Resultanly, retailers have seen the margins they get from FMCG companies getting eroded to 10-12%, as against 18-20% in the pre-Covid era.
Credit: Reuters Photo
Bengaluru: The rapid adoption of quick-commerce platforms coupled with discounting could wipe off 25-30% of kirana stores, according to a report by investment and advisory firm Elara Capital. As such, Kirana stores’ business has already declined by 25%-30% due to same reason.
Quick-commerce platforms provide fast moving consumer goods (FMCG) at a discounted price with superior user experience, including door-step delivery within minutes - a business model which has hooked Indians rapidly. Resultanly, retailers have seen the margins they get from FMCG companies getting eroded to 10-12%, as against 18-20% in the pre-Covid era.
The e-tailers have started offering more FMCG products. Today these products account for 10-12% of their bouquet of wares, rising from 4-5% in the pre-Covid days. To keep up with competition, the Mom-and-Pop shops have embraced united payments interface (UPI) payments and also facilitate delivery, communicating with customers over social media, particularly WhatsApp.
Though earlier supermarkets too grew at the cost of the neighbourhood grocer, they were not as disruptive and continued to coexist, unlike the rout quick-commerce is inflicting, the report pointed out.
Quick-commerce companies derive more than 90% of revenue from the top 10-12 cities and continue to test the waters in the non-metro markets. On the future outlook of quick-commerce, the report suggests, “If these firms are able to scale up beyond metro cities with sustainable profitability, it will be a big win-win, as growth rates of 70-80% year-on-year (YoY) for the quick-commerce segment could continue up to 2030 and beyond. As it is, most e-commerce companies derive approximately 50% of sales from non-metro markets.”
It may be recalled that All-India Consumer Products Distribution Association (AICDF) had recently approached the Commerce Ministry to pass the Digital Competition Bill which would cap discounts provided by quick-commerce platforms by implementing a minimum sales price (MSP). If implemented, it is bound to have a negative impact on growth rates of quick-commerce adoption, added the report.