Explained | Flipkart likely to enter quick commerce space, how will it impact the market?

According to a report by JM Financial, Flipkart can disrupt the existing QC industry structure.

Vaamanaa Sethi
First Published11 Mar 2024, 05:52 PM IST
Flipkart REUTERS/Dado Ruvic/Illustration/File Photo
Flipkart REUTERS/Dado Ruvic/Illustration/File Photo(REUTERS)

E-commerce platform Flipkart is preparing to venture into the quick commerce sector, according to media reports. The company's strategic objective involves establishing a network of dark stores strategically positioned in major cities such as Bengaluru, Delhi (NCR), and Hyderabad.

 The e-commerce platform is planning to introduce rapid 10-15 minute delivery services in at least twelve cities over the next six to eight weeks, giving fierce competition to quick delivery platforms like Blinkit, Zepto and Swiggy's Instamart.

Also read: Flipkart challenges quick commerce space with new 10-15 minute delivery venture, says report

It is to be noted that this is Flipkart's third attempt to enter the quick commerce space, however, experts say that the success will hinge on various factors like to find a strong product-market fit, optimise tech and supply chain for quick turnarounds.

According to a report by JM Financial, Flipkart can disrupt the existing QC industry structure. However, this would require substantial execution efforts, an area where Flipkart's previous endeavors were deemed lacking in commitment. Recently, the company has been focused on cost reduction, indicating a less aggressive stance. 

The brokerage firm suggested that the majority of QC incumbents have already established a solid foundation, and the total addressable market (TAM) for QC is ample enough to accommodate 3-4 key players thriving simultaneously.

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It further anticipates that this trend will compel major e-commerce platforms to reassess their market approaches and contemplate mergers and acquisitions to avoid falling behind, reminiscent of Meesho's experience in the value e-commerce segment.

“We believe Flipkart’s re-entry is likely to be anything but a cakewalk,” the brokerage firm said in its report.

JM further said that Blinkit, with its commanding 46% market share in quick commerce, has a strong market leadership, and a healthy balance sheet boasting a net cash reserve of 12,000 as of December 2023, is positioned to withstand challenges better than its competitors. Reiterating a 'Buy' recommendation on the stock, JM highlighted Blinkit's resilience among incumbents in the sector.

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According to Redseer's analysis, the Total Addressable Market (TAM) available for services (excluding non-grocery sectors) stood at approximately $45 billion in the calendar year 2021 for Quick Commerce (QC). Meanwhile, the organized food services market accounted for around $27 billion in the same period.

“However, due to its nascent history, we estimate that the QC market size was only ~USD 3bn as of CY23, versus online food delivery of ~USD 6bn+. We see a meaningfully longer growth runway for QC, given the under-penetration, fast-growing adoption and huge TAM. In fact, Deloitte estimates that the QC market will expand to USD 40bn by CY30, large enough to accommodate 3-4 players,” the brokerage firm said.

 

 

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First Published:11 Mar 2024, 05:52 PM IST
HomeCompaniesNewsExplained | Flipkart likely to enter quick commerce space, how will it impact the market?

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