Quick commerce: Expect quick-commerce firms to battle ecommerce soon: Zepto investor Glade Brook

In a blog post on LinkedIn, Hudson wrote that the market is already moving in this direction with Blinkit and Zepto expanding their product assortment. The fund had backed Mumbai-based Zepto last year and invested in Blinkit’s parent company Zomato back in 2019.

“Many believe Amazon and Walmart-owned Flipkart will continue to dominate the future of Indian ecommerce. In my humble opinion, I would not bet against the hometown teams at Zepto and Zomato,” he added.

ET reported on March 4 that Blinkit and Zepto are fast entering ecommerce territory and are set to add several categories like fashion, beauty, electronics, toys, home and kitchen to their offerings. On Thursday, ET reported that ecommerce major Flipkart is planning to launch a quick-commerce service in a few months.

“Blinkit and Zepto contend with relatively low average order values, modest product margins and incremental costs for rapid supply chain, logistics, fulfillment, and delivery – in addition to the cost of acquiring customers and covering overhead. As a result, the business model is operationally challenging… Over 2020-2022, dozens of quick-commerce start-ups raised and burned through billions of dollars in funding, only to not survive the 2022-2023 venture capital downcycle,” Hudson said in his post.

However, over the past few months quick-commerce firms have been able to increase their gross order value (GOV) – an indicator of sales – while also cutting down on costs, Hudson said. These firms have been able to turn the tide through factors like strong founders, true product-market fit, operational execution and innovation, and a deep moat.

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Also read | Flipkart to roll out quick-commerce venture soonPraising the founders at the two firms, Hudson contended that quick-commerce firms had found true product-market fit in India. “Ordering everyday needs via app across thousands of products, delivered within minutes, has struck a chord with Indian consumers. This is especially true for the millions of digitally native young people in India’s large and growing cities,” he said.

This was also opening up other avenues like earnings through advertisements on these platforms. ET reported on Jan 8 that advertising is quickly becoming an important way for platforms like Swiggy, Zomato, Blinkit and Zepto to bump up their overall revenue.

Operationally, these firms had also been able to nail down aspects like SKU selection, supply chain management and procurement, dark store layouts and so on, Hudson said. “For product forward and tech savvy teams, India provides the ability to cost effectively build most aspects of the tech infrastructure in-house… Zepto and Blinkit have brought nearly every aspect of the technology stack in-house, allowing the teams to customize and optimize in a manner that would otherwise be impossible,” he added.

All of these had helped quick-commerce firms to unlock good operating scale and a deep moat, Hudson argued. Scale also unlocked return on investment on advertising, and high margins on ad revenues which could be reinvested into things like technology and customer experience, he added.

Now, these firms are entering new ground, Hudson said. “The longer term investment thesis behind quick-commerce extends beyond rapid delivery of grocery and daily needs products into a broader SKU assortment that penetrates many categories. The moonshot of delivering a wide assortment of SKUs rapidly – say in one hour – opens up the much broader ecommerce market to a superior customer value proposition,” he added.

In a blog post on LinkedIn, Hudson wrote that the market is already moving in this direction with Blinkit and Zepto expanding their product assortment. The fund had backed Mumbai-based Zepto last year and invested in Blinkit’s parent company Zomato back in 2019.

“Many believe Amazon and Walmart-owned Flipkart will continue to dominate the future of Indian ecommerce. In my humble opinion, I would not bet against the hometown teams at Zepto and Zomato,” he added.

ET reported on March 4 that Blinkit and Zepto are fast entering ecommerce territory and are set to add several categories like fashion, beauty, electronics, toys, home and kitchen to their offerings. On Thursday, ET reported that ecommerce major Flipkart is planning to launch a quick-commerce service in a few months.

“Blinkit and Zepto contend with relatively low average order values, modest product margins and incremental costs for rapid supply chain, logistics, fulfillment, and delivery – in addition to the cost of acquiring customers and covering overhead. As a result, the business model is operationally challenging… Over 2020-2022, dozens of quick-commerce start-ups raised and burned through billions of dollars in funding, only to not survive the 2022-2023 venture capital downcycle,” Hudson said in his post.

However, over the past few months quick-commerce firms have been able to increase their gross order value (GOV) – an indicator of sales – while also cutting down on costs, Hudson said. These firms have been able to turn the tide through factors like strong founders, true product-market fit, operational execution and innovation, and a deep moat.

Discover the stories of your interest

Also read | Flipkart to roll out quick-commerce venture soonPraising the founders at the two firms, Hudson contended that quick-commerce firms had found true product-market fit in India. “Ordering everyday needs via app across thousands of products, delivered within minutes, has struck a chord with Indian consumers. This is especially true for the millions of digitally native young people in India’s large and growing cities,” he said.

This was also opening up other avenues like earnings through advertisements on these platforms. ET reported on Jan 8 that advertising is quickly becoming an important way for platforms like Swiggy, Zomato, Blinkit and Zepto to bump up their overall revenue.

Operationally, these firms had also been able to nail down aspects like SKU selection, supply chain management and procurement, dark store layouts and so on, Hudson said. “For product forward and tech savvy teams, India provides the ability to cost effectively build most aspects of the tech infrastructure in-house… Zepto and Blinkit have brought nearly every aspect of the technology stack in-house, allowing the teams to customize and optimize in a manner that would otherwise be impossible,” he added.

All of these had helped quick-commerce firms to unlock good operating scale and a deep moat, Hudson argued. Scale also unlocked return on investment on advertising, and high margins on ad revenues which could be reinvested into things like technology and customer experience, he added.

Now, these firms are entering new ground, Hudson said. “The longer term investment thesis behind quick-commerce extends beyond rapid delivery of grocery and daily needs products into a broader SKU assortment that penetrates many categories. The moonshot of delivering a wide assortment of SKUs rapidly – say in one hour – opens up the much broader ecommerce market to a superior customer value proposition,” he added.