Daybreak - Meet the unlikely winners of India's quick commerce boom. Local brokers.

Episode Date: September 30, 2024

India's biggest quick commerce players — Blinkit, Instamart, and Zepto — are on a mission. They are frantically hunting for properties they can convert into dark stores. Dark stores are an integral part of any quick commerce strategy. Especially now, that the lines between quick commerce and e-commerce are very quickly blurring. People aren't just ordering pantry staples anymore. They are also placing orders for high value goods like headphones and full blown air conditioners. So, dark stores have to cater to these evolving needs. And things are even more heated now that Walmart-backed Flipkart and Amazon have entered the quick commerce race.All that hype adds up to a mad dash for real estate, especially in tier-2 cities like Lucknow and Jaipur in north India and Nagpur in central India. And the unlikely winners in all of this are property owners and local brokers. Tune in. Why do women freeze their eggs? Take the survey here.Don't forget to send us your recommendation for this Thursday’s Unwind segment. The theme is “your favourite murder mystery.” Send them to us on WhatsApp as a voice note or as a text message. The number is [phone]. Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too? It's for a special announcement. For the last few months, I and Sita Raman Ganesh, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast.

It's called Intermission. We want to tell the Sita Ramancahans, my colleague. secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they managed to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people.

And if that wasn't enough, we also decided to throw in video into. to the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get an alert, as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcast. or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am.

With that, back to your episode. Hi there. Before we begin, here's a reminder for you to send in your recommendations for this week's daybreak unwind. The theme is, favorite murder mystery. It could be a book or a movie or a TV series, whatever you like. If you have no clue what I'm talking about, daybreak listeners, my co-host Rahel and I, all get together at the end of every Thursday episode to discuss things we can do to unwind over the weekend. You can send in your entries to our WhatsApp number,

which is 89711-08379. I'll link it to the show notes. And now, on to the episode. When we talk about the quick commerce boom in India, real estate doesn't come up in conversation very often. Generally, we talk about how delivery time is reducing day after day or the sheer range of products that are now available on most of these apps. You may even talk about winners and losers,

which of these quick commerce players are leading the race and who is falling behind. Now, the thing is, real estate actually has a big role to play in all of this, which is why the likes of Blinkets, Zepto and Swiggy Instamart are now on a mission. They are frantically hunting for properties they can convert into dark stores. Last year, these players needed 24 million squads. square feet of space for dark stores. Of course, now, the demand has only grown. So now these three platforms are aiming to set up at least 1,000 dark stores in the next six months alone. But see, it isn't as easy as identifying a random warehouse one day and magically turning it into a dark store

overnight. There are a lot of factors at play here. The main one, of course, being the first rule of real estate, location, location, location. With the quick commerce business where the goal is not to keep you waiting for more than 15 minutes for your order, location becomes even more important. Especially now that Walmart, back Flipkart and Amazon have also entered the QuickCommerce race. I mean, Flipkart already reportedly runs around 100 dark stores. What's happening is that the lines between QuickCommerce and e-commerce are very quickly blurring.

So you can now place an order for things like rice, vegetables and laundry detergent and also get headphones, cosmetics and full-blown air-closement. conditioners via quick commerce apps. I mean, people were buying the iPhone 16 on Zepto and Blinket right after its launch. I'm sure most of us wouldn't have even considered purchasing expensive items like ACs or mobile phones via Quick Commerce even a year ago. But now things are changing. And dark stores are being built to be able to accommodate some of these changes.

As of August this year, Blinket is leading the race. It has nearly 640 dark stores across the country. Zepto and Swiggy Instamart. meanwhile, trail behind with about 400 and a little over 500 stores respectively. All that hype adds up to a mad dash for real estate, especially in tier two cities like Lucknow and Jaipur in North India and Naqpur in central India. And the unlikely winners and all of this are well property owners and local brokers. Welcome to Daybreak, a business podcast from the Ken.

I'm your host Rahil Filippos and I'll be joining Snickta Sharma every week. to bring you one business story that is worth understanding and worth your time. Today is Tuesday, the 1st of October. When it comes to opening a new dark store, the right location is make or break for every platform. And this is exactly where data comes in. You see, data has a big role to play in this hunt for the right real estate. Platforms decide where to expand based on their pincode level insights.

Basically, they see what sort of orders are originating from which area. And the margin for error here is very thin. Ideally, they want to be a stone's throw away from the best pin codes. Now, when it comes to data, Blinket and Swiggy Instamart have an advantage. Now, that's because their parent companies, Zomato and Swiggy, know the ins and outs of people's food delivery order patterns like nobody else could. They have enough information about things like demand level and cart sizes. Now, with that data, they are able to make projections on the market for grosses.

re-delivery and prioritise areas for expansion. So that's how they are able to spot the right areas. Next up, the company's real estate teams use that data to identify a couple options. These property options are generally evaluated on a standard set of criteria. Of course, topmost in that list is geo-fencing requirements, location. So, for instance, it isn't unheard of for a site to be deemed unviable, even if it's just 200 metres away from an ideal location. Then, of course, there is the delicate balance of unit economics.

