Cheap labour fuels India’s newest e-commerce boom
The author is a Reuters Breakingviews columnist. The opinions expressed are her own. Updates to add graphics.
By Shritama Bose
MUMBAI, Aug 23 (Reuters Breakingviews) -India’s e-commerce story has found its next chapter. Quick commerce promises deliveries of everything from milk to smartphones in 10 minutes - a booming market made possible thanks to an army of low-earning delivery workers. Aspiring newcomers like Reliance RELI.NS and Amazon AMZN.O will find it tough to crack.
The $27 billion Zomato’s ZOMT.NS Blinkit, Swiggy’s Instamart and upstart Zepto dominate this corner of the grocery market. Since the pandemic, it has found favour with affluent consumers willing to pay a premium for convenience in a country where the ratio of modern grocery stores to urban households is just 0.2, lower than the global average of 1.1, per Bernstein research.
The $1.2 billion market grew 70% last year, Bernstein estimates, five times the pace of traditional online and offline retailers. By sales, quick commerce has emerged as the dominant form of shopping for young Indians in the $250 billion urban grocery market.
Unlike in the West, the model could be lucrative for the Indian startups. Cheaper labour is a key factor. A trip that would cost $10 in delivery fees in the U.S. is available to the Indian consumer for 36 cents or less, an investor in the sector told Breakingviews. Even compared to the rest of the country, delivery riders earn less: male food delivery platform workers put in longer hours on average but make 27% less than the average Indian adult urban male worker after adjusting for fuel expenses, a study by think tank National Council of Applied Economic Research showed last year.
The upshot is that Blinkit is close to turning a profit within two years of being acquired by Zomato.Rival Zepto raised funds in June at a $3.6 billion valuation, more than double the price tag in August 2023. Retail giants are readying to muscle in: a unit of Reliance Industries has been running a pilot for 30-minute deliveries while Amazon is considering a stake in Instamart, the Economic Times said in two separate reports in June and July, citing sources.
Yet the market will be hard for new players to break into. Discounts alone will not cut it: the average customer looking for an item in less than 10 minutes will hardly stop to compare prices. Building out a network of mini-warehouses, known as dark stores, will take time, too.
Moreover, wages could start rising if India’s latest attempt to increase jobs with subsidies begins to yield results. It would make quick commerce harder to juice. That's enough for investors to temper their euphoria.
Follow @ShritamaBose on X
CONTEXT NEWS
Ola Electric founder Bhavish Aggarwal is planning to re-enter the quick commerce business, the Economic Times reported on Aug. 8, citing unnamed people briefed on the subject. Ola’s parent ANI Technologies discontinued its instant delivery service in 2022.
Food delivery firm Zomato on Aug. 1 reported a consolidated net profit of $30 million for the three months to June, more than 100-fold higher than in the same period last year. Gross order value at its quick commerce division Blinkit rose 130% year-on-year, making it the fastest-growing segment.
Amazon’s Indian unit has approached food delivery firm Swiggy for a potential buyout of its quick commerce business, The Economic Times reported on July 22, citing three unnamed people aware of the situation. Swiggy plansto raise $1.3 billion through an initial public offering,Reuters reported on April 25, citing regulatory filings.
Graphic: Quick commerce leads urban grocery sales in India Quick commerce leads urban grocery sales in India https://reut.rs/3MeXKCw
Graphic: Food delivery drivers earn less than peers in other jobs Food delivery drivers earn less than peers in other jobs https://reut.rs/3Xc46sD
Editing by Robyn Mak and Ujjaini Dutta
Relaterade tillgångar
Senaste nytt
Ansvarsfriskrivning: XM Group-enheter tillhandahåller sin tjänst enbart för exekvering och tillgången till vår onlinehandelsplattform, som innebär att en person kan se och/eller använda tillgängligt innehåll på eller via webbplatsen, påverkar eller utökar inte detta, vilket inte heller varit avsikten. Denna tillgång och användning omfattas alltid av i) villkor, ii) riskvarningar och iii) fullständig ansvarsfriskrivning. Detta innehåll tillhandahålls därför uteslutande som allmän information. Var framför allt medveten om att innehållet på vår onlinehandelsplattform varken utgör en uppmaning eller ett erbjudande om att ingå några transaktioner på de finansiella marknaderna. Handel på alla finansiella marknader involverar en betydande risk för ditt kapital.
Allt material som publiceras på denna sida är enbart avsett för utbildnings- eller informationssyften och innehåller inte – och ska inte heller anses innehålla – rådgivning och rekommendationer om finansiella frågor, investeringsskatt eller handel, dokumentation av våra handelskurser eller ett erbjudande om, eller en uppmaning till, en transaktion i finansiella instrument eller oönskade finansiella erbjudanden som är riktade till dig.
Tredjepartsinnehåll, liksom innehåll framtaget av XM såsom synpunkter, nyheter, forskningsrön, analyser, kurser, andra uppgifter eller länkar till tredjepartssajter som återfinns på denna webbplats, tillhandahålls i befintligt skick, som allmän marknadskommentar, och utgör ingen investeringsrådgivning. I den mån som något innehåll tolkas som investeringsforskning måste det noteras och accepteras att innehållet varken har varit avsett som oberoende investeringsforskning eller har utarbetats i enlighet med de rättsliga kraven för att främja ett sådant syfte, och därför är att betrakta som marknadskommunikation enligt tillämpliga lagar och föreskrifter. Se till så att du har läst och förstått vårt meddelande om icke-oberoende investeringsforskning och riskvarning om ovannämnda information, som finns här.
