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How can quick commerce trend benefit FMCG and other sectors? Sachin Dixit explains, ET Retail


Sachin Dixit, Lead Analyst-Internet, JM Financial Institutional Securities, says “there is a large internet penetration story that is getting played out. Quick commerce for India is not really a new thing because India was always used to quick commerce, just in offline format by shopping at kirana stores. Now we have apps that are delivering the items to homes. Consumers are still getting used to having a higher frequency, lower ticket size purchases that they were anyways doing earlier.”

Could you explain how FMCG companies are focusing on quick commerce via internet trend? What is the growth one should be expecting from this trend?
If you look at commentaries from most of the FMCG companies, it is evident that they are increasingly talking about quick commerce accounting for a higher share of the business and that is going to continue. The reason: growth for these companies is not really limited to how you can think of any traditional companies, there is a large penetration story that is getting played out. If you think of quick commerce for India, it is not really a new thing as such because India was always used to quick commerce, just in offline format by shopping at kirana stores.

Now what has changed is that we have apps that are delivering the items to a home and so not much has changed for a consumer as such. They are still getting used to having a sort of higher frequency, lower ticket size purchases that they were anyways doing earlier, compared to a developed world economy or even some parts of Southeast Asia, where people used to stack up on their monthly inventory upfront, putting things in a pantry. And a lot of Indian households do not even have the concept of a pantry. There might be some staples that they might be stocking. But other than that, they are doing a lot of those frequent purchases that happen on the go. So that way, the growth trajectory remains strong. Some of the companies that we have been tracking are almost doubling on a year-on-year basis. There is no reason to believe that is likely to stop anytime soon.

Blinkit app data is showing a growth of 80% plus for the last three consecutive months. Do you expect similar trends to sustain over the next one to two years because our penetration levels are quite low?
I will not put a number out there. Blinkit can grow 50% or 100% but you can certainly see that the consumer love for this business model is there. Initially, when you were thinking of quick commerce, most people were banking on grocery as the primary category. Now if you look at what a lot of companies are releasing during the festive season, a lot of gold and silver coins that were sold on these platforms. Ganpati idols are being sold on these platforms. So a lot of these things have evolved.

Going forward, the growth will be driven by consumers getting added to the platform and the number of monthly and annual transacting users going up. But further growth is going to come from the assortment that these companies add. It is going to be a very, very strategic call that these companies make in terms of what sort of assortments they keep on adding on a localized basis.

If you look at some of these functions or festivals that India sees, a lot of them might not really be celebrated across the country. They might be very region-specific, state-specific. So that means the companies are adding particular inventories in the area in which they have the dark stores. So it is a combination of those things. One consumer addition, that is likely to be a good driver. But I think the bigger number to focus on is the ordering frequency on these platforms.

Where are you specifically seeing these trends of quick commerce pickup? Any specific segments? Obviously, we spoke about the consumer side, the FMCG side but other than that, anywhere else where you see this pickup is expected in the internet trend?
So FMCG obviously is there. Among other categories that are coming up, I highlighted gold coins, silver coins, and a lot of festive-related purchases have come up. Moving on, there is also, for example, a lot of those standardized beauty purchases, for example, that are coming up on these quick commerce platforms that are getting used.

Blinkit has been highlighting that they sold some iPhone 15 on the platform. But obviously, that is not something that you will forecast going forward or that is not something that you will build a lot of growth from because that might come and go over a small period of time. But in terms of categories, you should think of quick commerce as more like e-commerce. They are not really limited to grocery as a category. Whatever thing that you think of, let us say chargers, for all that matters, right, a number of those cables that people need, even those are coming up, low engagement items across the categories.

It is not just electronics, it might be even apparel, for all that matters. For example, during the recently concluded World Cup, a number of India jerseys were sold on these platforms. So it is now becoming more of a horizontal play, rather than the grocery-specific play that was actually talked about when these platforms were launched roughly two years back. If you think of it, within the last 20-25 odd months, these platforms have grown to account for almost 20% the size of the largest retailer in the country, D-Mart, combining maybe a Blinkkit, Instamart, as well as Zepto.

  • Published On Nov 23, 2023 at 08:28 AM IST

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