Thank you dear subscribers, we are overwhelmed with your response.
Your Turn is a unique section from ThePrint featuring points of view from its subscribers. If you are a subscriber, have a point of view, please send it to us. If not, do subscribe here: https://theprint.in/subscribe/
Rapid emergence of Quick commerce is creating stiff competition for e-commerce players. It will also have a significant impact on e-com logistics companies. As per estimates quick commerce volumes have grown at 45% – 50% year on year against 17-18% growth of e-commerce volume. This growth rate may further improve with addition of new categories. In spite of limited reach to about 25 cities, quick commerce volumes have already crossed 65 million shipments per month. These volumes are more than 15% of e-commerce volume, which has very strong reach across the country through 3PL service providers.
Quick commerce is largely a phenomenon of metro and Tier 1 cities and expected to remain up to tier 2 cities only. While we expect e-commerce to keep its dominance in tier 2 and smaller markets against quick commerce. Operating model of quick commerce revolves around inventory carrying dark stores. The viability of such an inventory led model depends on order volume and drop density, which remain very high in urban markets. While in tier 3 or tier 4 cities, maintaining a complete product range with lower order volumes, such a model may not be viable for quick commerce companies. On the other hand, customers have limited time to go to markets to buy routine things in Metro and Tier 1 environments leading to higher order frequency. While in smaller cities customers have sufficient time for going to markets and travel time to market is very low. Customers of smaller cities wait for 2-3 days for some specific things bought through e-commerce channels for a better product option or value.
Quick commerce, a segment which started with delivery of milk to households expanded to perishables, groceries and various other things of daily needs. Few months back quick commerce players started delivering smaller electronics products like earphone and chargers. Latest addition to the product portfolio of quick commerce companies is mobiles and white goods. This addition will adversely impact e-commerce players, as mobiles along with white goods & appliances contribute maximum for e-commerce players. In future any move by quick commerce players for entry in apparel may further hit e-commerce players.
So far, all four major quick commerce players: Swiggy Instamart, Blinkit, Zepto and Big Basket largely manage their own logistics, especially with multiple last mile vendors. Organised players like Shadowfax and Elastic Run are also delivering some part of quick commerce for these companies, but major e-commerce logistics players have negligible share in Quick commerce deliveries. So far, major e-com logistics service providers were reluctant to provide service on a single leg – dark store to customer, as the value proposition of these major players remains around end-to-end services requiring large & complex network operations.
Declining growth rate of e-commerce, reduced funding and stiff competition has created tremendous pressure on e-com logistics companies, especially for profitability. In such a scenario, further stagnation or slow growth in urban volumes of e-com shipments will increase pressure on logistics service providers. In semi urban and rural markets per unit merchandise value of e-com purchases remains lesser than urban markets, which leaves less headroom for delivery cost, while cost of delivering in smaller cities is relatively higher for logistics service providers.
Volmo, captive logistics arm of e-com major Meesho, is already developing a model to minimise logistics cost, for low value merchandise, with unorganised and fragmented vendors. Volmo’s model might have certain limitations in terms of quality of services, but it poses a severe challenge to major players for their pricing of e-commerce delivery.
In India per unit delivery cost of an e-com shipment is already 30% lower than China, where the e-com industry is multiple times larger than the e-com market. All Chinese e-com logistics majors post healthy EBITDA margins unlike Indian counterparts. Under the given scenario any hike in e-com delivery price is unlikely. Till a couple of years back, the only hope for the e-com logistics players to become profitable was volume and cost optimisation. High growth rate in e-com volumes seems unlikely due to competition from quick commerce. This has led to a change in thought of e-com logistics players to consider joining hands with quick commerce companies for providing services and snatching volumes from them. But days to come will be more challenging for e-commerce logistics service providers for attaining profitability aligned to shareholders expectation.