Quick Commerce 2.0 - Beyond Groceries

Quick commerce companies like Swiggy Zepto Blinkit have been rapidly upping their game. Starting from the origins of delivering grocery under 15mins, these platforms are now challenging the likes of 亚马逊 Flipkart at their own game by combining the best of both worlds. The Ken in their article have nicely put it -

Indian quick-commerce biggies Blinkit, Swiggy Instamart, and Zepto have been delivering the punches thick and fast—combining the packaging efficiency of e-commerce giant Amazon with the delivery speed of pizza chain Domino’s. And their knockout jabs and uppercuts are now no longer restricted to their familiar hunting ground: groceries. The quick-commerce companies have taken their 10-minute-delivery fight to a whole new ring—non-groceries—putting fear into the hearts of Amazon and its rival Flipkart."

Zomato share price is at all time high, thanks to Deepinder Goyal 's foresight to invest in the vision of Albinder Dhindsa and Blinkit . Zepto is on its way to go for a fundraise to support its ambitions. Flipkart is venturing into Quick Commerce and bigbasket.com has pivoted into BBNow + BBSaver to take on Quick Commerce. Amazon is doubling down on Amazon Fresh. Even Country Delight is betting aggressively its own version of quick deliveries. So what does it take for Quick Commerce companies to grab market share from eCommerce companies? Let's understand this more in detail. But before that, quick stats on Quick Commerce market -

Addressable market: 25M - 30M households

Avg spends per household: 3000 ~ 5000

Avg frequency per month: ~5

Retention rate ~ 60%?

Typical SKUs in a dark store: 5K - 15K depending upon locality density

Blinkit is doing about 45crore of daily Gross Order Value. Instamart could be doing about 30cr and Zepto around 20cr

Core metric to optimize - Sales per sft of darkstore

Do note that these 25M - 30M households are the premium users of India which are served by almost all the internet platforms - Media, Commerce, Productivity, Mobility, Entertainment and more.

There are broadly 3 core focus areas for the Quick commerce firms besides the strong grip around continuous improvement of the operational performance -

• Increase the basket size of the orders a.k.a average order value
• Enable seamless discovery of ever increasing product assortments
• Empower brands to sell more on their platforms through self-serve tools

One of the frameworks that can help evaluate above priorities better is by taking a consumer first view by looking at the purchase frequency versus purchase complexity matrix. Purchase frequency is essentially the number of times a product is purchased in a given duration (weekly, monthly, quarterly, yearly etc.). Purchase complexity is level of involvement required to decide whether to buy it or not. If you plot this on a 2x2 matrix and put down various categories that a household purchases, it would look something like below -

Each of the above quadrant have distinct user needs and requires changes to UX, systems and processes. Let's dive into it.?

High Frequency - Low Complexity

Dairy, grocery, staples come under this quadrant and is currently the main driver of business for quick commerce. The Product-Market-Fit is established and it is in the phase of bringing maturity w.r.t scale, efficiency and predictability. The following becomes critical to this segment -?

• A solid demand forecasting and inventory planning efficiency
• Features like Notify Me, “I want this”, pre-buy etc., can aid in better forecasting as well as drive stickiness on the platform
• Keep the price competitive / slightly cheaper for signaling. Think what dmart does for everyday low pricing. Price scraping tools can aid here in quick price adjustments basis heuristic rules.
• To reduce wastage especially on perishable goods, a separate real-estate can be established on the app for steal deals to drive quick sales. One can also evaluate a b2b sub-site to sell these in bulk.
• Bolder ideas to try could be a digital "to-buy" slate that gets attached to your kitchen counter or refrigerator. Order gets placed once the list is x items long :). Amazon had Amazon Dash which was on the similar lines

• Evaluate if a subscription service for high frequency repeat purchases can help drive better platform stickiness and retention. Country Delight is moving from a subscription based model to a hybrid of quick commerce + morning subscription. QCommerce can go the other way :)

Low Frequency - Low Complexity

Festival and seasonal purchases are examples of categories that fall under this quadrant. Since consumer still assume Quick commerce to sell only grocery and daily needs, the focus for this quadrant should be around merchandising, cross-sell promotions and bundling on the app. Apart from this, the team needs to have a strong understanding of the seasonal nuances viz., mangoes in summer, ipl fever during april, colors during holi, decorative items during diwali, stationery during exams and school reopening, umbrellas and raincoats during monsoon etc. These products can be kept at higher margins as users will value convenience and delivery speed.

• A solid content management system that help run a good and relevant merchandising and offers program on the app storefronts
• Introduce cross-sell and bundling touchpoints on app that not only drives conversions but also awareness for such categories. For instance, drive category / sub-category awareness (pen drive in <10 mins? Light bulb fused, get it replaced in 10 mins?). Drive contextual cross-sell (eg: Bought ice-cream? Cross-sell wafer cones / ice cream fillings etc.); send out free samplers / flyers with the delivery
• Introduce checkout products (similar to what we see near supermarket checkout) and auto fill basis free delivery limits and last purchased

Low Frequency - High Complexity

This is the quadrant where Quick Commerce can penetrate deeply through smart and selective SKU assortment. Focus should be to -

• Sell products that are either standardized (eg: gold coins during akshay trithiya)
• Have a demand >> supply (eg: Newly launched iphone)
• Fast delivery convenience is valued (eg: Gifting?)

Since core north star metric is sales per SFT, it implies that product assortment chosen here should be relatively fast moving seasonality / occasion or other purpose wise. Additionally products should be prone to low returns. The margins will be low and important to keep price at par with what eComm firms offer and focus on quick delivery as callout. This quadrant can help drive up overall AOV and some virality. Team should have ability to build partnerships with brands for exclusivities and customized products for platform users

Solving for this quadrant is complex and there will product and process changes required at multiple places -

• Warehouse and logistics should be able to handle high value products, open box deliveries, return process, warranty registrations etc.
• The purchase funnel UX should evolve from utility based to experience based. Think of Category pages, Product detail pages with R&R, Q&A, product videos + images, magazine catalog styled content etc. This will not be the immediate need but will be required for the long run
• Some of these products won't be put up in dark stores due to operational reasons. Does that mean UX should account for showing different delivery schedules based on products purchased?

High Frequency - High Complexity

This quadrant sometimes overlaps with High Frequency - Low Complexity especially when a new brand is trying to usurp an incumbent in this category.? Users are tuned to buying their regular products and when new products come to market, some of them may be interested in researching and trialing it. Additionally some categories like kitchenware, personal care and nutrition tend to display characteristics of high complexity.

Focus of this quadrant should be to onboard high margin d2c brands and private labels. One can draw similarities between how CRED is an alternate source of high quality (high credit worthy and hence high quality?) user acquisition for many D2C brands. Likewise Quick Commerce is increasingly becoming a new source for acquiring customers for D2C brands. The additional advantage that QCommerce gives is a true filtered user cohort who are actually purchasing online. Cred tends to bring window shoppers who generally are discount seekers.

The challenges will be around inventory management and pricing & promotions. One can also debate if QCommerce should go with inventory led model or create a curated marketplace model for new age brands to scale on their platforms. QCommerce have already identified this as a potential source of additional bottom line (ad monetisation, higher margins, more offers) and ramping up seller platform capabilities that can streamline supplier onboarding, ad management, offers & promotions, sales analytics and fulfilment systems to manage their inventory in dark stores / mother hubs. I wouldn't be surprised if they launched Amazon's Fulfillment-By-Amazon type program

What are your thoughts?