In 2024, the spotlight was on rapid commerce. The wind was behind its sails as the sector saw rapid growth with widespread consumer adoption in metros and a flood of capital to support innovation as investors discovered a new gold rush.
Initially marketed to meet last-minute grocery needs, the use case for fast commerce expanded beyond daily essentials and groceries to apparel, footwear and electronics this year, stepping on the toes of ecommerce players like Amazon and Flipkart. This prompted giants to introduce their own express delivery offerings to protect their turf.
This reflects a shift in consumer patterns as demand for instant grocery delivery increases as an alternative to physically visiting a grocery store or supermarket. By offering a huge assortment of products like toys, fashion basics, beauty items, etc., players like Zomato-owned Blinkit, Swiggy Instamart, and Zepto have established themselves as powerful players in this space—also giving consumers the option to make last-minute purchases. Shopping.
The sector’s exponential growth has attracted new ventures, and at the same time, brought scrutiny and competition checks.
Holy Trinity
Zepto, Blinkit, and Swiggy Instamart are dictating the terms of growth in this sector.
Sriharsh Majety-led Swiggy went public this year with a Rs 11,327 crore initial public offering (IPO) and has since grown 49% (as on December 19, 2024) over its sale price. The foodtech giant looks set to make its rapid commerce business profitable by September 2026.
Meanwhile, Blinkit, the golden child of quick commerce, managed to achieve EBITDA breakeven in less than 6 months of the year. The only profitable player on the scene, it is now expanding beyond metro cities and entering new categories. Its parent Zomato had earlier raised $1 billion, or Rs 8,500 crore, through a qualifying institutional placement for Blinkit’s store expansion.
Zepto, which is aiming for an IPO in 2025, plans to expand Zepto Cafe, add more categories and double its food delivery by renewing it by tapping monetization to improve the unit’s economics. The unicorn is flush with cash after raising $1.35 billion this year.
Profit and growth
In March, Zepto started charging a platform fee of Rs 2 per order on top of variable handling charges. The firm also levies restaurant charges on Zepto Cafe orders, taxes and occasional overhead charges such as late-night charges, surge costs, and rain charges. Both Swiggy and Zomato have increased their platform fees to Rs 10 annually from Rs 5 at the start of the year, citing a surge in orders during the festive season.
This is not unusual as the costly nature of hyperlocal delivery operations drives rapid commerce platforms to rely on delivery fees, with supplements. Revenue from advertising and additional channels.
“Brands are now spending more on ensuring that their products are exposed to customers on rapid commerce apps as they are more competitive than grocers… Brands are spending the same on Amazon and Flipkart,” notes Satish Meena, founder of Datum. wisdom
A large portion of advertising revenue comes from D2C brands that find overlap with the target group and see higher conversions on rapid commerce platforms than other channels.
“What’s particularly noteworthy is that it’s Tier I customers who are driving this shift towards rapid commerce – the same group that also gravitates towards D2C brands,” Keshav Biyani, co-founder, The Good Bug, says, adding that the company has already re- Allotment is done. Advertising spend for new fast-moving commercial players.
Swiggy also expects growth in advertising as a key driver to improve take rates for Instagram, with its contribution margin projected to expand to 9%.
However, upcoming players like former Flipkart executive Ayyappan R’s startup FirstClub, an omnichannel and rapid commerce retailer, want to prioritize customer trust and transparency in advertising. The firm will work on a subscription model to bring in more revenue.
For Zepto, some of these additional revenues came from the Zepto Pass launched earlier this year. However, Zomato CFO Akshant Goyal said in the company’s September quarterly earnings call that the company does not plan to introduce a loyalty program for Blinkit.
Another areas of monetization that are developing are sampling services and private labels, however, there is a need to cultivate the infrastructure.
10-Minute Food Delivery x Fast Commerce
Platforms are expanding SKUs to improve order frequency and bring down average order value.
