Is Quick Commerce Businesses Sustainable or Quick to Fade Away?

Quick Commerce Businesses

Do you patiently wait for your order to arrive? Or are you like me, impatiently tracking orders right from the minute you ordered it? This uncomfortable feeling of impatience you feel after ordering is because we are so accustomed to instant gratification. 

GenZ and Millennials – the social media generation  have grown alongside social media, which is the breeding ground of instant gratification. Businesses have understood this behavior pattern in GenZ and Millennials. 

GenZ and Millenials together make up 50% of the Indian population. So, it makes the most sense for businesses to cater to this instant gratification need of their customers. This is the reason why we see such a rise in Quick commerce businesses. 

Quick commerce businesses like Swiggy InstaMart, Blinkit, and Zepto promise you to deliver groceries, etc within 7-15 minutes. This, as a customer sounds like a dream come true, but from a business point of view, I would have my heart in my mouth.

The question is: Do we even need instant deliveries? Are customers ready to pay premium prices for delivery? And, the most important question: Is Quick Commerce Sustainable for a long time, or will it fade away with time? Did you know that most of these businesses are running on losses? 

Can Quick Commerce Businesses Quick fix its way to profitability?

The pressure of faster turnaround time (TAT), low margins, and high charges of hyper-fast delivery cause companies to burn cash, which makes this a risky model of business. 

Adding more fuel to the fire, most e-commerce companies are focused on just groceries which are low on margins, so breaking unit economics becomes difficult. In the longer run, they might want to diverge into more products like beauty, electronics, and gifting products, to break even. 

Quick commerce is also very location-dependent, so breaking unit economics might be more difficult in some regions than others. It’s all about picking the right locations with a high order density. 

Also, the Indian market is diverse not only from a product point of view but also because the prices vary a lot. The new-age platforms don’t have an understanding of the right product assortment for customers. 

For example, there are 5,000 varieties of Rice available in India, so knowing which variety will sell well in which area of the country is crucial. Here’s where Kirana stores take the lottery, they know their customers and have a direct relationship with them, which puts them in an advantageous position. 

The Path to Profitability is Bleak 

Companies with deeper pockets that can run on negative Earnings before Interest, Tax, Depreciation, and Amortization (EBITDA) for a long time will stay afloat. In today’s time, you can also say that the more losses a company makes, the more valuation they get. 

In well-established FMCG companies, there is a point after which you cannot lower your prices. But in the commodities market, there are no rules, many players start their prices way below the baseline, way below the cost price, and at 1 or 2% gross margins. With this framework, there is no sight of profitability for them. 

A lot of quick commerce startups have gotten crazy valuations and some have even turned into unicorns. But now even their funding pockets have run dry and have seen corrections in their valuation. 

Customer-centric approach a must

The only way these companies can become profitable is by returning to basics, going back to a customer-centric approach, attractive margins, and attractive profits. Also improving the working conditions of delivery personnel is important, given that their entire business is based on quick delivery. Many times delivery personnel have gone on strikes because of the delays in their payments and poor working conditions

 This quick delivery promise has also raised road safety concerns amongst the delivery persons. They often put their lives at risk by not obeying the traffic rules for the sake of quick delivery. All this is very crucial to look into, for the well-being of both the business and the customers.