Quick commerce fires up record discounts with rivals getting quicker

Time of India

10 hours ago

ETtech
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The rapid expansion of online retailers Amazon and Flipkart in the crowded quick commerce sector is pushing discounting across platforms to record highs in an industry battling accelerating losses.As price becomes the primary differentiator for these apps with near similar user experience, intense discounting and attendant cash burn are likely to intensify further, according to multiple people in the know .This month, average discounts across categories rose to 20–25% on maximum retail price compared to below 10% two years ago across various quick commerce platforms, including for segments like dairy and groceries, the sources said."Rising competition is the reason for increasing discounts within quick commerce, today there are eight players," Karan Taurani, executive vice president at Elara Capital.'Today there are eight players, unless we see a convergence towards four-five players, this kind of discounting will persist. We had only 3-4 players earlier but now we are seeing the entry of more players including Flipkart and Amazon…I think discounting will persist for some time until the competitive intensity cools off,' Taurani added.In addition to market leaders Blinkit Zepto and Swiggy 's Instamart , others such as Reliance Retail's JioMart, Flipkart Minutes and Amazon Now have also started building a presence in this space.Analysts are of the view that discounts are the highest in the personal care category rising to around 35% discounts on maximum retail price. Other products such as packaged foods, basic staples, home care, beverages also are discounted heavily. 'Dairy has the lowest discount (5%), understandable given it is a lowmargin category and hence, there is limited headroom. Prices vary significantly across players in fresh fruits & vegetables too, albeit we do not include it in our basket due to potential variations in product quality,' said a note by Jefferies.Industry executives point out that with all competing firms being well-capitalised they are not focusing on profitability in the short term. ET had reported in February that the monthly burn for the quick commerce sector across companies had increased to Rs 1,300-1,500 crore – more than doubling in a few months. Burn refers to the rate at which a company spends cash. For the quarter ended March 31, Blinkit parent Eternal saw its net profit plummeting to Rs 39 crore from Rs 175 crore in the year ago period. Its Bengalurubased rival Swiggy's net loss for the quarter nearly doubled to Rs 1,081 crore. Both the companies increased spending on expanding their quick commerce businesses.'There is a massive headroom for growth in quick commerce…and the overall market is expanding as well. The attempt right now is to build a sticky customer base. A lot of effort is also going into building for tier-II and tier-III cities, where platforms are trying to get consumers to try quick commerce for the first time,' a senior quick commerce executive said.Brokerage firm Morgan Stanley estimates the size of India's quick commerce sector at $8 billion in 2024, estimating it to expand to $28 billion by 2026 and $57 billion by 2030.Walmart-owned Flipkart's Minutes, which currently has around 400 dark stores aims to expand its network to 800 micro warehouses for 10-minute deliveries by the end of this year. ET reported on June 13 that Amazon Now has gone live in select pincodes in Bengaluru with 10-15 dark stores on its network, and aims to expand to other cities such as Mumbai and Delhi-NCR as well. Early movers Blinkit, Zepto and Instamart are also expanding their footprint.Notably, during the company's quarterly earnings call in May, Akshant Goyal, CFO of Blinkit's parent Eternal, said the quick commerce platform will prioritise market share gain even at the cost of short-term profitability.As per the Jefferies report, average discounts were also higher on bulk-buy offerings from companies like Zepto and Instamart, which operate the Super Saver and Maxxsaver programmes, respectively. Under these offerings, platforms offer greater discounts to users with larger basket sizes – typically over Rs 1,000. For the 10-minute delivery platforms, this results in cost savings in terms of fewer trips and reduced packaging expenses, while also increasing competitiveness with value retailers such as Dmart.