India: 2-Minutes Meal To 10-Minutes Delivery
The Indian retail market is estimated to be around $800 billion. Predominantly, it is unorganised and operated by over 11 million kirana shops. These kiranas depict the power of MSME or even nano-SME entrepreneurs, using their native intelligence and commercial acumen to trade. They continue growing despite the past two decades of large brands of formal retailers having entered this space. This retail space has its set of complexities of hyper local consumer behaviour, local product preferences, price sensitivity, packaging requirements, brand vs product trade-offs and much more.
The Indian grocery ecommerce market is estimated to grow to around $25 billion by 2025. The research firm Sanford C. Bernstein’s report mentions that “Online grocery penetration is expected to reach ~3-5%, by 2025 from less than 1% today. Long-term structural drivers remain strong: rising income and affluence, lower tier consumption, e- commerce penetration (~30% CAGR) and a young population (~50% below 25). Grocery spend as a proportion of income remains high at ~ 30%”.
Traditionally, the Indian households bought monthly groceries in bulk. With the advent of nuclear families, this slowly segmented into buying groceries as dry goods and fresh goods (like vegetables, fruits, meats, etc.) as separate purchase patterns. With usage of marketing mediums to communicate freshness, price bargains, free home deliveries, special SKUs (stock-keeping-units), seasonal merchandise and more, the formal retailers have been trying to capture territory and consumer mindshare, as well as a share of their wallets.
Fairly, the consumer behaviour of planning the monthly groceries purchase has changed and continues to shift more towards Just-in-Time (JIT). In today’s instant-gratification world, should this shopping basket, or rather the shopping experience be left out?
But as the internet became popular, online delivery became easy. That’s why earlier Internet grocery brands started delivering groceries with a lead time of one to three days. Now the race is on to deliver it in 10 minutes! Even the food aggregator platforms want to deliver food in 10 minutes, with questions abundantly being raised about whether fresh food can actually be prepared in less than that time.
*Quick Commerce
The availability of cheaper internet data, a plethora of smartphones with cost barriers being slashed down, ecommerce is becoming an easy adoption facility. It is not just restricted to top Indian cities, but well accepted across the Indian geographies and socio-economic consumer segments. Also the majority of Indian demographics being in the less than 30 years of age bracket, the concept of instant gratification is a consumer priority. This has sparked the 10-minute delivery trend. Instead of planning their grocery shopping in advance, the younger audience is using multiple unplanned and last (10)-minute shopping to get their groceries. Well, the basket also includes items not usually ordered frequently, thereby increasing the volumes and increased basket value. Impulse purchases would end up adding to these.
The backend of this concept is its true hero. The agility and strength of the supply chain and delivery mechanism decides the probability of the trend succeeding. To deliver groceries in 10 minutes, warehouses need to be in the midst of dense residential pockets. It is precisely for this reason that 10-minute delivery services demand creation of multiple mini-warehouses or logistical hubs where products are located. Currently, using data science as a tool, these startups are able to store frequently ordered items (and with predictive analytics, even get the orders ready, based on seasonality and other consumption trends). Hence the SKUs would be limited and not comparable to a fully stocked store. But in general, this would serve the need of the consumers, and allow for the speed of picking the products and delivering them to consumers.
The typical journey starts with order coming in on the app. The items are picked up at those mini-warehouses, also known as dark stores. The delivery partner (typically on a motorbike or scooter) picks it up at that warehouse and heads to the customer address. In most cities where apartments are common-place, the delivery person has to cross the security check at the building main gate and then at the tower lobby. Then he has to head into the elevator to the specific apartment address. Then the order is delivered.
This entire process would have to take into account other externalities like road traffic, weather patterns like rains, flooding, scorching summer, cold winter, foggy conditions and delays in packing or items ordered not being available.
