NEW DELHI: To analyze the evolving landscape of quick commerce (QC), we engaged with industry experts and derived key insights into this fast-growing sector. Unlike traditional e-commerce, QC platforms exhibit distinct consumer behavior, with a higher preference for direct product searches over category exploration. The annualized ad revenue run rate (ARR) of QC platforms is estimated at INR 30-35 billion, nearly half of Amazon India’s ad revenue. Increased shopping frequency and extended commercial time post-orders have fueled the growth of QC platforms, leading to heightened ad commitments from emerging brands.
Data-driven operations are crucial in optimizing performance, given the smaller catchment areas of dark stores and store size constraints. Monitoring the entry of e-commerce giants into QC will be critical, as performance in non-metro regions remains unpredictable due to lower store throughput and higher price sensitivity.
Targeted Purchases Over Category Exploration
Consumer behavior in QC differs from e-commerce, with direct product searches accounting for 40% of all searches, compared to 60% via category exploration. For example, search volumes for Lay’s chips exceed those for the general chips category. Similar trends are seen in other segments like hair oil, where direct-to-category searches follow a 45:55 ratio. This underscores QC’s role in targeted purchases rather than broad category exploration. Data-backed insights into consumer habits within dark store catchment areas are essential for optimizing store throughput and ensuring a lower payback period. The right product assortment at competitive prices will differentiate store performance, even within the same area. Micro-level data intelligence is vital for maintaining same-store sales growth (SSSG) and managing delivery costs effectively.
Ad Revenue: A Key Growth Driver for Quick Commerce
Advertising revenue is a significant advantage for QC platforms compared to traditional retail, which primarily relies on trade commissions. Current estimates suggest that the combined ad revenue ARR of three leading QC platforms—Blinkit (45% share), Zepto (35%), and Instamart (20%)—has already reached INR 30-35 billion, roughly half of Amazon India’s FY24 ad revenue of INR 67 billion.
Several factors contribute to this trend:
- Higher shopping frequency on QC platforms compared to traditional e-commerce.
- Brand onboarding policies requiring minimum ad spend, particularly for lesser-known brands.
- Dual ad revenue streams—advertisements for onboarded products and promotional placements in post-order tracking windows, which last 10-20 minutes before order delivery.
Smaller brands tend to be more aggressive in advertising on QC platforms than their larger counterparts. Blinkit’s algorithm-driven ad model delivers higher ROI than competitors, and with ongoing expansion and rising adoption, ad revenue is expected to increase further, gradually taking market share from e-commerce incumbents.
Quick Commerce Platforms: A Magnet for Brand Onboarding
The high inventory turnover associated with quick commerce’s rapid delivery model has attracted brands eager to boost sales. However, store size constraints (QC stores ~3,500 sq. ft. vs. modern trade ~40,000 sq. ft.) mean that platforms are becoming increasingly selective in brand onboarding. As dark store sizes expand, more brands will enter the QC ecosystem, leading to increased ad spends and more competitive brand negotiations, benefiting both platforms and advertisers. Striking the right balance between established FMCG giants and emerging direct-to-consumer (D2C) brands will be key. Quick commerce has already captured a dominant share in certain categories, accounting for 60-70% of retail online sales for soft drinks.
E-commerce Giants Entering Quick Commerce
The performance of e-commerce players in QC is a key trend to watch. Amazon’s Tez and Flipkart Minutes have launched in Bengaluru, marking their entry into the quick commerce space. A strong presence from incumbents in metro areas will drive up customer acquisition costs (CAC) for new entrants. E-commerce players, with their profitability focus, access to capital, and extensive operational data, could significantly accelerate their QC ambitions. India’s rich multi-year e-commerce data provides a valuable foundation for data-driven expansion in quick commerce.
Non-Metro Markets: A Non-Linear Growth Trajectory
Non-metro markets present a mixed picture, with uncertainty over unit economics, product assortment, and store throughput variations. Kirana stores and modern trade channels remain deeply entrenched, particularly in smaller cities, due to:
- The extended credit periods offered by Kirana shops, which are highly relevant in tier-II and III cities.
- A lower proportion of working professionals per household compared to metro cities.
- Strong demand for low-sachet products, which counteracts QC’s focus on higher average order values (AOV).
Growth in these regions will hinge on identifying emerging cities with increasing consumption patterns. Modern trade giants like DMart may see limited impact in non-metros, as price-sensitive consumers continue to favor traditional retail formats.
FMCG Dominates GMV; Kirana Stores Entering Delivery Space
FMCG products constitute approximately 80% of QC platforms’ gross merchandise value (GMV), and over 90% in non-metros. To boost AOV, QC platforms are diversifying their product mix, but growth outside FMCG remains limited beyond metro areas. Meanwhile, large Kirana stores are rapidly adopting home delivery models—both slotted and quick delivery—potentially increasing competition for QC players. From a profitability perspective, the margin hierarchy for manufacturers is: Kirana > Modern Trade > Quick Commerce. As QC gains traction in metro areas, it could exert pressure on brand margins in the long run.
Outlook: The Future of Quick Commerce
Quick commerce is firmly positioned in the retail ecosystem, benefiting from increased ad revenue, higher order frequencies, and rapid brand adoption. However, challenges such as unit economics in non-metro markets, store size constraints, and competition from traditional retail and Kirana stores remain. Monitoring the competitive landscape, especially the moves by e-commerce giants, will be crucial in assessing QC’s long-term growth trajectory. As the market evolves, data-driven insights and strategic expansion will determine the winners in this rapidly growing segment.
