Despair in kiranas as quick commerce roars ahead

“We’re essentially reduced to window shopping or serving our loyal customers," said 45-year-old Vikas Katyal, who runs Katyal General trade store in Delhi's Lajpat Nagar area. On this quiet weekday morning, foot traffic has dwindled, with shoppers primarily seeking small items like milk, bread, chips or colas. Katyal believes increased competition and the rise of quick commerce are to blame.

“Demand for larger items like kilo packs of detergent or tea has decreased significantly in recent months, cutting our business in half. These larger items are no longer selling well, and customer loyalty seems to be waning. Many young customers are now turning to online shopping," he lamented, noting the frequency of delivery persons around.

In Bengaluru, small grocery stores with two to three outlets are seeing similar trends. A two-store chain in the upscale Indiranagar neighbourhood says sales are down 20% from a year ago. The owner, speaking anonymously to Mint, attributed this to a decrease in walk-in customers and a reduction in average order value. Most sales now come from repeat customers who have been visiting since the store was opened in the early 2000s.

The general slowdown in the FMCG industry due to inflation hasn't helped either.

Encroaching market share

Online retailers, particularly in quick commerce, are increasingly encroaching on the market share of both small and large retailers. Consumers love the convenience of ordering everything from groceries to household items online and have them delivered quickly.

On Friday, a national distributors’ association—All India Consumer Products Distributors Federation (AICPDF)—wrote to trade and industry minister Piyush Goyal expressing concerns over the popularity of quick commerce.

Their concerns were simple—quick commerce platforms are increasingly becoming direct distributors for major FMCG companies, sidelining traditional distributors and threatening the livelihood of small retailers, the association said.

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The unchecked expansion of quick commerce platforms is creating an uneven playing field, undermining the viability of small “mom-and-pop" stores that have long been the backbone of India’s retail sector, it added. The association urged the government to ensure the growth of e-commerce is “balanced".

While quick commerce is still a very small fraction of sales trade for fast moving consumer goods—it cannot be sidelined given its pace of growth.

Quick commerce platforms reported a 77% jump in gross merchandise value to $2.8 billion in 2023, as per Redseer data. In the same period, e-commerce platforms hit a gross merchandise value of $60 billion, marking a 22% increase from the previous year, according to estimates by Redseer.

Traditional trade still big

To be sure, traditional trade (including small stores, chemists, cosmetic stores and others) still accounts for 88% of FMCG trade pan-India; the remaining is split between organised department store chains as well as e-commerce. In metros, however, e-commerce contribution for FMCG stands at 7.2%, per data from NIQ (NielsenIQ). The company does not track quick commerce sales, yet.

Quick commerce clearly is still a big-city phenomenon,according to data shared by market researcher Kantar with Mint.

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"In the top-nine metros, quick commerce retailers have a penetration of 8% when it comes to FMCG (fast moving consumer goods). The number of households availing quick commerce services to buy FMCG products grew by an impressive 23% in the 12 months ended 31 March 2024," per Kantar.E-commerce now has a penetration of 23% in the top 9 metros, and has grown at 13% during the March 2024 period.

Penetration refers to the number of households shopping via the platform over a 12-month period. “This could be the next growth driver for the sector in the coming years," K. Ramakrishnan, Managing Director- South Asia, Worldpanel Division, Kantar, said.

Losing in cities

Initial research is pointing towards kiranas losing out in the top nine cities, said Satish Meena, advisor, Datum Intelligence. “However, quick commerce is still in its early days. It is concentrated in the metro cities, that too in specific pin codes. With quick commerce being a zip code-specific phenomenon, it’s likely that kirana stores in some areas may be affected more than the others. However, quick commerce is witnessing hyper-growth now and will plateau in the future," Meena said.

Moreover, Meena added that quick commerce volumes are still smaller than nationwide retail volumes; so, distributors will remain an integral part of the supply structure.

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Quick commerce has come to dominate large cities, with platforms such as Zepto, Blinkit and Swiggy Instamart expanding their offerings. Fast moving consumer goods firms, on the other hand, are channeling more resources and advertising to the segment.

Earlier this month, Flipkart's quick delivery service went live in Bengaluru. Big Basket has announced a complete pivot to quick commerce (10–30-minute deliveries) from slotted deliveries, The Economic Times has reported. The company did not offer any comments to Mint.

Zepto operates over 350 dark stores in the country; while Zomato's Blinkit has 639. Zomato, Swiggy and Zepto declined to address queries linked to distributor concerns. For most, profitability still remains a concern.

Disrupting organized retail

Brokerage firm JM Financial, its February report, said quick commerce is disrupting the unorganized retail channel in India. Neighbourhood kirana stores have drawbacks including limited choice of products, discounts and operating hours, which quick commerce platforms have the ability to solve, according to the report.

Industry estimates peg that the share of quick commerce sales for large FMCG brands currently stands at 1-2%; this may, however, double over the near term, according to an April report by Elara Securities. For smaller brands, the contribution is 7-8%.

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Krishnarao Buddha, senior category head at Parle Products, emphasized the need for traditional trade partners to step up their game.

“We give utmost importance to every channel partner and ensure parity in our offerings. The key USP of quick commerce is convenience, impulse purchases, and discounts. Traditional trade partners need to ramp up their services, especially in timely deliveries. These measures will ensure a level playing field among all channel partners," Buddha said, commenting on distributor concerns.

Slowed growth

FMCG volumes in June quarter grew 3.8% year-on-year, slowing down both sequentially and from a year earlier, according to market researcher NIQ. Given that demand for such goods is already under pressure, quick commerce is unlikely to create new demand and will hurt existing players, said others.

“The impact on traditional businesses is definitely much higher," noted Karan Taurani, senior vice-president at broking firm Elara Capital. “Quick commerce is negatively impacting mom-and-pop stores and traditional businesses. Modern trade is also feeling the pressure, but the hit to traditional businesses is far greater," Taurani said, adding that from a regulatory standpoint, there’s currently nothing in place to counter these platforms.

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Others said quick commerce is seen as a convenience rather than a threat to general trade, as it caters to time-poor, money-rich consumers. However, it does divert consumer wallet share from modern trade.

“We see that modern trade shoppers have now started ordering a lot of stuff on e-commerce, so that share of wallet has been diverted, but general trade remains unaffected, because almost 50-60% of India's population resides in rural and semi urban areas where quick commerce has not reached," said a sales head at a large FMCG company.