Startup and VC Ecosystem Updates | Issue# 4 [August 14, 2024]
Flipkart recently launched Flipkart Minutes, its new quick commerce service, in parts of Bengaluru and aims to deliver products within 8-16 minutes. The service is currently available in areas, such as Bellandur and HSR Layout. This article by Inc42 delves deep. More below.
Background
Flipkart has attempted to enter the hyperlocal grocery delivery market twice in the past, first in 2015 with Flipkart Quick, which provided 30 to 90-minute deliveries in select cities, and then in 2017 with Flipkart Supermart. While Flipkart Quick was discontinued in November 2022, Supermart had potential but relied on fulfillment centers with broader inventories and wider distribution areas instead of expanding through dark stores.
Features
Flipkart Minutes offers a variety of products, including groceries, electronics, and smartphones. Deliveries are free for orders above INR 99, with a nominal platform fee of INR 5 per order. Customers have the option to cancel or refuse orders if they are not satisfied with the service.
Competitive Landscape
The quick commerce market is experiencing rapid growth, driven by consumer demand for ultra-fast delivery services, particularly in the urban areas. Traditionally focused on grocery deliveries, the market is now seeing an increasing number of non-grocery e-commerce users turning to these platforms for a wider range of products. As consumers prioritize convenience and speed, the competition intensifies among established players, such as Blinkit, Zepto, and Swiggy Instamart. Flipkart’s entry into the quick commerce sector is a strategic move, leveraging its extensive e-commerce infrastructure and logistics expertise to position itself as a formidable challenger in the evolving market.
Quick Commerce Strategy
Strategic Positioning
The launch is part of Flipkart’s broader strategy to enter the fast-growing quick commerce segment that offers a great revenue potential, competing with the established players, such as Blinkit, Zepto, and Swiggy Instamart. Flipkart is focused on stabilizing the offering in select areas before expanding further.
Although Blinkit and Zepto have significantly expanded their grocery offerings by adding thousands of SKUs and introducing new categories, their customer base remains predominantly urban. Flipkart’s large existing user base, as well as its strong brand recall in the smaller towns, where Blinkit, Zepto, and Instamart are yet to penetrate deep, will provide the e-commerce giant with a definite edge.
The New Approach
The dark store model has now become the standard approach for success in the quick commerce industry and has been adopted by Flipkart’s competitors, such as Blinkit, Zepto, Swiggy’s Instamart, and the Tata-backed bigbasket. For the uninitiated, a dark store is a a retail store or distribution center that exclusive caters to product inventory for online shopping, and is not open to the public. In its latest venture, Flipkart is embracing the dark store model, directly competing with these established players across various product categories. As per Hemant Badri, Senior Vice President at Flipkart heading the quick commerce vertical, the company plans to open around 100 dark stores by the festive season to enhance its quick commerce capabilities.
Catering to the Market
Quick commerce is rapidly gaining traction due to the changing consumer preferences and the demand for faster delivery options. Flipkart Minutes aims to capture a significant market share by offering competitive delivery times and customer-friendly policies. Additionally, in order to attract and retain customers, Flipkart Minutes offers unique features, such as the ability to cancel orders if the service does not meet expectations. The feature is not currently offered by other players in the market, giving Flipkart Minutes a much-needed edge. Given the revenue potential in the non-urban markets, apart from the large user base in metros, it is no surprise that Flipkart Minutes plays a crucial role in the ecommerce giant’s super app strategy.
Strategic Funding
Flipkart’s move into quick commerce follows a significant financial boost from its recent $1 Bn funding round co-led by Walmart and Google. The round of funding included a substantial $350 Mn investment from Google, signaling strong confidence from the investors in Flipkart’s ability to compete and succeed in the rapidly growing market.
The funding will likely be used to scale up Flipkart Minutes by expanding its network of dark stores, enhancing delivery logistics, and investing in technology to optimize operations. The financial backing positions Flipkart to aggressively compete against the established players by offering similar or superior delivery speeds and expanding its product offerings.
Financial Performance
Despite the funding boost and the categorical expansion into quick commerce, Flipkart remains a loss-making entity. However, the company’s operating revenue has grown by 42% year-on-year to INR 14,845.8 Cr in FY23. Losses have decreased by 9% to INR 4,026.5 Cr.
Thoughts
Flipkart Minutes represents the company’s strategic entry into the quick commerce space, focusing on fast deliveries, customer satisfaction, and competitive positioning in a growing market. The company is taking measured steps to scale the service while keeping an eye on profitability and market share.
With the existing quick commerce giants successfully and profitably venturing into categories beyond grocery – especially electronics – which have been Flipkart’s forte, it was a matter of time before Flipkart ventured into the category as well. More here.
Existing quick commerce players, such as Blinkit, Zepto, Instamart, and bigbasket have not only successfully established their distribution and supply chain, but are also scaling at a rapid pace. The competition is instense and sooner than later, Reliance Retail, with all of its firepower (both infrastructural and economic), will push on grabbing a bigger chunk of the Indian quick commerce market pie.
We agree that the ability of the consumer to cancel or refuse an order based on the quality of service offered is a superpower for the consumer that will help build trust for the Flipkart Minutes platform. Additionally, Flipkart’s ability to leverage the massive revenue potential of quick commerce across both urban areas and non-urban areas, such as Tier 2 and Tier 3 towns and cities and beyond, places the e-commerce major as a competitive force for the established quick commerce players. It is good that as consumers, we will have multiple competing services with different value propositions to have goods delivered at our doorstep in no time and we see this as a healthy and much needed competition.
If you are interested to learn more, feel free to check out this coverage by Inc42.
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Acronyms used in the blog that have not been defined earlier: (a) Venture Capital (VC), (b) Indian Rupee (INR), (c) Billion (Bn), (d) Million (Mn), (e) Crore (Cr), and (f) FInancial Year (FY).