Amazon, Flipkart face stiff competition to catch up in quick commerce race

Analysts said companies like Amazon and Flipkart may have to invest at least $1 billion each in 2-3 years to catch up

E-commerce majors Amazon and Flipkart, which are planning to scale up their quick commerce (qcom) operations, may need to invest at least $1 billion each over the next two-three years to catch up with established platforms, such as Zomato-owned Blinkit, Swiggy Instamart, and Zepto, according to analysts. 

 

Qcom refers to the delivery of consumer items within 10 to 30 minutes. In August, Walmart-owned Flipkart entered the growing qcom segment with the launch of Minutes. Amazon India plans to launch its qcom service, called Tez, in January.

 

“They would have to invest at least $1 billion in the next 2-3 years because the other side is ready to deploy that kind of capital. If you think, “let’s invest $25 million and see how it goes”, then that will not work,” said Satish Meena, an advisor at Datum Intelligence, a consumer technology-focused market research firm.

 

According to industry sources, 15 to 20-minute deliveries are taking a major share of sales, particularly in the grocery and household essentials categories, away from Flipkart and Amazon. Analysts said it’s only a matter of time before these qcom firms expand into premium categories like electronics and fashion, which have traditionally been dominated by Amazon and Flipkart.

 

“Amazon and Flipkart are in the same boat. Being late to the qcom space is a concern for these large e-commerce firms. The execution quality of qcom companies is very good,” Meena said. “These qcom players are no longer startups. All of them have at least $1 billion in cash to deploy and can raise more from the market. It is going to be a tough task for Amazon and Flipkart.” 

 

As consumer preferences shift toward the convenience of last-minute grocery deliveries, qcom companies are outpacing traditional retailers, with 46 per cent of consumers surveyed reporting a decrease in purchases from local kirana shops, a Datum Intelligence report has said.

 

The qcom market size is projected to reach $40 billion by 2030 from $6.1 billion in 2024, according to the report. The rapid acceptance of qcom among consumers demonstrates a clear willingness to pay for the convenience of immediate, on-demand purchases.

 

Experts said qcom companies are dealing directly with fast-moving consumer goods (FMCG) players and manufacturers, saving 10 to 15 per cent on margins. As their volumes increase, they will secure better pricing from FMCG companies. Qcom platforms are also seeing a surge in advertising revenue, all of which contribute to a path toward profitability.

 

Samir Kumar, the newly appointed Amazon India head, recently announced that the firm was piloting 15-minute delivery in Bengaluru this month.

 

Experts said that what would work for Amazon and Flipkart is wider selection of products, better pricing, and access to a very large number of brands.

 

Although Amazon and Flipkart have massive logistics infrastructure and large warehouses primarily located on the outskirts of cities, they may need to adjust their operations and move closer to customers for 10 to 30-minute deliveries, according to industry sources.

 

What works for qcom firms, according to experts, are their dark stores, which are mini warehouses located in densely populated areas to minimise delivery times.

 

As of September 30, Blinkit houses 791 dark stores, up from 639 at the end of June, and it plans to expand to 1,000 dark stores by the end of the fiscal year and 2,000 by the end of 2026. It also aims to extend services into Tier-II and -III cities. In the July-September quarter, Blinkit reportedly delivered 92.9 million orders, recording a gross order value (GOV) exceeding Rs 6,000 crore.

 

In the second quarter of FY25, the GOV growth of newly listed Swiggy’s qcom platform accelerated to 24 per cent quarter-on-quarter (Q-o-Q) at Rs 3,382 crore. Overall orders grew 21 per cent Q-o-Q, with orders per dark store per day rising 10 per cent Q-o-Q.

 

During the quarter, Instamart added 12 cities and 52 stores and improved its contribution margin by 124 basis points Q-o-Q. It plans to double its dark store count by March 2025 (from 523 on March 2024) while increasing the average size of its stores by 30 to 35 per cent. “It will also allow us to finish our transformation. We have operated as a grocery first business for the first few years of our journey. But now we would see more assortment which opens a new wave of selection for quick commerce,” Sriharsha Majety, managing director and group chief executive officer (CEO) of Swiggy, had told Business Standard recently, adding that the firm plans to launch pharmacy category.

 

Zepto, on the other hand, saw its operating revenue more than double Y-o-Y Rs 4,454 crore in FY24. It plans to use the capital it has raised to double the number of its dark stores to 700 by March 2025. The company is on track to achieve annualised sales of $3 billion in a few months, according to co-founder and CEO Aadit Palicha.