The price of products are about 10 percent lower on Flipkart Minutes, the latest entrant in the quick commerce space, when compared with Blinkit, the current market leader, according to analysts at UBS.
Launched in August in select areas of Bengaluru, Flipkart Minutes is leveraging introductory discounts, a common strategy among new entrants like Open Network for Digital Commerce (ONDC), Amazon, Ola, and Swiggy to build demand and secure customer loyalty.
Companies that follow this strategy rein in discounts after they find a footing and have a sizable user base. For Flipkart, entering quick commerce, with Minutes, is much easier now that there are enough players and the industry is about three-and-a-half-years old.
“Overall, Flipkart seems to be replicating the model that has now been proven successful, in terms of the look and feel of the app, the user interface and layout, product categories as well as the monetisation models, delivery fees, platform fees,etc.,” UBS said in its note to clients.
As the quick commerce industry gets more competitive, differentiated product pricing is a key metric for newcomers like, Flipkart Minutes, to stand out from the incumbents, such as Blinkit, Swiggy Instamart, Zepto and Big Basket, and pull customers away from other platforms.
“While the lower pricing could be an initial market entry strategy, we will keep an eye on prices as Flipkart expands this offering to more areas within Bangalore and to other cities. A 10% lower cost, which in effect could be in line with DMart prices, could be a good value proposition to attract customers,” the UBS note added.
For Flipkart, offering and retaining these discounts will be easier since it’s much larger in size and has dabbled in this space for long which will give it more negotiating power with brands.
During Zomato's Q4FY24 earnings call, Albinder Dhindsa, CEO of Blinkit said he doesn't believe in discounting. "...our focus is to build a valuable service that customers actually are willing to pay more for rather than trying to provide an inferior service and leaning on discounting to grow. And that will be our strategy going forward as well," Dhindsa said.
Walmart-owned Flipkart was forced to enter the quick commerce space to ward off competition and defend its market share. While Flipkart is the market leader in e-commerce, ahead of Amazon, Nykaa, Ajio and others, as per several industry estimates, it is yet to capture a sizable share in the quick commerce industry.
As of July, Blinkit was the leader with 40-45 percent market share ahead of Swiggy Instamart’s 20-25 percent share. Zepto, with 15-20 percent market share, was third and ahead of Big Basket (BB Now) which has a 10-15 percent market share, per UBS.
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