Reliance Industries has a track record of disrupting any space it enters, whether telecom with Jio or e-commerce with JioMart. However, experts anticipate Reliance Retail’s entry into the booming quick commerce space might not be as easy. To be sure, it is deep-pocketed and could cause significant shifts in consumer loyalty and market dynamics. But the incumbents have the experience, execution skills and a track record.
As of now, Blinkit enjoys a 39% market share as of September, Zepto 28%, Swiggy Instamart 28%. BigBasket’s BB Now and Flipkart Minutes together have a 6% share in the Q-commerce segment, as per brokerage firm CLSA.
Reliance Retail could have the edge in certain geographies like Tier 2, 3 and 4 towns, where it has a presence and can move faster than competitors. According to reports, Reliance Retail will not be setting up dark stores. It will leverage its vast network of over 18,000 stores across India and the services of its acquired last-mile logistics company Grab to fulfil orders in 10-30 minutes. Initially, the company will focus on grocery products and soon expand to fashion and small electronic products.
Besides small-town presence, Reliance’s decision to not charge a delivery, platform fee or surge fees is viewed a strategic move that could force competitors to reassess their pricing models. Currently, many players, including Blinkit and BigBasket, levy such fees to maintain profitability amidst rising operational costs. Mukul Goyal, co-founder, Stratefix Consulting told Fe that by absorbing these costs, Reliance not only enhances its value proposition but also sets a new standard. “It may compel other companies to follow suit or risk losing customers. This shift could lead to a price war in the sector, impacting margins for all players involved and potentially reshaping consumer expectations around delivery services,” Goyal said.
However, while price discounting is a great way of acquiring customers and merchants, experts say that in the long term, the model requires a certain ‘platform’ fee or similar central charge to be applied to justify the brand, technology and operation spending required to maintain a competitive edge.
What matters the most is the quality of the service. “If they are not able to deliver on time and if they are not able to deliver good service, then price cuts may not be enough. I think they have to factor in a large amount of capital if they are planning to do that,” Vikram Gupta, founder and managing partner, IvyCap Ventures said. The Indian quick commerce market is valued at $3.34 billion in 2024 and is expected to reach $9.95 billion by 2029, a compound annual growth rate (CAGR) of more than 4.5% over the period, according to a report by Chryseum report, a financial services firm.
Additionally, Blinkit, Swiggy Instamart and BigBasket need not fear as long as they innovate rapidly and enhance their service offerings to maintain their competitive edge, pointed out an analyst. Some also say that Q-commerce is not an easy business, even for a conglomerate like Reliance. “It requires a lot of execution, ability, the right team and a minimum amount of time. For entering the market, the starting point should be acquiring an existing player which won’t come cheap,” Gupta observed. “Q-commerce model only works at scale and requires a high degree of investment to enter an already crowded marketplace like ours today,” Dhruv Dhanraj Bahl, managing partner, Eternal Capital added.
Notably, this is not the first time Reliance has entered the space. In March 2021, a pilot grocery delivery service–, JioMart Express—was launched, in Navi Mumbai, with plans to expand to 200 cities. But by February 2023, it was quietly discontinued, reportedly as the service turned out to be a high-cost business with a higher cost of deliveries and lower ticket sizes than e-commerce. Some analysts also say that Reliance didn’t expect Q-commerce penetration to take off so aggressively, just like e-commerce giants and rival Amazon and Walmart-owned Flipkart who also miscalculated the potential.
Existing players also have operational efficiencies that are tuned to Q-commerce and have gained a certain customer loyalty and familiarity. Moreover, they have also created strong partnerships with local vendors and suppliers. “Like all great skills, Q-commerce has a learning curve. Starting up is very easy but optimizing operations from procurement to storage to delivery are best learnt with the richness of data and experience,” Bahl said.
From: financialexpress
Financial News
