The market size of quick commerce apps is estimated to be valued at Rs 50,461 cr. In pic, a person delivers groceries for a q-commerce platform.
Credit: DH file Photo
New Delhi: Ramesh Malik, who has been running a kirana store at Indirapuram, Ghaziabad, in the National Capital Region for over 10 years, plans to close his shop by December. “Earlier we used to have regular customers. Now they compare prices online and ask for discounts, which are not possible for us to offer,” said Malik. He added that reduced margins and a sharp decline in sales volume have made neighbourhood grocery store businesses unsustainable.
Radhika Kamath, who has been running a retail store in Central Bengaluru for more than 30 years, has a similar story to tell.
“Today, 10-minute delivery apps have started to become more common. Many people have stopped coming to the shop altogether. This is a great loss of business,” said Kamath. The average number of customers visiting her store has declined to almost half of what it was two to three years ago.
India is often referred to as a nation of shopkeepers. The country’s shop-to-population density ratio is among the highest in the world.
The number of kirana stores is estimated to be around 1.3 crore across India, according to Invest India, the national investment promotion and facilitation agency. There are around eight crore trader-based stores like sabziwallahs and paanwallahs. Together, these stores have formed a quintessential part of India’s shopping scene for generations.
The shops also contribute over 10 per cent to the country’s gross domestic product (GDP) and employ around 8 per cent of the workforce, shows Invest India data. Even the advent of supermarkets failed to make a significant dent in this network. Kirana stores, sabziwallahs and paanwallahs not only survived but also flourished through the pandemic as well. Today, a large number of them face an existential challenge due to the competition posed by quick commerce.
Erosion of profit margins, drifting consumers and online commerce are some challenges that shop owners like Malik and Kamath currently face. According to brokerage firm Elara Capital, the expansion of quick commerce platforms in non-metro markets could wipe out around 25 to 30 per cent of kirana stores in the country.
Quick commerce, commonly called q-commerce, has found a new customer base through applications like Zomato's Blinkit, BigBasket’s BBNow, Swiggy’s Instamart, Zepto and Flipkart Minutes. These apps have expanded aggressively in metro cities like Delhi NCR, Mumbai, Bengaluru and Chennai.
Praveen Govindu, a partner at Deloitte India, explained that sales through quick commerce platforms have been rising at a rapid pace since the Covid pandemic. In 2019, just around 4 per cent to 5 per cent of sales of large fast-moving consumer goods (FMCG) companies occurred through online platforms. This number has now surged to 10 per cent to 12 per cent.
Regulate q-commerce platforms
Online sales of FMCG products have been driven by the rapid growth of quick commerce businesses. The gross merchandise value of quick commerce platforms surged by around 80 per cent in 2023 when compared with the previous year. The market size of quick commerce is estimated to almost double to $6 billion (Rs 50,461 crore) in 2024-25 from $3.3 billion recorded in the previous year, as per consulting firm Redseer.
“Quick commerce is expanding serviceability radius rapidly in tier-1 cities by opening more dark stores. These platforms are looking aggressively at expansion into tier-2 and tier-3 cities as well,” said Govindu.
The country’s e-commerce market was valued at $85 billion in FY23 and posted a growth of around 25per cent when compared to 2022.
The Indian retail market, which was valued at $753 billion in FY23, is projected to grow at 9.1per cent per annum until FY27, the highest amongst large economies, as per estimates by Euromonitor International, a data analytics and market research firm. The retail market posted an average annual growth of 3per cent between 2017 and 2022. Despite the surge in e-commerce and quick commerce businesses in recent years, unorganised kirana shops still remain the predominant player in India’s retail space.
India’s quick commerce business is dominated by Blinkit, which is owned by Zomato, Swiggy Instamart, Zepto and Tata Group-owned BBNow. E-commerce giant Flipkart has come up with its quick commerce platform ‘Flipkart Minutes’ while Amazon is reportedly planning to enter the quick commerce space soon.
What is driving quick commerce?
Quick commerce is the natural evolution of e-commerce. While e-commerce platforms strive for faster deliveries, quick commerce is characterised by ultra-fast deliveries. From milk and eggs to bread, vegetables and medicine, almost every essential could be delivered to your doorsteps within minutes. The pandemic was also a crucial turning point for people who wished to avoid the risk of exposure in crowded stores to switch to quick commerce platforms for everyday essentials.
“Quick commerce is rapidly growing, with more consumers buying from quick commerce platforms, more such platforms being launched and traditional e-commerce platforms providing express delivery options,” said a Federation of Indian Chambers of Commerce and Industry-Deloitte Report released earlier this month.
“Today, quick commerce and e-commerce are growing in popularity as they offer increased convenience to consumers. This underscores the need for stronger multi-touchpoint channel strategies and customised offerings to cater to unique consumer cohorts,” noted Kumar Venkatasubramanian, CEO of Procter & Gamble India, an American multinational consumer goods corporation, in a report.
Time is key. Most quick commerce platforms offer a 10-minute delivery window. Initially, many of these platforms started with the delivery of groceries but have now expanded to non-grocery categories as well. Platforms now offer luxury items like iPhones along with milk and eggs, all delivered within 10 minutes.
Quick commerce platforms also cater to festive demands by delivering festival-related items within minutes. For example, during Diwali, one can buy a diya, candles and decoration materials.
Platforms are increasingly using data analytics to meet the ever-changing demands of existing customers and are devising new strategies to attract new customers. Some of these strategies cater to impulse purchases of customers.
