What does Flipkart's plan to enter quick commerce mean to Zomato's Blinkit, Swiggy Instamart, and other players?

Reports about Flipkart, one of the leading e-commerce companies in India, gearing up once again to enter the quick commerce (QC) segment have raised questions on how the move will affect existing players such as Blinkit, owned by Zomato, Swiggy Instamart, and others. 

As per a report by JM Financial, Flipkart has considered the acquisition of Reliance-backed Dunzo, which would be its attempt to expand its wings in the QC space. Further, the report said that it won't affect Blinkit (Zomato) as much as it could affect others in the segment. 

Meanwhile, shares of Zomato, amid this news, slipped 3.22 per cent on Monday to end at Rs 154.80 apiece on the BSE. 

"Blinkit (Zomato), due to its strong market leadership (46 per cent share) and robust balance sheet (net cash of Rs 12,000 crore as of Dec'23), is least likely to be affected amongst the incumbents, in our opinion," the report read. 

What does it mean for Flipkart to enter the QC?

This will be Flipkart’s third attempt at QC, and success will hinge on the following: 

>> its ability to find a strong product-market fit.

>> its ability to solve the complexity of hyperlocal delivery.

>> its ability to optimise tech and supply chain for quick turnarounds.

>> its ability to create a differentiated brand focused on QC, de-linked from its traditional offering.

As per reports, Flipkart has already started ramping up its infrastructure to support 10–15-minute deliveries in at least a dozen cities and is building a chain of dark stores in Bengaluru, Delhi NCR, and Hyderabad, amongst others. The report mentions that Flipkart will focus on FMCG and grocery categories apart from its traditional stronghold categories such as electronics and fashion. 

The company has already started same-day deliveries in 20 cities for mobiles, essential items, electronics, home appliances, fashion, books, and lifestyle products. These developments suggest that the company is increasingly warming up to the evolving urban Indian expectations of speed and convenience.

Expressing concerns regarding the move, the brokerage said this is Flipkart's one of the many attempts as it has failed to build its image in this space earlier. Besides, lately, it has been in cost-cutting mode and is, therefore, unlikely to be very aggressive. 

Additionally, most QC incumbents have already built a decent scale, and the QC Total Addressable Market (TAM), which represents revenue opportunity at 100 per cent market share, as if no competition exists, is large enough for 3–4 players to thrive.

Flipkart vs Blinkit vs Swiggy Instamart vs Zepto vs BB

Currently, the QC market in India has at least three players operating at an annualised GMV run rate of more than USD 1 billion. Gross merchandise value (GMV) is the total value of merchandise sold over a given period of time through a customer-to-customer (C2C) exchange site.

Blinkit was the largest player in 4QCY23E, with a 46 per cent market share based on an annualised GMV of USD 1.7 billion, followed by Swiggy-owned Instamart (27 per cent), Zepto (21 per cent) and Bigbasket-owned BB Now (7 per cent). 

As per JM Financial, Blinkit is also the best-placed platform in terms of balance sheet, as the consolidated Zomato business had net cash of Rs 12,000 crore as of December 2023. Its food delivery segment is highly profitable, and Blinkit itself is likely to become self-sustainable over the next two quarters. 

Amongst others, Zepto is close to breaking even as per recent management comments, while Swiggy has a strong net cash balance sheet and a profitable online food delivery business. 

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