Quick commerce companies on the rise; experts discuss market potential

In recent times, quick commerce companies have raised huge amounts of money, amid rising valuations. From Grofers, which rebranded itself as Blinkit, to Zepto, Dunzo, among others have raised millions of dollars in the past two-three odd months.  Players like Zomato, Ola have all been forthcoming in investing money in the sector. To understand the dynamics of the sector, CNBC-TV18, spoke to Arvind Singhal, Chairman at Technopak Advisors, and Bijou Kurien, Chairman of Retailers Association of India (RAI) and Former President and CE of Reliance Retail.

First up, Singhal said that the quick service market may not be more than $2-3 billion. He isn’t even sure consumers are really wanting a quick delivery service in the first place.

"To me, the more fundamental question on the quick commerce aspect is, do the consumers want it or not?" he said.

Reliance Retail buys 25.8% in Dunzo for $200 million

Kurien, meanwhile believes that quick delivery works for the top-up basket. He is of the opinion that the value of the basket is going to be much smaller for speed delivery players.

"The question is that when you think of the number of grocery trips a customer makes - a consumer makes several trips, they have large baskets, they have medium sized baskets, and they have top-up baskets and this is probably relevant fully in the case of top-up baskets. That last minute thing that you forgot, when you are in the middle of cooking a dish. The value of the basket is going to be much smaller," said Kurien.

According to Kurien, quick service could be much beyond grocery. He believes there's a need to define service levels as 10 or 20 minutes. He explained that such businesses need proper planning and one can stand to lose a fair amount otherwise.

"It is not an easy game at all. And it is not a game which is for the faint-hearted. Because this is going to be a very critical game, you can lose a lot of money very fast if you're not careful about the way you plan this thing. But it is a need. However, it's not a significant need at this point of time. The question is that how do you make it a significant need over a period of time and yet make it a breakeven model," Kurien said.

"There certainly is going to be a great growth potential. Currently, when we think about it, we think about it only for groceries but think about it also for categories which go beyond grocery. In the case of Dunzo, and Reliance Retail, it's a double benefit, because Reliance Retail itself has got a grocery business, it's also got JioMart, where it services the needs of several customers. It's got merchants as part of the larger network of fulfillment partners. Dunzo, being the delivery partner will certainly enable speedy delivery from its own stores, and from its merchant partner stores," he added.

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"Many customers say that I need it fast. But do I need in 20 minutes? I am not so certain. So it's a bit of a chicken and egg kind of thing. Unless provided, you really can't realize demand and once you start realizing demand, the opportunity to grow is significant," Kurien further said.