“The impulse purchase vertical is affected the most in the kirana segment,” said Govindu. An impulse purchase is driven by urgency, a sudden desire or an emotional urge.
Accessibility is a factor too, explains Bharath Surendra, a design professional based in Nagarbhavi, Bengaluru, who shops from both online and offline stores. He explains, “I have seen the difference. In some neighbourhoods like mine, physical stores still thrive. In newer neighbourhoods, like HSR Layout, the apps really rule the roost.”
Among many factors, convenience seems to be a reason why many prefer to buy online. “I know where to get what. For someone who might have shifted to the city, this knowledge does not come easily. Some neighbourhoods also lack accessible provision stores and without vehicles, running these errands can be a chore,” said Surendra.
Discounts
A majority of consumers have also become conscious of prices. One of the key factors in the growth and growing popularity of quick commerce platforms is competitive pricing. All online platforms offer attractive discounts.
For instance, some quick commerce platforms offer up to 20 per cent to 30 per cent discounts on selected items. According to a recent survey conducted by brokerage firm Jefferies, quick commerce platforms offer the highest discounts in the home care segment, followed by staples and personal care.
“Some customers come and say they are getting 30 per cent discounts online. Our purchasing cost is higher than that. I do not understand how somebody can offer such a high discount,” said a kirana store owner in Delhi NCR.
S S Manoj, president of the Kerala Vyapari Vyavasayi Ekopana Samithi, alleged that quick commerce firms were indulging in unfair practices to woo customers. “They either highlight the price of one low-priced commodity or project the price of a commodity in units of 500 grams so as to mislead the customers,” said Manoj.
Manoj added that online platforms have affected 15 per cent to 20 per cent sales of traditional shops in Kerala. The mobile phone segment has suffered the most, with a fall of over 50 per cent in sales, he claimed.
Predatory pricing
E-commerce and quick commerce platforms have been accused of being involved in predatory pricing practices. This refers to a strategy in which goods or services are offered at unrealistically low prices in order to eliminate competition.
Speaking at an event in August, Union Commerce and Industry Minister Piyush Goyal accused e-commerce giants like Amazon of being involved in predatory pricing.
While the ultimate beneficiaries of the discounts offered by retailers or online platforms are consumers, any strategy to kill competition would be dangerous. It may lead to oligopoly or even monopoly.
“Quick commerce companies often offer discounts and promotions that local stores may find difficult to match. This price pressure is impacting the profit margins of smaller retailers who operate on thinner margins,” said Praveen Khandelwal, secretary-general of the Confederation of All India Traders and an MP in the Lok Sabha.
“Discounts are offered on a range of products, especially essential items like groceries, personal care products and household supplies. These discounts are much deeper than what traditional retail stores, particularly small kirana stores, can afford to offer. This creates an uneven playing field and local stores cannot compete,” said Khandelwal.
He added that discounts are often funded by venture capital or large corporate backers, allowing companies to absorb short-term losses to gain market share. “If left unchecked, predatory pricing by quick commerce could result in the closure of many local kirana stores, which serve as critical supply chains for communities, particularly in non-urban areas,” he added.
Most States, including India, have rules to prohibit predatory pricing. Section four of the Competition Act, 2002, provides for the prohibition of the abuse of a dominant position. The Act defines ‘dominant position’ in terms of strength enjoyed by an enterprise, in the relevant market in India, which enables it to “operate independently of the competitive forces prevailing in the relevant market.”
The All India Consumer Products Distributors Federation (AICPDF), which represents over 4,00,000 distributors and stockists across the country, recently lodged a formal complaint with the Competition Commission of India against quick commerce platforms like Blinkit, Zepto and Instamart, alleging predatory pricing practices.
“In light of the increasing disruptions these platforms are causing to traditional retail, we have submitted a formal letter to the Competition Commission of India, urging immediate investigation and regulatory action. Our letter highlights critical issues such as predatory pricing, monopolistic strategies, and labour law violations that are threatening the livelihood of millions in the traditional retail sector,” said Dhairyashil Patil, National President, AICPDF.
Additionally, the federation expressed concerns about the unethical practices employed by some quick commerce firms, including bypassing of foreign direct investment (FDI) regulations through dark stores, exploitative labour conditions and the lack of legal protections for franchisees, he added.
“We are calling for a balanced regulatory framework to ensure fair competition and protection for the interests of small retailers, who form the backbone of the Indian economy,” he added.
Quick commerce is reshaping the retail value chain. It is becoming increasingly popular among younger generations. Though major quick commerce platforms are primarily focused on densely populated areas and large cities, where demand for speed and convenience is high, their expansion in smaller cities will pose bigger challenges for kirana stores.
"Quick commerce uses algorithms to provide hyper-personalisation to all its shoppers. It integrates urgency and convenience for shopping at the eleventh hour. Integration at the back end, where traditional retailers act as fulfilment centres, would help create a win-win situation for all partners involved in the value chain," said Mini Mathur, associate professor of strategic marketing, Mudra Institute of Communications Ahmedabad.
Kirana stores do have some inherent advantages and have been a part of Indian society for generations, offering personalised services. It is imperative for the stores to embrace new technology. Many stores have already started using digital platforms for orders, payments and supply management. Adapting to technological changes, diversification of offerings and new ways of business would be the key to the survival and growth of neighbourhood stores.
(With inputs from Arjun Raghunath in Thiruvananthapuram, Sathish Jha in Ahmedabad, S N V Sudhir in Hyderabad and Varsha Gowda in Bengaluru)