From Milk to Smartwatches, Quick Commerce Can Sell Anything. Can It Sell iPhones and ACs?

Impulse shopping is the foundation on which India’s billion-dollar fast commerce industry has been built. And after initial success, fast trading platforms will now need to determine how strong the buying impulse is.

Milk, vegetables, groceries, notebooks—all delivered in 10 minutes—until recently, this was the great promise of fast commerce. But platforms quickly realized that delivering these things wasn’t bringing them enough revenue. Hence the shift in direction. Fast commerce platforms like Blinkit, Instamart, and Zepto aren’t just shipping milk and vegetables to your home, they’re also shipping charging cables, smartwatches, and blenders. And now they want to sell smartphones, air conditioners, and refrigerators.

“Electronics is the lowest-hanging fruit,” says Anand Ramanathan, partner and leader, consumer products and retail leader, Deloitte India. For Ramanathan, the mantra to keep a retail business growing rapidly is to improve unit economics – the amount of money made by selling one unit of a product. For this to happen, fast trading platforms need to sell expensive items.

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That’s because fast-trading platforms have to factor in the profit or loss per square foot of their “dark store” warehouses — warehouses in parts of cities where sales are high.

So selling phones makes sense. They take up very little space and provide larger margins. But will selling air conditioners and refrigerators be as profitable as selling phones? Fast trading platforms need to think about this.

How strong is the impulse?

People buy food and groceries on impulse. Some people even buy phones on impulse. But do they buy refrigerators and washing machines on impulse? Ramanathan thinks not. “People are willing to wait a while for these products,” he says. But he adds that people may want to buy things like small kitchen appliances immediately.

Jeetu Bairathi, principal partner, transaction advisory, BDO India, in northern India, says, “From a business perspective, increasing the average order value (AOV) makes sense as home appliances have a healthy margin of 15-40 per cent.”

The AOV on QRTs is in the range of Rs 200-400. But for a modern retail store — what QRTs want to be, but online — the AOV is Rs 2,000-3,000. An average retail store is also three times the size of a dark store.

But no one knows what the demand for home appliances is in the fast-paced trade, says Bairathi.

And without adequate demand, managing inventory of large electronic goods becomes a problem. Bairathi says dark store operators will need to anticipate demand to optimize their just-in-time inventory system and convince sellers to lock up working capital.

One obvious reason for fast trading platforms to consider adding large home appliances to their product range is so they can sell to their existing customers rather than going out looking for new customers. People who buy vegetables and fruits on Blinkit are also expected to buy more ACs on the platform.

“With the growth of the category, platforms are banking on customers coming back to place repeat orders on their app,” says Bairathi.

Question in 10 minutes

Storing bulky electronic goods in dark warehouses is just one part of the problem for fast-paced retail. Another big part is logistics. How will platforms ship air conditioners, refrigerators and washing machines to their customers? It certainly won’t be on bikes.

BDO India’s Bairathi says that while impulse-buying demand can be met for smartphones, “for larger electronics, platforms may have logistical issues. They will have to make three-wheeled connections.”

Add to that the propensity of digital shoppers to return things they buy online. Nearly 15 percent of electronic goods purchased online are returned, the highest return rate of any category after clothing and shoes. Large e-commerce platforms like Amazon and Flipkart are able to process returns and issue refunds quickly.

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However, processing refunds will be difficult for fast trading platforms, Bairathi says. E-commerce platforms also facilitate after-sales service through their existing network of local dealers and retailers, but fast-trading platforms will have to create such networks from scratch.

High-speed trade is one of the fastest-growing segments of the Indian economy. After the pandemic made people fall into the habit of ordering even the smallest things online, Indians, especially those living in metros, never went back to shopping from kiranas. The high-speed trading industry is booming but still struggling to make a profit. Selling household appliances can be a good solution, but it’s a tricky area.