*Risks and Adding to Worries
Even in our major cities, most roads have sufficient potholes to risk lives and limb of riders on those roads. The onerous condition that any delay in order would be penalised from the earnings of these delivery-members, makes for speeding as a necessary condition to mitigate the risk. While all the startups would claim that they have factored in sufficient time for safe and careful ride in the delivery process, the claims should be taken with a lot of discount.
For a market that has a death on the road every four to five minutes (going by World Bank data), India has to be concerned about its businesses encouraging more rash and unsafe speeding on the road. We don’t want our digital startups to become or add to the dark side of the gig economy.
The large brands and investors have started betting on this market opportunity. India’s largest offline retailer is seeing an opportunity for scaling up in this segment and has invested in a startup. This is premised on the quick delivery market being a $50 billion white space. The Indian grocery delivery sector has seen multiple startups being funded for getting to the 10-minute delivery promise.
*Consumers and Consumption
The Indian retail space has been largely in the informal space, despite efforts over the past two decades by the organised retail chain. The long pending disruption could be fast-tracked by ecommerce chains promising delivery based on a shorter time.
These brands are promising convenience cheaper price points and more (product) choices. Offering these by using technology seems to be attracting private investors’ capital, as well. For a market that has always had sufficient low-cost human base available for mundane and odd jobs, home delivery and free delivery concepts are not surprising. To enhance their revenues and actual potential for quick commerce, these companies need to operate not just in the top ten cities, but also in the smaller towns and they have to offer private labels to improve their unit economics and margins.
Whereas, in other parts of the globe where such consumer behaviour or cost structures don’t exist, investors have invested billions of dollars into on-demand grocery delivery firms. This has been accelerated especially after the Covid pandemic when consumption dropped with strict global lockdowns. Unlike the other markets where retail infrastructure is poor, India has its own micro and nano retailers across its geographies. The larger question is, if India really needs a 10-minute delivery model and is it sustainable once people start moving about, post the unlocking of the pandemic? It serves both the needs of easy ordering and lazy-to-order-on-time.
Will Quick commerce be the next battleground for the Indian e-commerce sector in 2022? Looks like it, now that the behemoth RIL is also said to be kickstarting trial runs in Navi Mumbai. In a market where consumers are used to delays, this 10-minute delivery could be a change agent. Hopefully quick commerce will stay the course and not become quirky commerce.
Integrating the informal sector mom-n-pop grocers and other service providers into this quick commerce game could lead to inclusive growth. What is not said openly but practised as dark stores shows that Q-Commerce is in fact, a Phygital model that uses the digital medium to connect, communicate and transact, but with physical stores where items are stocked.
To keep its realty costs lower, these quick-commerce (Q-Commerce) platforms have to set up dark stores at a lower cost base; these could include unused building basements, cheaper or unused commercial spaces, underutilised parking spaces, mall parking, and any other empty space. The worry is that the working conditions for those at these dark stores may not be of decent living standards. In addition, what would be the other (hidden) costs and other terms and conditions that these individual unorganised retailers would face to either work with or fight the large giants?
And yet putting some other life and limb at risk, we want a 10-minute commerce. For a market, where many proudly abbreviate IST to ‘Indian Stretchable Time’, we surely seem to have the wrong time pressure priorities. After all, serious investors are betting larger funds on quick commerce becoming the new norm. Hopefully for many lives and for their better living standards, we don’t put certain lives and livelihood at stake for others who serve them! To rightfully seek a 10-minute ambulance access as mentioned by many critics, this q-commerce could be an idea for another set of healthcare startups to emulate.
Is q-commerce creating a consumer-need from consumer-want? Or is it the brute force of private investing capital availability that is shaping consumer behaviour? It is worrisome to see the way the market is pushing or the brands are offering everything ‘instant’ ‒ instant credit, instant matchmaking, instant grocery delivery, and more such instant offerings! Nature still has not made human birth instantaneous ‒ one still needs to wait 10 months (and not 10 minutes)!
(Disclaimer: the time taken to read this article would be similar to that of a 10-minute delivery process. No one was injured in the process of writing this article!)
