Is Speed ​​Trade the modern Kirana?

I have to start by admitting that I was skeptical when Zepto launched its delivery service in less than 10 minutes! After all, who has food emergencies on a regular basis? I was quite pleased with Big Basket with its wide range, good quality and next day delivery.

In early 2023, we at Elevate Insights surveyed 600 online grocery shoppers in 6 metros and found that most of them fell into the same camp. 30-minute delivery was found to be adequate for a few top-up occasions, while most grocery occasions were classified as scheduled, with no delivery rush.

Zepto not only promised delivery in less than 10 minutes, but also provided the goods at a discounted price and did not charge any delivery or handling fees. Everyone wondered how this could ever create a viable business model?

Let’s fast forward to 2024: Zepto now makes up 80% of my total household grocery purchases with 30-40 orders per month. This has become my go-to source for milk, fresh produce and groceries, given its competitive prices and rocket-like delivery service. I must admit that now even 15 minutes seems like a terribly long delivery time. Delivery within 4 hours or next day is not necessary! I’m willing to pay as much as INR 99 per month for this convenience, partially sweetened with some discounts here and there!

Changing rules for shaping habits

Philip Kotler taught us that awareness  Consideration  Rehearsal  Application. Zepto and others like them have shown us that a free service  Experiences delight  Habit builds  Willingness to pay dues  Good investment.

Foodtech players also tried the same model of creating habits through deep discounts and attractive offers in the early days. However, the frequency of dining out for the Indian diaspora is not on par with the daily restocking of milk and groceries, which is why high-speed commerce has become a center of gravity even for Swiggy and Zomato.

Race to play Q Commerce:

Even though high-speed trading is fading in many markets and several heavily funded startups have gone bust, India is emerging as a striking outlier, registering an astonishing tenfold growth between 2021 and 2023. However, despite this rapid expansion, high-speed trading has only captured a modest portion. According to JM Financial, this represents 7% of the potential market, with a total addressable market (TAM) estimated at $45 billion, dwarfing the food delivery market. It is therefore not surprising that Reliance’s Jio Mart was the last to announce plans to enter this race.

How this seemingly undeveloped industry became a rocket!!

1. Unique product market fit: Quick Trade mimics the incredible convenience and personalization of a traditional mom-and-pop neighborhood retail outlet with a fairly extensive premium selection like Modern Trade. Analysts predict that many consumers would switch directly from traditional retail to high-speed commerce, bypassing MT. Also from an operational perspective, the Quick Commerce model is based on a network of dark stores, and the technology enables players to optimize every second, from optimized identification of dark store locations to inventory storage, packaging and invoicing. Some players have had an order delivered that took 5 minutes for the consumer to place!!!!

2. Unique audience profile and opportunity matching: This helps when the core user of Quick Commerce is basically the target audience of most new age brands looking to disrupt consumer goods, especially in the food and beverage space in India. Moreover, this channel is characterized by a high retention rate of nearly 65%. This makes it a marriage made in heaven. This channel is quickly becoming the most desired space for advertising, new launch samples and brand collaborations for all premium products.

A large number of digital first brands such as GoDesi, GoZero, MasterChow, Dadi’s, etc. are scaling through fast commerce channels as it is a perfect combination of right audience and right fit for occasion considering the impulsive nature of their goods.

3. Moving beyond the F&B industry towards e-commerce, lifestyle and gifts : Today, the fast-trade sector sees its success as a piggy bank of diverse e-commerce and lifestyle products as another legitimate way to reach a very relevant audience. From Lenskraft sunglasses to toys, makeup and personal care items. High-speed trading is also rapidly increasing market share in gifts. Who needs to book in advance through Ferns & Petals when you can order cake, flowers and special gifts for Mother’s Day, Valentine’s Day in an easy way, the trade itself in minutes.

Even with Blinkit running the show, Zepto is gaining momentum.

While Blinkit is the dominant player in the Q-Commerce market with an estimated market share of 40%, according to a report by HSBC Global Research, Zepto has steadily increased its market share from 15% in March 2022 to 28% in January 2024 . at the expense of Swiggy Instamart, whose market share has dropped from 52% to 32% in the last two years, leading the industry in all vectors.

This is amazing considering that Instamart and Blinkit benefit from the Foodtech customer base that Zomata and Swiggy had, apart from back-end operational efficiency. Big Basket definitely has a lot of catching up to do if it wants to remain relevant in the online grocery space. Without a doubt, fast trading is the future of online grocery in India. Given the way Zepto is leading in all aspects of monetization, we think it could soon become a leader in this category.

Ruchira Jain is the founder of Elevate Insights, a market research and consulting company. Previously, she was vice president of Swiggy, director of PepsiCo.