23.1 C
New Delhi
Saturday, November 9, 2024

Quick-commerce sector on track to compete with e-commerce giants, says Glade Brook Capital Founder

Published:

The Indian quick-commerce sector might see expansion into a much wider array of stock keeping units (SKUs), bringing it closer to ecommerce in the future, according to Paul Hudson, founder of investment firm Glade Brook Capital.

In a blog post on LinkedIn, Hudson highlighted how the market is already progressing in this direction, with Blinkit and Zepto expanding their product assortment. The fund had supported Mumbai-based Zepto the previous year and had invested in Blinkit’s parent company Zomato back in 2019.

“Many believe Amazon and Walmart-owned Flipkart will continue to dominate the future of Indian ecommerce. In my humble opinion, I would not bet against the hometown teams at Zepto and Zomato,” he added.

On March 4, Snackfax reported that Blinkit and Zepto are rapidly entering ecommerce territory and are prepared to introduce several categories such as fashion, beauty, electronics, toys, home, and kitchen to their offerings. Additionally, on Thursday, it was reported that ecommerce major Flipkart is planning to launch a quick-commerce service in a few months.

Continue Exploring: Quick commerce platforms Blinkit and Zepto expand into e-commerce, targeting fashion, beauty, electronics, and more

“Blinkit and Zepto contend with relatively low average order values, modest product margins and incremental costs for rapid supply chain, logistics, fulfillment, and delivery – in addition to the cost of acquiring customers and covering overhead. As a result, the business model is operationally challenging… Over 2020-2022, dozens of quick-commerce start-ups raised and burned through billions of dollars in funding, only to not survive the 2022-2023 venture capital downcycle,” Hudson said in his post.

Nevertheless, quick-commerce firms have managed to boost their gross order value (GOV), an indicator of sales, and simultaneously reduce costs over the past few months, as stated by Hudson. These companies have reversed the trend by leveraging factors such as robust founders, genuine product-market alignment, operational efficiency, innovation, and a strong competitive advantage.

Commending the founders of both firms, Hudson argued that quick-commerce companies had successfully identified a genuine product-market fit in India.

“Ordering everyday needs via app across thousands of products, delivered within minutes, has struck a chord with Indian consumers. This is especially true for the millions of digitally native young people in India’s large and growing cities,” he said.

This development is also paving the way for additional revenue streams, such as earnings from advertisements on these platforms. Notably, it was observed that advertising is rapidly emerging as a crucial means for platforms like Swiggy, Zomato, Blinkit, and Zepto to bolster their overall revenue.

Continue Exploring: Flipkart challenges Zepto and Blinkit with quick commerce expansion

Operationally, these firms have also succeeded in optimizing aspects such as SKU selection, supply chain management, procurement, dark store layouts, and more, according to Hudson.

“For product forward and tech savvy teams, India provides the ability to cost effectively build most aspects of the tech infrastructure in-house… Zepto and Blinkit have brought nearly every aspect of the technology stack in-house, allowing the teams to customize and optimize in a manner that would otherwise be impossible,” he added.

Hudson argued that all of these factors had enabled quick-commerce firms to achieve significant operating scale and establish a strong competitive advantage. Additionally, scale facilitated a return on investment in advertising, as well as high margins on advertising revenues, which could be reinvested into areas such as technology and enhancing the customer experience, he added.

Now, these firms are entering new ground, Hudson said. “The longer term investment thesis behind quick-commerce extends beyond rapid delivery of grocery and daily needs products into a broader SKU assortment that penetrates many categories. The moonshot of delivering a wide assortment of SKUs rapidly – say in one hour – opens up the much broader ecommerce market to a superior customer value proposition,” he added.

Continue Exploring: Zomato’s Blinkit set to ramp up e-commerce deliveries with diverse product range

SnackTeam
SnackTeamhttps://snackfax.com
SnackTeam is a specialised group of editorial staff motivated to improve the lives of individuals and society. The team intends to bring the most authentic, well-researched and dependable content for you and your loved ones every day.

Related articles

Recent articles

× Drop a, Hi?