Over the past two years, India saw an emergence of several quick grocery platforms such as Swiggy Instamart, Blinkit, Dunzo, Big Basket Now and Zepto, which built their fortunes by delivering groceries to customers within an average 30-minute timeframe. But the quick delivery model remains a work-in-progress.
ETtechETtech reported on January 4, that the
quick commerce sector will find it difficult to bring in news users and investors.
Quick commerce was one of the hottest tech properties during the pandemic and the 10-minute grocery delivery business received widespread attention over the past two years. But 2022 saw most investors stay away from the cash-burning sector.
ETtech“The funding environment deteriorated in 2022 and I expect it to further worsen in 2023, given the way the private markets have behaved and the state of companies in the venture-backed space… ,” said Aadit Palicha, cofounder and CEO of Zepto. “The way that we look at the sentiment and how to tackle this environment is to fundamentally have great unit economics and great execution,” he said.
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The LocalCircles survey revealed that a third of people surveyed, preferred their groceries to be delivered within 3-24 hours without any delivery fee above a certain order value. Only 11% were willing to pay a small delivery charge but that too for orders to be delivered within 3 hours.
Companies in the quick commerce space have been focusing on improving unit economics over the last one year, and 2023 is expected to see them following the same trend.
ET reported on Dec 20, that Swiggy Instamart, Zomato’s Blinkit and Reliance Retail backed Dunzo,
are nudging customers to place larger orders as they look to cut cash burn. These companies are incentivising customers with offers and discounts on orders above Rs 1,000. The push for higher order value from Swiggy and Zepto comes when funding is hard to come by for high cash-burn sectors. Increasing the cart size is one way for quick commerce platforms to achieve better unit economics as bigger order sizes would bring the cost of servicing each order down.
BigBasket’s cofounder & CEO Hari Menon, said that for the business to make money at the unit economics level, customers should be charged at least 3-4% of the order size, ET reported on January 5. Since the average order value in quick commerce is about Rs 400, this would amount to Rs 16-18 per order. But increasing the average order value is a “tricky” proposition.
(Illustration and graphics by Rahul Awasthi)
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