Quick commerce not just a fad, here to stay, says Jefferies report

The Jefferies report was based on a visit to one of Blinkit's dark stores in NCR

Zomato chief executive officer (CEO) and founder Deepinder Goyal’s bet on quick commerce is finally getting validated by analyst firms. Jefferies — in its latest report on Blinkit — said, “We are convinced that it (quick commerce) is not just a fad; 30-minute delivery is here to stay.”

The analyst firms also acknowledged that there was considerable uncertainty on various aspects at this early stage, including profitability.

The analyst firms were surprised to see that unlike perception, the average order value in quick commerce was much higher.

The Jefferies report was based on a visit to one of Blinkit’s dark stores in the National Capital Region (NCR). According to the report, the average order value for the visited store was Rs 700 while the company average stood at Rs 580.

“The early narrative on quick commerce has been around small SKUs (stock-keeping unit), as customers would rely on quick commerce for top-ups.

However, we were surprised to see large-pack sizes in case of several products like wheat flour, rice and detergents, among others, suggesting that the use case is not restricted to small purchases,” added the report.

Surprised at Blinkit’s portfolio spread, which offered less-obvious products like pet care, stationary, board games and appliances, among others, apart from the traditional spread, the firm stated, “Prima facie, Blinkit’s portfolio spread seems wider than that of peers like Dunzo, Swiggy Instamart and Zepto.”

A typical dark store spans a radius of around three kilometres and locations are chosen based on population demographics. Each store receives an average of around 700 orders a day, which could go up to 3,000. Each store has about 25 riders on an average. A warehouse hub caters to each store and supplies to around 40 dark stores, revealed the report.

In the report, Jefferies places Zomato at a price target of Rs 100. However, key risks identified by the firm include the resurgence of Covid, increase in competition, lower-than-expected market growth and adverse regulations. 

Zomato recently acquired Blinkit for Rs 4,447 crore. Though the company got shareholder approval for the acquisition, scepticism among shareholders was high as this would impact Zomato’s path to profitability. 

Store highlights

• Interesting products on shelves: Air purifier, hookah, ice cubes and cooking pan, among others
• No own-label products; instead, some packed food staples are sold as white label
• Strong order of rakhi on Rakshabandhan (Hindu festival)
• Store also sells ice cubes and sees fairly good offtake, particularly over the weekend