Among the first to introduce the 10-minute delivery concept, Zepto finally expanded the category with the launch of its standalone app for food delivery with Zepto Cafe. The service already clocks close to 30,000 orders a day and is projecting an Annual Run Rate (ARR) GMV of Rs 160 crore.
Now the company has emphasized on segment expansion. If it grows significantly, it could compete directly with just 10-minute quick food deliveries, potentially onboarding restaurants and full-scale food delivery models, Meena noted.
Swiggy’s Bolt — a take on its 10-minute food delivery service — already accounts for 5% of the company’s total orders and the share is likely to grow as Swiggy scales beyond top cities. Zomato has also started pilots for bistros by Blinkit, while players like Magicpin and Ola Consumer have entered the fray. Tata Digital’s BigBasket is also in the process of launching food as a category, while new startups like Zing and Swiss have started delivering to select pincodes in Delhi-NCR and Bengaluru respectively.
Higher average order values help offset higher costs of logistics and storage, prompting players like Zepto to launch SuperSaver, which charges a minimum order value of Rs 1,000 to attract price-conscious consumers and position itself as a grocery stock-up service. Only a top-up service.
Expanding the boundaries of rapid commerce
Categories like gourmet foods, premium beverages and small electronics are expected to grow as platforms refine their delivery capabilities, says Ninad Karpe, founder and partner at 100X.VC.
Both Blinkit and Swiggy have initiated pilots for larger order fleets, with the latter setting up separate infrastructure for extended delivery timelines for some Instamart categories. Swiggy plans to increase the average size of its stores by 30-35%, and at the same time, is rolling out Megapods – stores that can house 50,000 SKUs – to improve the size and selection of its categories.
“Challengers (new entrants) will find it difficult to disrupt the existing market as customers are not price conscious and therefore do not explore many options (unless the current platform is under delivery)”, notes Kushal Bhatnagar, Associate Partner. At Redseer Strategy Consultants.
FOMO brings new entrants
According to a Datum report, the Indian grocery market is expected to add nearly $250 billion in sales by 2028, driving everyone to hunt for a share of the slice.
Vertical marketplaces such as Myntra and Nykaa have launched 30-minute delivery for select assortments under the M-Now and NykaaNow initiatives respectively. Tata Digital’s ecommerce app, Tata Neu has also launched its fast commerce arm under the name Neu Flash to offer apparel, beauty and personal care, and electronics along with daily essentials.
Walmart-backed Flipkart launched Flipkart Minutes in Bengaluru this year, with plans to scale it to other cities. Amazon, through Tez, expects to enter the race as soon as the end of this year.
Ecommerce players like Amazon’s edge in fast commerce lies in strong sourcing integration with brands, as a large portion of its business is slotted commerce, and specializes in non-grocery categories, notes Bhatnagar.
“It will be a multiplayer market. Everyone is looking at it from different perspectives; some will fight on price, some will fight on assortment, some will fight on speed, etc.,” believes Vipul Parekh, co-founder of BigBasket.
Channel changes and regulatory scrutiny
However, as more players enter the retail market, companies are looking at channel change rather than market creation opportunities.
The economics of rapid commerce platforms make matters worse for grocery stores and offline supermarkets as these platforms are able to command better prices because there are few middlemen. On the manufacturing side, major FMCG giants such as HUL, Tata Consumer, Dabur and Parle Products have flagged better-than-average growth in their brisk commerce channel mix, with higher contributions expected in the near future.
Unorganized retail accounts for a major share of 93% in the Indian grocery market and fast commerce is less than 1% as of CY2023, according to a Datum Intell report, analysts expect fast commerce contribution to grow to 3% by 2028. By the end of this decade, the sector will turn into a $40 billion market.
“Kwik Commerce largely took share from slotted ecommerce players in top cities (and not much from offline stores), as QC targeted customers in developed big cities who were already buying their groceries online through various modes,” believes. Bhatnagar.
This rocket growth is bound to attract regulatory scrutiny, as major fast-moving commercial players are forced to change or already prepare to change or implement changes in their captable structure to include a higher representation of domestic investors. Regulation of FDI in inventory holding.