market

• New user adoption: As quick commerce continues to maintain its commitment with minimal lapses in the consumer experience, a growing number of consumers have redirected their intended e-commerce expenditure towards quick commerce. Millennials and Generation Z living in metro cities such as Bengaluru, Delhi NCR, and Mumbai are the major promoters of this category. Additionally, existing users have reinforced their instant purchase behaviours, resulting in increased spending on these platforms.
• Event days: Quick commerce platforms have excelled in grasping the purchasing patterns of target customers and altering the selection and experience accordingly. All major platforms have recorded unprecedented sales on 'event days' or occasions such as Diwali, New Year's Eve, Valentine's Day, and sporting events like the Cricket World Cup (CWC) final. In addition to running promotional events, these platforms ensure the availability of appropriate selections for these days, such as pooja essentials and festive decorations for Diwali, roses, and bouquets for Valentine's Day, and India team jerseys for the CWC final.
• Category diversification: Quick commerce platforms extend beyond traditional grocery offerings such as fruits, vegetables, meat, staples, and FMCG and have expanded into a wider retail spectrum, including beauty, electronics, home decor, wellness, and other general merchandise. Direct-to-consumer brands are capitalising on this trend and beginning to view quick commerce as an attractive channel partner. This development is positioning quick commerce platforms in direct competition with established e-commerce giants, resulting in greater convenience for customers across categories.

Role of quick commerce in last-mile delivery

Quick commerce significantly impacts last-mile delivery in India by introducing innovative solutions to address the challenges associated with traditional delivery models.

Favourable government initiatives

The following initiatives by the government have contributed to the growth of quick commerce in the country:

• Digital India has transformed India's digital infrastructure, increased digital literacy, and promoted e-services.
• Start-up India has created a favourable environment to encourage innovation from new-age start-ups.
• Skill India has developed the talent by providing them with training in market-relevant skills and technology.
• Unified Payments Interface (UPI) and RuPay have made payments convenient and hassle-free by providing customers with banking services at their fingertips.
• BharatNet has improved broadband access, facilitating the expansion of quick commerce and e-commerce in previously underserved regions.
• Open Network for Digital Commerce (ONDC) has increased the reach of India's quick commerce and e-commerce ecosystem by onboarding smaller vendors onto digital platforms and promoting fair competition within the industry.
• 100% FDI is permitted through the automatic route in entities engaging in B2B models to encourage the participation of foreign players.

Road ahead

The rise of quick commerce in India represents a fundamental shift in the retail industry, led by changing consumer behaviours, technological advancements, and a favourable business environment. Quick commerce is set to change the Indian shopping experience, offering immediate satisfaction, unmatched convenience, and significant investment and growth prospects for industry stakeholders. However, as the industry evolves, the success of quick commerce companies will depend on their ability to efficiently manage delivery infrastructure in a cost-effective manner by using innovative technology and artificial intelligence.

Players are likely to prioritise growth in major cities targeting consumers that value convenience over cost, implement delivery fees for orders below a set amount, explore new revenue possibilities like advertising and FMCG partnerships, and focus on sustainability measures. The price-sensitive nature of India's market poses sustainability challenges for quick commerce players in the long term; however, a vast potential lies in India's diverse consumer demographics and varied needs.