Sandheep Balachandran, Director – Planning, Licious, 0
With the recent $30 million funding round in Zepto to Blinkit adding printing service as a category in its service offering, the sector is finally recovering from its cloudy days of the funding winter post covid pandemic. Today, the news feed is once again buzzing with information on Quick Grocery. While the top-of-mind platforms today in the Quick Commerce market are Swiggy Instamart, Blinkit and Zepto, the offering of delivering grocery quickly existed as a service on the initial slotted-delivery model (delivery in slots across the next few days post order) of online grocery players like BigBasket and the erstwhile Grofers. Therefore, what truly led to the creation of the Quick Grocery segment was the existence of some unsolved problems in the online grocery space.
Customer Value Proposition
Some of the customer pain points that remained unsolved with the slotted-delivery model of online grocery business were –
• Top-up Mission: Not all items in your basket will last for the same amount of time, and therefore will need to be topped-up once they’re out of stock. This pain point plays-out particularly in the low shelf-life category (for example, fruits & vegetables, dairy, breads and others). Thus, the customer still needs to visit the nearby grocery store to fulfill these needs.
• Basket-building Process: Unlike the visit to the grocery store, where you stroll across aisles and pick-up items that remind you of what’s needed, the online grocery purchase journey is largely search-driven. Here, you need to be fully aware of what’s needed and keep a shopping list ready. While the app provides recommendations and nudges based on your previous order history, they can only solve for so much. Also, placing a quick second order after realizing that you missed a few items is difficult, as there is the threshold of a minimum order value (MOV) and your small basket might not cross that.
• Impulse Purchases: Quick cravings, hosting guests at home on short notice and house-party preparations are major use-cases in the Indian market where Gen Z and millennials constitute ~50 percent of the consumer base. The slotted-delivery model doesn’t solve for these use cases.
Quick-grocery players identified this gap and opportunity,
and further capitalized on the Covid-scenario to quickly launch and scale this business. These players not only solved the aforementioned use-cases of the existing customers who are on-boarded with the slotted-delivery players, but also unlocked a key new customer-cohort in the market largely consisting of Gen-Z and Millennials. This group was earlier not sold on the proposition of slotted-model which was designed for planned purchases and the young-single customer cohort don’t necessarily plan their grocery purchases. This cohort of customers also had more affinity to impulse purchases, thereby adding to the repeat-rate and retention of the platform, and also higher share of disposable income with lesser financial commitments.
Selection, Speed, Pricing and Quality are the four key pillars of the quick grocery customer value proposition (CVP). Speed value proposition has been the key callout in marketing campaigns, for instance, with Zepto launching the business with a sharp 8-minute promise and Blinkit promising 10-minute deliveries in select locations during launch. But the businesses largely operate in the 10-45 mins range. The selection offered ranges from 3500-5000 SKUs across the different platforms. Different platforms follow different pricing strategies - coupon discounts on baskets to strategic customer cohorts, product discounts on key categories and bank-offers. Additionally, platforms charge a delivery-fee, while discounting it beyond certain order values and if the customer has bought platform memberships (Swiggy One for eg.). Quality of products is key particularly in the fresh category (Fruits and vegetables, bread, dairy and eggs) and the platforms invest heavily in tight quality-control mechanisms across sourcing, storage infrastructure in the dark-stores and delivery process.
Market Size, Growth & Challenges
Quick Grocery market is currently worth approx. $2 billion and expected to grow at a CAGR of ~60 percent to reach $5.5 billion by 2025 basis industry reports. Roughly, over 80 percent of the market is shared between Swiggy IM, Blinkit and Zepto. While growth prospects look extremely positive, there is a lot of pressure on profitability and sustainability. Businesses in this space operate at a negative contribution margin (margin made over variable cost alone), but recent news on Blinkit turning contribution positive and Zomato’s Q2 results give a lot of optimism in making this business profitable with adequate scale. Adoption of EV-bikes, batching of orders and bio-degradable secondary packaging are certain themes that the players are working on to make the business more sustainable. Some of these initiatives also help improve the bottom-line. Therefore, future looks positive for the Quick Grocery business with strong double digit growth projections and early evidence of ability to operate at scale in a profitable manner.
Selection, speed, pricing and quality are the four key pillars of the quick grocery customer value proposition.
Selection, Speed, Pricing and Quality are the four key pillars of the quick grocery customer value proposition (CVP). Speed value proposition has been the key callout in marketing campaigns, for instance, with Zepto launching the business with a sharp 8-minute promise and Blinkit promising 10-minute deliveries in select locations during launch. But the businesses largely operate in the 10-45 mins range. The selection offered ranges from 3500-5000 SKUs across the different platforms. Different platforms follow different pricing strategies - coupon discounts on baskets to strategic customer cohorts, product discounts on key categories and bank-offers. Additionally, platforms charge a delivery-fee, while discounting it beyond certain order values and if the customer has bought platform memberships (Swiggy One for eg.). Quality of products is key particularly in the fresh category (Fruits and vegetables, bread, dairy and eggs) and the platforms invest heavily in tight quality-control mechanisms across sourcing, storage infrastructure in the dark-stores and delivery process.
Market Size, Growth & Challenges
Quick Grocery market is currently worth approx. $2 billion and expected to grow at a CAGR of ~60 percent to reach $5.5 billion by 2025 basis industry reports. Roughly, over 80 percent of the market is shared between Swiggy IM, Blinkit and Zepto. While growth prospects look extremely positive, there is a lot of pressure on profitability and sustainability. Businesses in this space operate at a negative contribution margin (margin made over variable cost alone), but recent news on Blinkit turning contribution positive and Zomato’s Q2 results give a lot of optimism in making this business profitable with adequate scale. Adoption of EV-bikes, batching of orders and bio-degradable secondary packaging are certain themes that the players are working on to make the business more sustainable. Some of these initiatives also help improve the bottom-line. Therefore, future looks positive for the Quick Grocery business with strong double digit growth projections and early evidence of ability to operate at scale in a profitable manner.