E-Commerce Giants Join the Quick Commerce Frenzy, But Will It Work?

When a Bengaluru man ordered a laptop on Flipkart Minutes and received it in literally minutes, 13 to be precise, it made headlines. While quick deliveries are not unheard of in India, getting a laptop this fast was probably a first. But this won’t be the last as India’s e-commerce majors plan quick deliveries for all sorts of products.

Quick commerce that allows deliveries within minutes has gained popularity in India in the last few years with majors like Zepto, Blinkit and Swiggy Instamart making business like never before. But they were only limited to essentials like groceries. Now, e-commerce and hyperlocal logistics firms like Warburg Pincus-backed Ecom Express, Flipkart-backed Shadowfax and Tiger Global-backed Loadshare are also diving into the rapid delivery trend to capture a share of the increasing order volumes.

“We have been planning the quick deliveries model for e-commerce for a while now and it has been under pilot for six months. We are working with many D2C brands, though some are still figuring out the costs for this service,” Praharsh Chandra, co-founder and chief business officer of Shadowfax told The Core.

India's e-commerce platforms hit a major milestone in fiscal year 2023, reaching a gross merchandise value (GMV) of US $60 billion — a 22% jump from the previous year. The industry is expected to surge to US $300 billion by 2030. These numbers are a reflection of how the quick commerce market in India is growing rapidly driven by the increasing on-demand delivery services.

While the quick commerce players are known for their 10-15 minute deliveries, e-commerce logistics providers might deliver as quickly as within three to four hours. But do such quick deliveries for electronics and other non-essentials have a demand?

“Way more than one would imagine. While today it is not a must-have, it is very good for your business. It gives a seller an edge over their competitors,” Nayaan Ratandhayara, founder and CEO of Shipyaari told The Core.

Metros and tier 1 cities dominate the market, accounting for about 45% of e-commerce volume. Tier 2 cities like Jaipur, Ahmedabad and Pune follow closely, contributing around 35%. Tier 3 cities make up roughly 20% of total e-commerce sales, according to Shipyaari.

“As these areas become more accessible and online marketplaces expand their footprints into them, consumers there develop expectations akin to those in major metropolitan areas. Moreover, the festive season exacerbates this situation because people across tiers seek their purchases such as gifts or clothes or electronics among others ahead of time so that they can get themselves ready for the celebration,” Sandeep Kulkarni, chief operating officer at Allcargo Gati Limited told The Core.

The Battle Of Speed And Variety

With the launch of this new service, there are questions on how it stands apart from quick commerce platforms that also deliver apparel, accessories, beauty products and electronics. The key difference lies in the variety of stock-keeping units (SKU) that e-commerce platforms offer.

“Quick commerce mainly focuses on the top 6,000 to 10,000 SKUs in the market, offering speed for the most commonly used items. However, traditional e-commerce, which handles over a million SKUs, can't match this speed, especially for less frequent purchases. While quick commerce is great for everyday essentials, India’s larger e-commerce platforms cater to a broader range of products that aren't ordered as often,” said Chandra.

From 2024 to 2029, India’s quick commerce market is expected to grow at a compound annual growth rate (CAGR) of 24.33%, reaching an estimated US $9.95 billion by 2029. By then, the number of users in the quick commerce sector is forecasted to reach 60.6 million, with the user penetration rate rising from 1.8% in 2024 to 4.0% in 2029.

While it is a period for growth for all types of e-commerce in India, this new sped-up version could fairly eat into the market that quick commerce caters too. But that has now worried market leaders like Zepto. Anurag Doshi, zonal head (east-west) at Zepto is confident there will be no negative impact—quick commerce is here to stay.

“Quick commerce is doing great. Just look at Blinkit's numbers—they are impressive, Zepto is making waves too and Swiggy is eyeing an IPO. Same-day delivery has always been the goal, but the real challenge is reaching distant customers quickly. Quick commerce is the only way to speed things up,” Doshi said.

