10-minute grocery delivery - serving an unwanted need or a smart move?
Entry of a young player (Zepto) has disrupted the online grocery market in India. Each online grocery platform is now targeting 10 minutes delivery. But is it a market need or a smart move?
“Bro, It didn’t even take 10 minutes. I started my timer as soon as I placed the order of a 2 ltr coke and a few ready-to-cook snacks. One of my friends visited us unannounced and man, Grofers delivered it in just 9 minutes and some 20 seconds.” My manager was amazed like a kid watching a magician show while sharing this first-hand experience of grocery delivery disruption tale, during a lunchtime chat.
Remember getting new clothes and the excitement of trying them for the first time. The emotion of going on a holiday at a new place and to keep revisiting that place in your mind even after a week of coming back home. I could sense the same here in the eyes and voice of my manager.
While in this story a 10-minute delivery looked like a blessing but why there is so much discussion and debate going-on on LinkedIn and Twitter against the same, what’s that? Are they wrong when they are thinking about the risk delivery guys would take or the operational pangs these companies going to face?
This made me dig the 10-minute delivery tale further and find out whether it is a service nobody asking for or do online grocery companies know something that we do not know?
Online grocers are so bullish on 10-minute delivery that the 2nd ranked in India (e-grocery market) has shut down the operation in locations where they’re unable to deliver within 10 minutes.
An email statement from Grofers (now Blinkit)’s CEO Albinder -
While many may not agree but in my opinion, 10-minute delivery is a smart move by these online grocery companies and I’m sure this pivot is going to pay off and I’ve all the reasons to assume this -
No prior Cognitive Load of ordering - This is a huge problem Zomato and Swiggy trying to solve. Imagine yourself hungry and Zomato/Swiggy are your go-to place. Being in and out of meetings you hardly have time to search something to order for your lunch. what do you order? Biryani? or the usual Thali order from the same restaurant, probably the 15th time in the last 2 months.
You do not want to take the cognitive load of what to order today in lunch. Even a lot of times you forget to order lunch and then eat whatever you find small vendors selling outside your office - a loss of revenue for Swiggy/Zomato.
Coming back to grocery, every month you plan the grocery order list in advance to keep the stock for the next 30 days. You check each rack and container twice/thrice to assure you’re not missing any item in your To-order list. They want to take this unnecessary load off your mind.
Fighting for a bigger chunk of the market - India’s grocery market size is approx. $610bn in market value while 8+ top e-grocery companies including likes Grofers (Blinkit), BigBasket, Swiggy, Amazon, Flipkart are fighting in mere 5% of the total market valued at $22bn.
Enter Zepto, everyone is pivoting to 10-minute delivery and now fighting against Local Kirana stores holding 86% market share. 10-minute delivery opened gates of the largest market chunk for all these grocery companies. While these companies would be now fighting for the fastest delivery among themselves, Kirana stores are the Thanos of grocery market they would be facing.
Creating a virtual stock house for every household - With Grofers opening a new dark store every 4 hours and other companies not much behind in the race, every household will now have access to a virtual stock room in their mobile. Now when we can get the item delivered in 10 minutes, why create an unnecessary stock at home with a risk of damage and at a certain cost of maintenance.
Customers can now order anything anytime without worrying about availability as you’ll have multiple options. Most of these instant e-grocers hold up to 2,500-3,000 SKU’s in all, up to 80% of demand is concentrated within the first 1,000 SKUs.
Cooking something with no salt at home, just wait for 10 minutes. Guests at home out of snacks, open the app.
Unorganized Kirana stores market to their favor - While pandemic has done unthinkable in terms of digitization, as per a report by Snapbizz over 1 million Kirana stores have digitized in terms of taking payment, managing stocks, and accepting online orders, still there is a lot of work to do.
In India, we have over 12 million Kirana stores, just 8% of them have moved online till now means most of them are still unorganized offering a lot of scopes for these e-grocery companies to grow.
A brighter hope of charging a delivery fee - With the earlier model of 2+ days delivery, it was tough for Grofers or Bigbasket to charge a delivery fee as that move would have made the customer lose to Kirana stores. If I’m getting my grocery delivered in 2+ days that comes with a delivery fee, I’ll better buy from a Kirana store but now with 10-minute delivery, these companies have an edge over Kirana stores.
Initially, they would most probably go on a habit-forming spree, proving free delivery in 10 minutes. Once they have made customers lazy, chances are high they’ll start charging delivery fees and someone above the 15th floor would not mind paying a nominal delivery fee saving a monumental effort of getting down and walking 2 km to a Kirana store.
But charging delivery fees is not going to be an easy decision for these companies as India’s 70% grocery bills are below Rs. 200, how these companies would fit delivery fee in this would be a strategic move to watch out.
As Zepto shows an average delivery time of 8 minutes and 47 seconds, stats are also in favor of e-grocery companies, and moving further with efficient use of technology and training may make it smoother for these companies to fulfill their magical promise without many pangs. While many are criticizing this move, there are some appreciating and accepting 10-minute delivery a futuristic move -
In this whole instant delivery saga, the shakiest part is profitability. With an Rs. 3-4 rent costs and Rs. 30-40 delivery costs per order, the profitability of these companies depends on the margin in grocery items, total order amount per bill, and the number of orders per day. In order to grow and reach a profitability stage, these e-grocers would have to work on each of the 3 factors.
This wraps up today’s article.
About Author - Hey, This is Ankit. I am an early adopter of new products. I’ve tested more than 1000 online platforms/apps/products to date. My key skills include observation, which helps me test every single detail (even a minor one) in a product.
I write about Product features and the scope of improvement from a User's perspective. Along with that, I also write about new Product/start-up ideas.
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