Dark stores typically turn profitable when they hit 800 to 1,000 orders a day. But when they push past a certain order limit, it ends up affecting other things. You will see things like delivery delays and inventory management issues. Then there is the fact that no two neighbourhoods are the same. They will all have different requirements and needs. For instance, a more posh part of Bangalore may require dark stores with ambivales. coal storage because, say, exotic fruits are more popular there. But when it comes to actually identifying a space, the essentials remain straightforward and no frills.

Generally, these are nondescript properties tucked away in a commercial or industrial area, hence the dark in dark stores. You barely notice their existence. But that does not mean that just any site would do. Generally, platforms like Instamart and Blinket would require 2,000. to 2,500 square foot space. It would ideally be close to a residential area and located either on or near the main road.

The idea is for the approach to become easier. Usually they also look for ground floor units. Ample space for two-wheeler parking and loading and unloading of goods is another non-negotiable. This was the general requirement that all these quick commerce companies had. But now, as they evolve and grow, so have their requirements from dark stores. Now the likes of Blinket and Zepto are looking for sites that are double the size.

High ceilings are a must because they mean more shells to store goods. So how are they able to identify the right sides? More on that in the next segment. Conventional wisdom around egg freezing often writes it off as yet another scammy product of the booming fertility industry. But as to women in our early 30s and late 20s, we know things are not that straightforward. But why shouldn't we be able to hack the system and prolong our fertility? We have a hypothesis. We believe that women opting to freeze their eggs are career-oriented and in their 30s.

We also believe that most people who don't want to go through with freezing their eggs opt out of the procedure because it is just too expensive. In an upcoming episode of Daybreak, we want to dive into the real-world complexities that drive a lot of women to opt for procedures like egg freezing. We want to hear from you. Do you agree with our hypothesis? This survey isn't just for women who have undergone the procedure. It's also for those of you who have considered it at some point in your life. We want to glean from all your experiences and why you make the decisions you make. And of course, it goes without saying that the results of this survey are completely anonymous and confidential.

We will reach out to you for more details only with your explicit consent. The link to the survey will be in the show notes of this episode. It'll only take a couple of minutes to fill it. And now back to the episode. This is where local brokers enter the picture. You see, QuickCommerce platforms, the large players at that, are now turning to locals to identify the right sides. The assumption here is that they have deep micro-market experience

and access to wide networks of small-scale property owners. One industry expert, Shubhindu Kumar, said the reason Zepto Blinket and now Flipkart are working with local brokers is because none of the Pan-India brokers have such inventory of micro properties readily available. But the downside to all of that is that in the process, platforms are increasingly willing to take up spaces that don't meet safety norms. That's also why major property consultants are hesitant to get involved. The thing is, many of these platforms have no time to waste.

So they are charging ahead anyway. Like take Blinket for instance. Typically, the whole process of identifying a dark store can take around 10 to 50. days. An ex-Blinket executive said they can close in less than 10 days if they want. Another 30 to 45 days for the store to go live and tada, they're open for business.

That's just blinket. Meanwhile, if we look at Instamart, it's more of a periodic exercise. The company's expansion targets are defined on a quarterly basis rather than weekly or monthly. If not done in a rush, it takes at least two months to go from deciding to

add a dark store to actually taking it live. By contrast, an equal commerce marketplace like Amazon could take as long as three months to even finalize a site for the warehouse. But the thing is, as the rate intensifies, it comes down to desperate quick commerce platforms paying a premium for the right property. Now it's gotten to a point where they are poaching properties from one another. Basically, they go up to a property owner and say, hey, you know what, I'll pay you double. And that's an offer that anyone would struggle to refuse. But now they are in a situation where platforms are willing to pay three to four X over

market rates as rent to lock down the ideal dark stores in cities like Delhi. The competition isn't just limited to quick commerce players either. A former Swiggy executive explained that the same locations could even be used as a retail storefront or any kind of commercial endeavor. In that sense, competition is a larger real estate phenomenon and not isolated to quick commerce alone. But even though it's still early days, there's a long way to go for India's quick commerce platforms. Real estate is already becoming a very important factor. And as long as this frenzy sustains, brokers and owners will be queuing up to offer them all a buffet of more and more dark stores.

Daybreak is produced from the Newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. Head to the Ken.com and click on the red subscribe button on the top of the website. Today's episode was hosted by Rahil Filippos, produced by me Snigda Sharma and edited by Rajiv Sien.