Setting Up Dark Store

Shadowfax, an end-to-end logistics service provider, is helping brands by setting up and managing dark stores to meet the rapid delivery demand.

“For brands that already have physical stores, we enable them to use those locations for direct-to-consumer (D2C) deliveries. For those without physical stores, we are helping set up dark stores, like in Mumbai, so that they can reach customers within that two-to-three-hour window,” Chandra added.

The range of financial investment in a dark store is extremely wide as this depends on a lot of factors, from the size one needs to the location and city they plan to set this up. Also depending on the capability of a dark store, it does require a specialised skill set and resources to set them up and keep them functional.

“Decentralising your inventory does come with a higher fulfilment cost. If you are currently spending X rupees on delivery, storing goods in dark stores could raise that cost by 30-40% in some cases. These are the typical added expenses a brand faces when shifting to this model,” said Chandra.

Because of the costs involved, businesses are increasingly choosing to invest in shared tenancy dark stores rather than setting up their own.

Strategically placed surface transshipment centres (STC) in key locations across India, including Nagpur, Indore, Mumbai, Bangalore, Farukhnagar, and Kolkata are going to play a crucial role in enabling quick e-commerce. These hubs also help to meet rise in demand in India’s tier 1 and tier 2 cities.

“In recent times there has been an increase of dark stores required by companies in Tier I cities to ensure that parcels are delivered within an hour or two via key neighbourhoods. Though fewer in number for Tier II cities they have to be placed in strategic positions to cover all critical areas,” Kulkarni said.

Managing Additional Cost

Apart from the cost of setting up a dark store or a warehouse nearest to the customers, the rapid delivery service also comes with a premium price.

“While in most cases the brand absorbs this cost to offer a premium service, even when indirectly passed ahead in most cases customers do not hesitate to pay the cost, for convenience,” Ratandhayara added.

Quick commerce platforms launched with free deliveries, but once customers got hooked, they started charging a platform handling fee.

Similarly, e-commerce quick delivery aims to make users accustomed to the service. However, the delivery costs are higher than those in same-day or quick commerce models.

“For brands that are experimenting, prices are fluctuating between Rs 90 - Rs 160 per delivery cost. Imagine setting up a small store that needs just 10 orders. Your cost per shipment could be anything and during the experimental phase, costs are often quite high. However, if that same store suddenly handles 600 to 700 shipments, you might see costs dropping below Rs 80 per shipment,” Chandra added.

Can The New Service Outpace Challenges?

With two delivery models already in the market (same-day delivery and quick commerce), will the new quick e-commerce service be a successful model?

“Businesses today have no choice but to offer same-day and quick deliveries. Customers won't revert to slower deliveries. With users now accustomed to 10-minute hyperlocal deliveries and getting iPhones in 20 minutes, it's not a question of ‘if,’ but ‘how soon,’” Ratandhayara said.

Doshi pointed out that every weekend is peak time for quick commerce, allowing deliveries within minutes. In contrast, e-commerce sees its peak during the festive season.

The real challenge is how e-commerce platforms will sustain themselves throughout the rest of the year when it's not peak season, with high costs looming.

“Quick commerce is likely to dominate high-demand, fast-moving inventory that is currently driving e-commerce sales. The challenge isn’t just occasional demand spikes but also the ongoing fight for market share. As quick commerce gains ground, e-commerce companies will find it harder to maintain their cost structures due to large amounts of unsold inventory,” Doshi explained.

E-commerce logistics companies have faced issues like receiving counterfeit products when returned from customers, impacting the businesses. The Core published a report on online brands dealing with a strange problem like getting counterfeit products returned after delivering the original one.

This issue is hitting businesses hard, affecting both small and large brands. How will quick e-commerce delivery have an impact on fake returns?

“We now offer a 90-minute pickup service for clients, ensuring the same quality check as our regular reverse pickup. We are experimenting with this faster option with some brands, though it is too early to say if it affects fraud rates,” Chandra added.