What will fuel quick commerce success in India? Retailers Association chief explains
Summary
Bijou Kurien, Chairman of Retailers Association of India, talked about the need for high investments and the importance of achieving scale for quick commerce companies to achieve break even faster.
Bijou Kurien, Chairman of Retailers Association of India discussed the opportunities and challenges for the quick commerce space in India and the implications for the local grocery stores with CNBC-TV18.
Kurien also talked about the scope for scalability of the quick commerce businesses and the other factors that will drive their revenue and profitability.
These are the edited excerpts of the conversation.
Q. The big question is what is taking place with quick commerce. We saw it with Zomato where Blinkit really stole the show this time. What is your sense in terms of the further scalability for quick commerce in the Indian market?
A. Quick commerce is a service which is being provided largely driving the need for households who run out of groceries and want to buy what you call top-up groceries. This will continue to remain because of the way we buy groceries has also changed over the years. Traditionally, we used to buy from large wholesale markets, then we used to do monthly shopping. And now, we actually end up buying more frequently during the course of the week. And as long as that happens, then it’s quite likely that you will need you know, a combination of buying from a grocery store as well as having somebody supplied to you at home.
Q. While quick commerce is a big opportunity, and everyone’s using it, it’s still limited to just a few metros. At scale, do you think there’s room for more players here or is it a winner takes all sort of market?
A. It’s a high investment category. Along with that it also needs scale. So you could see that even a company like Zomato has managed to scale quite significantly but still loses money in this particular category. I think if you’re going to be able to achieve revenues in the region of maybe about ₹3,500- ₹4,000 crore, you can break even with something like this. The second is because it’s high investment, and you’ve got the promise of 10 to 15 minutes, you need to be able to use extremely sophisticated analytics, to be able to determine where your dark stores need to be put up, and the amount of investment that you want to keep in these dark stores in order to be able to fulfil your promise. So it’s overall it’s a good game to play in. Currently, it’s confined only to groceries and home essentials. But there is no reason why this service can’t also extend to other categories of products.
Q. That’s the key point. How much do you think it can expand, which are these other categories that companies could probably look to invest in, and probably have a first mover advantage in?
A. Speed fulfilment is an essential consumer requirement. And everybody looks to try and make sure that if you buy something online, you get it at your home as fast as possible. Currently, the only things that typically customers want delivered quickly is groceries because you require it as part of the kitchen. However, if you are getting something else within half an hour, or within a couple of hours also, you still are making a difference compared to what the classical ecommerce players are currently doing.
To that extend, you will certainly find that over a period of time, if you go into let’s says electronics, or electronic accessories, stuff that you need in an office or at home, you suddenly realise that you run out of it, can I check it on click commerce before actually ordered on even another online platform.
Q. We take your point that once a categories broaden out, people would want things faster. We’ve seen that with cell phones and recently with PlayStation 5, which was launched on quick commerce. But it is the sudden disruption of general trade that needs to be keenly watched. What happens to general trade? Do all of them turn into dark stores?
A. Not necessarily. They don’t need to turn into dark stores. What the quick commerce players are doing general stores can also do. If a quick commerce player is creating a dark store, which is essentially a warehouse, and moving goods from the warehouse to a consumer’s home, a general store can also do the same thing. Traditionally, you would call up your local retailer grocer to send a pound of bread across, or your pharmacist for medicines, and they would be comfortable doing that. This is something we don’t call quick commerce. It is something which happens in half an hour or depending on the need. But I think general stores have the same capability as any quick commerce player. The way in which they do it might be less sophisticated than a quick commerce, but essentially, they can do the same thing.
Q. How will CPG companies reset their thinking when it comes to supplying to another channel, when it comes to their price, the range the assortment that they have to give fulfil to all these channels. What is the kind of reset that is required by them?
A. I don’t think there requires to be too much of a difference to what they’re currently doing. They are currently actually replenishing stocks at retailers counters. Retailers have inventory management systems, which allow them to be able to order as and when the stock levels decline. I don’t think there’ll be too much of a difference which needs to be made to them. The play will be at the front end in terms of pricing. While delivery might end up becoming table stakes, at pricing levels, there will be some who are willing to burn cash and some might want to protect margins. That’s the only area where CPG companies need to worry because the general trade has less ability to be able to offer deep discounts, whereas some of the larger online players can afford to that.
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