Quick commerce platforms currently drive 40% of online grocery sales, but are they close to cracking other major categories like electronics and fashion which marketplaces bank on
While Amazon India, Flipkart may see minimal impact from the rise of instant delivery, the situation could be trickier for vertical marketplaces particularly in the beauty category
The likes of Blinkit, Zepto, Swiggy Instamart are moving to Tier 2 and 3 markets for the festive season, but changing customer behaviour for large purchases will remain a challenge
Quick commerce vs ecommerce marketplaces — that’s the big battle in the 2024 festive season sales.
The rise of Blinkit, Zepto, Swiggy Instamart has certainly thrown a big curveball to ecommerce giants Amazon India, Flipkart and Meesho. So how large of a dent will quick commerce make on the biggest sales season for these ecommerce giants?
The question is particularly pertinent in 2024 given that quick commerce giants have stepped into the marketplace territory for key categories. This was not the case in 2022, when quick commerce had just emerged on the radar, or in 2023, where the focus was on scaling up and expanding the dark store network.
But in 2024, quick commerce players are certainly matching marketplaces in terms of categories and penetration and have become the de-facto destination for festive season shoppers in metros and Tier 1 markets.
Take the recent launch of Apple iPhone 16, for instance. While in the past couple of years, there have been one-off launches such as this, this time around, every quick commerce player has made a big deal of this launch.
Plus, ahead of the festive season sales, we have seen Zepto, Blinkit and Swiggy expand their dark store networks to Tier 2 and 3 markets as well. The signal is clear: quick commerce is going after the marketplace lunch.
Industry insiders and experts believe while the quick commerce capacity-building is impressive, it will take a lot more to dethrone marketplaces as the primary festive season destinations for online shoppers.
That’s because a majority of the festive season sales in India are driven by non-impulsive shopping behaviour where trust factor, planning, pricing and brand legacy are important metrics for shoppers.
Quick commerce players still have a way to go in this regard. Data released by market intelligence firm Datum Intelligence last week suggested that quick commerce players will only contribute around $1 Bn in GMV to the total estimated GMV of $12 Bn during the festive season sales.
Quick commerce platforms have seen a spike in order volumes due to their expansion beyond metros, but the average order value is not likely to overshadow marketplaces just yet.
A majority of the non-grocery categories, where quick commerce players are catching up, will still be dominated by the ecommerce marketplaces, says Satish Meena, adviser at Datum Intelligence.
Quick commerce’s impact will be felt by marketplaces across a majority of the grocery categories and a few beauty, personal care verticals in the metros, Meena told Inc42. However, in Tier 2,3 cities and beyond, quick commerce’s entry will largely hit local brick-and-mortar retailers.
“Quick commerce platforms account for 40%-plus share in online grocery sales outside the festive season. We expect this to increase to 51%. Instant deliveries as a trend is now catching up in markets beyond metros, Tier 1 cities. However, that will take away the market share of the local kirana shops rather than the ecommerce marketplaces,” Meena explained.
What about the non-grocery category? Analysts say that Flipkart, Amazon, Myntra, Ajio, Meesho and others have the upper hand when it comes to electronics and fashion categories which have typically contributed over 50%-60% of all ecommerce marketplace sales.
Indeed, when it comes to gifting, electronics and fashion are the biggest draws during the festive season. So can marketplaces protect these moats from the quick commerce onslaught?
Marketplaces Guard Electronics Stronghold
Among electronics, mobile phones is the dominant category, and each festive season, we see a ton of exclusive launches, discounts and brand tie-ups on Flipkart and Amazon India.
Mobile phones account for nearly 40% of the festive season sales on these two marketplace giants. The fact that these platforms offer exchanges and EMI/credit-driven purchases also gives them the edge over Blinkit, Zepto or Swiggy Instamart.
In fact, Flipkart’s strengths in the electronics space give it an edge in the quick commerce space, where the company has launched Flipkart Minutes.
“So far, Flipkart and Amazon have garnered millions of dollars in sales from mobile phones eating into the retail market share. This cannot be disrupted by quick commerce platforms anytime soon. Despite the initial buzz around delivery of iPhones, quick commerce platforms have a lot to catching up to do,” a representative of a Bengaluru-based mobile retailers body claimed.
He added that the mobile retailers have also scaled online visibility, are tying up with ONDC like networks and giving deep discounts to prevent marketplaces from dominating further.
“In recent times, retailers like Sangeetha Mobiles are going live on ONDC in Bengaluru with 2-hour deliveries. This actually could be a huge tipping point for brick-and-mortar stores as they look to level the playing field against Flipkart and Amazon. On the other hand, quick commerce companies will have to fight challenges like trust factor, returns, exchanges, EMIs and more which will not be easy to implement well this year,” according to the owner of a mobile retail chain.
Datum Intelligence’s Meena also sees minimal impact on Amazon, Flipkart from quick commerce platforms in the electronics categories such as laptops or mobile phones or even large appliances like televisions, washing machines and refrigerators which are big sellers during the festive season.
“During the festive season, we tend to see a lot of planned purchases for large and high-value products. Many of these are heavily reliant on credit features such as EMIs or BNPL, and customers prefer options such as returns and exchanges that quick commerce players do not yet offer,” Meena added.
“Large ticket purchases are usually not impulsive like in the case of grocery items. Ecommerce giants and mobile retailers will easily trump quick commerce companies because of their limited exposure to these categories thus far,” Meena said.
Who Will Win The Fashion Show?
It was only late last year that we saw some quick commerce platforms add fashion as a category with a handful of SKUs in the athleisure, innerwear and footwear segments. Inventory building on the fashion side has been relatively slow for these platforms due to some particular challenges in this category.
For instance, fashion sees the highest volume of returns and exchanges, but quick commerce platforms do not yet have the same robust returns process that the likes of Myntra and Ajio have relied on.
“Fashion has been a tricky category to crack, which is why we have not seen many platforms venturing into this vertical despite high margins. It’s not just enough to have the most popular brands on the platform, but consumers prefer a wide variety of brands across all price segments,” the founder of a Bengaluru-based athleisure brand said.
“Quick commerce platforms can only take limited risks for inventory in the fashion category in the dark store model. Hence, fashion will see limited exposure to quick commerce and the key share is expected to stay with the vertical marketplaces,” founded added.
The other challenge is in the luxury or the premium segment. Myntra and Ajio have created separate sections within their apps to cater to these high-value products. Ajio has the edge when it comes to exclusive deals with international brands and labels. Expecting Blinkit and Zepto to have the same brands is far-fetched.
Beyond fashion, quick commerce platforms can make a dent in the beauty and personal care, as well as lifestyle segments, since these categories do cater to impulse shopping.
“We have seen a very fast adoption of skin care and beauty products by quick commerce platforms which will only increase in coming months. This might hit the niche players like Nykaa, Purplle and others that have been market leaders. We expect small-ticket purchases and non-make up product orders to spike during this festive season on quick commerce platforms,” Meena added.
Similarly, quick commerce players will shy away from other large verticals such as furniture, which is also reliant on returns and exchanges. Catering to these categories will require a rewiring of the dark store model, which is not suited for large inventory.
All in all, experts feel that bridging the gaps in the electronics and fashion categories will take a lot of brainstorming by quick commerce players. So as far as the 2024 festive season sales are concerned, marketplaces may not be too worried. Perhaps by 2025, they may be singing a different tune.
[Edited By Nikhil Subramaniam]
