The recent fall notwithstanding, a major reason for the rise lies in the very fast growth of the company’s quick commerce business, which delivers vegetables, groceries and other products—from lipsticks and pen drives to floral bouquets and branded kurtas—in a matter of minutes.
In 2023-24, the adjusted revenue of the company’s quick commerce business grew by 186% to ₹2,302 crore. In comparison, the adjusted revenue of the company’s mainstay food-delivery business grew by a significantly lower 27% to ₹7,792 crore.
Swiggy and Zepto are the other major players in the field of quick commerce. Swiggy recently filed for an initial public offering. Experts and analysts believe that the company’s success as a listed entity will depend on how well its quick commerce business does. Further, a Mint Long Story published on 22 May points out that the e-commerce major Flipkart “after failing in 2015 and 2020… is attempting a quick commerce venture yet again”.
This rise of quick commerce raises a few interesting points. First, economics is all about second-order effects. So, will the rise of quick commerce lead to expansion of India’s economic output, or will it simply take away business from traditional players that were servicing this demand? Or will it be a bit of both? How will it impact street-corner kirana stores and supermarkets?
This point isn’t just important in the context of quick commerce companies, but applies to e-commerce as a whole too. In their book, Breaking the Mould: Reimagining India’s Economic Future, Raghuram G. Rajan and Rohit Lamba, mention that Lenskart, which is in the spectacles business, sells 50,000 frames a day. How is this impacting India’s 50,000 eyewear shops. Is Lenskart taking away business from traditional eyewear shops?
Another interesting example here is that of India’s increasing ghost malls. A recent Reuters report points out that smaller malls are increasingly turning into ghost malls as customers gravitate towards bigger malls and shop online. Hence, as quick commerce companies grow bigger, whether they will end up expanding India’s broader economic output is an important question in need of more thought and research.
Typically, a technological innovation leads to the destruction of existing economic activities and jobs as well as the creation of new ones, although those who get hurt by it do not necessarily benefit from the new opportunities thrown up. As Daron Acemoglu and Simon Johnson write in Power and Progress: “Technology doesn’t have a preordained direction, and nothing about it is inevitable.”
Second, will quick commerce businesses reach a point where they start resembling large e-commerce firms like Amazon and Flipkart? As the letter accompanying Zomato’s financial results for the period January to March pointed out: “We will be adding more use cases,” meaning the platform will sell a greater variety of products.
Quick commerce companies are already delivering non-grocery products like electronic gadgets, lipsticks, toys and even gold and silver coins. Of course, this expansion will need continued innovation at the supply-chain level to manage the higher inventory that selling more products necessitates. On the flip side, nothing stops larger general e-commerce companies from making bigger bets on quick commerce, as Flipkart plans, making success tougher for everyone.
Third, will quick commerce turn out to be a pan-India phenomenon, or will it be limited to our bigger cities as it currently is? As the Zomato letter referred to earlier pointed out: “While we have a presence in 26 cities, the focus from an expansion standpoint is the top eight cities in India.”
This is where the money is, and hence, in a way, it’s low-hanging fruit for quick commerce companies. Nonetheless, as the country’s digital penetration keeps increasing, there is enough reason to believe that these companies will focus on non-metros as well and that will mean more pressure on traditional kirana stores.
Fourth, it will be interesting to see how the relationship of quick commerce companies evolves with other companies, like those in the fast moving consumer goods sector or even those selling electronic products. Will the quick commerce businesses launch their own private labels, like large general e-commerce companies have? And will that then lead to quick commerce companies limiting the presence of products made by other companies on their platforms?
Of course, we are getting into the realm of speculation here, but it is worth remembering something that Kaushik Basu writes in Reason To Be Happy: “In traditional economics, buyers and sellers were brought together by the invisible hand of the market… With the arrival of the digital platform, the [invisible hand] is no longer imaginary but an actual corporation, with an eye on little other than its own profit.”
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