How do dark stores help deliver groceries within 30 minutes?

Market dynamics are forcing tech companies to constantly evolve and undercut each other. In e-commerce, firms are competing not only on pricing and quality, but also on how fast they reach your doorstep.

It started with Swiggy launching Instamart, promising grocery delivery in 15 to 30 minutes in Bengaluru and Gurugram. Soon, Dunzo stepped in with its 19-minute delivery promise. Then Grofers with a 10-minute pledge. Now, Zepto, a startup run by 19-year-old Stanford dropouts Aadit Palicha and Kaivalya Vohra, is also promising 10-minute delivery of groceries. So, how are these firms able to deliver groceries in such a short time? The answer is dark stores.

Dark stores or micro-warehouses are located close to the point of delivery, as opposed to large warehouses on the city outskirts. Hundreds of dark stores service an entire city like Delhi, compared to 3-4 large warehouses. Each dark store manages a focused set of 1,500-2,000 stock-keeping units (SKUs) or distinct product items.

Startups are using technologies inside these dark stores to reduce the processing time for orders. 

However, as Indian startups are gunning to become the fastest to deliver your groceries, their race has also triggered a debate on social media. 

Given the condition of our roads and the traffic in our big cities, is it fair for startups to make their delivery partners work under a time constraint of as little as 10 minutes?

Responding to the criticism, Grofers CEO Albinder Dhindsa clarified that his company is, in no way, forcing its delivery partners to “drive faster”. 

The market penetration of quick-commerce is estimated at around $0.3 billion in the calendar year 2021 and is expected to grow to $5 billion by 2025, according to a new report by RedSeer. The growth will be led by convenience-seeking customers, among them ambitious millennials who are impulse purchasers, in the big cities. The addressable market for quick-commerce in India is 20 million households, according to RedSeer. 

However, analysts aren’t sure about the sustainability of the quick-commerce model in India. Online grocery startups operate on wafer-thin profit margins of around 10 per cent to 20 per cent. Now add to that the cost of delivering groceries in 10, 15 or 19 minutes by operating several micro-warehouses. Analysts add that while customers would not say no to quick deliveries, it is highly unlikely they’ll choose to pay extra for it. It remains to be seen if quick-commerce startups can create an addressable market and sustain their race for faster deliveries.