Is quick commerce eating into kiranas or e-commerce? Blinkit, Swiggy, Zepto, DMart, Delhivery weigh in

L to R, Moneycontrol's Chandra R Srikanth, Delhivery's Sahil Barua, SoftBank's Sumer Juneja, Swiggy's Sriharsha Majety

As quick commerce surges to a $5 billion market in India within just three years, leading players like Blinkit, Swiggy, and Zepto assert that their growth is driven by shifting consumer preferences from e-commerce, rather than a direct threat to traditional kiranas and mom-and-pop stores.

However, at the recently concluded Moneycontrol Startup Conclave in Bengaluru on August 9, Sahil Barua, co-founder and CEO of Delhivery, noted that quick commerce is eating into the share of traditional retail. In fact, a top executive from DMart, a value-focused retail chain, admitted that the business has experienced a marginal hit due to the rise of quick commerce.

The impact is understandable as the sector has gone from good to have in 2021 to an indispensable one now, according to analysts at UBS. In fact, the industry has become so attractive that even larger e-commerce companies have been forced to build out a separate unit, such as Flipkart Minutes, to take on new-age players. Some also see Flipkart’s entry into quick commerce as a pre-emptive move to ward off competition and retain its market share as quick commerce companies eat into the e-commerce pie.

“The advent of quick commerce has made people want things faster than they would have otherwise got from e-commerce. This has led to a direct share shift of a number of non-grocery use cases to quick commerce where customers were primarily reliant on e-commerce for buying these products,” Albinder Dhindsa, CEO of Blinkit, said while announcing the company’s results on August 1.

E-commerce, incremental consumption and a shift away from mid-premium range modern retail in large cities is fueling the growth of quick commerce, industry participants said.

“We know that we are not taking share away from kiranas, or from value focused large retail players like DMart. The value focused items available in these formats are hard to replicate in our business; especially in categories like staples, where price sensitivity is higher and we don’t have the ability to sell open stock keeping units (SKUs) that brick and mortar can. Most kiranas also offer personalised commerce, such as the khata system for their customers, while we sadly, aren’t able to,” Dhindsa added.

Zepto’s co-founder and CEO, Aadit Palicha, also has similar views.

“Right now, quick commerce is still a fraction of modern trade size – but our sellers are seeing the share of modern trade decline. So, we’re growing partly at the cost of modern trade, one part is coming from core e-commerce and the rest, a smaller portion, is coming from the disorganised markets,” Palicha told Moneycontrol in an interview.

ALSO READ: We are where Amazon was in the 90s, could achieve $50-80 bn outcome if we execute well: Zepto's Aadit Palicha

Palicha has often compared Zepto with DMart and said his startup’s revenue will be bigger than that of the value-focussed retailer in 18-24 months. The growth will, however, come from different sets of users as DMart doesn’t appear to be losing sleep for now.

“We've been crunching data for the last two years on this and how is this (quick commerce) format impacting us? Surprisingly, it is not. If there is any one reason that impacts our metro revenues, it's actually our own ability to operate the store…and not really because of the competitive context - specifically about quick commerce. That's our analysis of things,” Neville Noronha, Managing Director and CEO, Avenue Supermarts Ltd, which runs DMart, told analysts while discussing the company’s quarterly results on July 30.

However, when a city that does not have any intense quick commerce versus a city that has rapid delivery are compared “there could be a 1 percent to 2 percent...impact. I don't have a very clear point of view there. I can't pinpoint it exactly…maybe 1-1.5 percent kind of an impact could be there. But is any of my store declining, negative? Do I see very large red flags? Absolutely not,” Noronha said while dismissing any fears.

That lines up Delhivery CEO Sahil Barua’s views on the industry. “As quick commerce proceeds, the supply change is going to see a rearrangement. It will impinge on traditional retail,” Barua said while speaking at the Moneycontrol Startup Conclave in Bengaluru on August 9.

While quick commerce has made a dent on the earnings of DMart, it is only marginal for now because kiranas and value retailers are both positioned very differently when compared to quick commerce.

“Quick commerce can't be taking away share from kiranas…Kirana stores are more for incremental/top up purchases. They sell sachets and other stock keeping units (SKUs) which are anyway not sold on quick commerce companies. The user base is very different,” Sriharsha Majety, co-founder and group CEO of Swiggy said during a session at the Moneycontrol Startup Conclave.

ALSO READ: Having a listed competitor is both good and bad, says Swiggy chief Majety

There are only 30-40 million customers who shop on quick commerce, this cohort anyway did not shop from the nearby kiranas. They were the online grocery shoppers who are now purchasing from quick commerce platforms instead of waiting for slightly longer deliveries, as per Majety.

While quick commerce shoppers are the slightly affluent class, who do not hesitate to shell out a few extra bucks for convenience, the value shoppers will look around for deals and buy from whichever platform offers the best price.

“Our view is (that) both will coexist…When we crunch our numbers at an operating principle level, from a cost level, we have a huge, huge advantage compared to quick commerce from a cost of operation standpoint. But where they (quick commerce players) have an edge over us is the gross margin. Their ability to earn gross margin is significantly better than us because they operate on the principle of convenience,” Avenue Supermarts’ Noronha said while praising the quick commerce model and the work companies have done so far.

However, not all’s rosy.

Even as companies maintain that the target user base is different for quick commerce and kiranas or value retailers, an ecommerce investor said that companies like Blinkit, Swiggy and Zepto are hesitant to paint an accurate picture.

“If any of the companies go out on a limb and say they’re growing at the cost of kirana stores, they know they’ll draw regulatory glare. The kirana shop owners, and their union, is a big vote bank for the government, and if quick commerce companies upset these owners, the government will have to intervene. So, it’s just safer to say quick commerce is growing at the cost of ecommerce,” the investor concluded.