Daybreak - What happens when your grocery delivery apps start selling you iPhones & water coolers?

Episode Date: May 23, 2024

Thanks to Swiggy and Blinkit, it’s gotten to a point where getting everything – from your groceries to a literal water cooler – delivered to your doorstep within minutes has become pretty routine. Something we expect. But there is so much going on behind the scenes to make that delivery possible. Like one executive told The Ken, it’s a combination of solid logistics and precise inventory management.Pulling that off with just groceries that you can easily throw into a carrier and strap on to a bike is one thing. But then you go and add things like water coolers, mixer grinders, even iPhones to the mix. It sounds like a logistical nightmare. But it’s a nightmare that quick commerce apps like Blinkit, Swiggy Instamart and Zepto have dived headfirst into. They are becoming everything stores, almost like ‘mini Amazons’. And with that, the very nature of quick commerce is changing. 

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 Ramon 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. If there's one thing I've realized since I moved to Bangalore two months ago, it's that people here are really proud of the city's weather. Their biggest flex is invariably how long they've lived in the city without having to install an air conditioner. But I've been told that this summer was one of the worst the city has been. witnessed in years. It was all over the news and I can vouch for the fact that it was actually pretty bad. In fact, on one particularly sultry Saturday afternoon, I bit the bullet.

See, I wanted to be all cool and not succumb to the urge of getting some kind of air conditioning installed. But that day was just too hot. I started looking up ways to get a cooler ASAP. And that's when I discovered that you could actually get a full-blower. 27-liter water cooler on Blinket. There were even two different varieties on offer, both of which could be delivered to my house within 20 minutes. Almost like magic. But Quick Commerce apps have been around for long enough to know

that it's not actually magic. Sure, it's gotten to a point where getting everything from your groceries to a literal water cooler delivered to your doorstep within minutes has become pretty routine, something we expect. But there's so much more going on behind the scenes to make that delivery possible. Like one executive told again, it's a combination of solid logistics and precise inventory management. Pulling that off with just groceries that you can easily throw into a carrier and strap onto a bike is one thing.

But then you go and add things like water coolers, mixer grinders, even iPhones to the mix. It sounds like a logistical nightmare. But it's a nightmare that QuickCommerce apps like Blinkets, Swiggy, Instamart and Zepto have dived headfirst into. They're basically becoming everything stores, almost like mini-Amazons. And with that, the very nature of quick commerce is changing. This also means that there's a lot of one-upmanship happening in the quick commerce space. All of these platforms are all competing to have the best variety of products and the quickest delivery times. But the non-grocery space is still fresh territory for them.

They're still fine-tuning their delivery processes and experts say there's a lot to lose if they get it wrong. Welcome to Daybreak, a business podcast from the Ken. I'm your host Rahil Filippos and I'll be joining Snigda every week to bring you one business story that is worth understanding and worth your time. Today is Thursday, the 23rd of May. Until pretty recently, companies like... like Blinkets, Swiggy Instamad, Zepto and Big Basket,

was synonymous with quick grocery delivery. But in the last year or so, they've started delivering everything from smart watches and speakers to make-up and novels. In fact, the Ken C-O-O, Praveen Gopal-Krishnan, ran a pretty interesting survey in his weekly newsletter, NutGraf, recently.

To understand the next chapter of quick commerce, he asked his readers about their habits when it comes to grocery delivery apps, which ones they use more, why, and also what they generally buy. I don't want to give too much away, but people are ordering a lot more than just grocery staples these days.

There's a whole bunch of non-grocery items listed in the responses to his survey, electronics, printouts, you name it. You can look out for Praveen's analysis of the responses in the next edition of NutGraf this Saturday. But for now, let's get back, to just how these QuickCommerce apps are pulling it off. Because to get into the non-grocery space,

these startups had to considerably switch up their delivery playbook. Like with your standard grocery deliveries, it all begins in a dark store near you. Now, I've been kind of fascinated by these dark stores. I mean, there are literally thousands of these warehouses with aisles stuffed to the brim with grocery items, household essentials, and now even things like smart.

smartphones and makeup. All of them are tucked away unnoticed in some random back alley pretty much invisible to the rest of the world. And yet, they're literally at the very heart of the quick commerce business model. Different platforms run their dark stores differently. Like, in the case of Blinket, there are three or four dark stores within a five kilometre radius of each customer. So say one day, I place an order on Blinket for a bunch of coriander leaves, a packet of milk, some tea leaves, and to spice things up, a type C charger. Best case scenario, everything is available at one dark store. Otherwise, if everything isn't available in one dark store, the order may be split in two

lots. So my coriander leaves, milk and tea arrive together and the charger is picked up from another dark store and delivered to me separately. Hopefully all within 30 minutes. With Swiggy, the only difference is that these stores are categorized into three sizes, small, medium and large. Smaller stores offer focused items, while larger ones have a wider assortment, including your non-grocery items. Meanwhile, Zepto has a pretty interesting system. They have pickers who are tasked with retrieving items from designated shelves under a minute and a half for orders with six items or less, and three to four minutes for larger items. Each picker has an app where they basically receive order alerts that guide them through the store,

telling them where everything is. Now, Instamart and Blinket also have similar tech for streamlining the process. Analysts, of course, have a few things to say about these apps and their delivery systems. First of all, they say ideally every order should come from a single dark storm. The logic is simple. If two riders fulfill the same order, the customer, the customer, The customer pays for one delivery, but the dark store incurs the cost of two rides. Secondly, these companies are still figuring out how to navigate dark store layout.

And by that I mean how to sort groceries and non-groceries in the same space. To do that, they have to figure out the ideal mix of products to keep in a dark store. That's a really important part of cracking the non-grocery game. More on that in the next segment. A bunch of managers in the quick commerce industry told the Ken's Akriti Bhala that the ideal ratio of grocery to non-grocery items is about 80 to 20. With purchasing habits changing so drastically in half a year, Zepto Blinket and Instamart have actively been increasing the share of non-grocery items on their platforms. In fact, it would be fair to go as far as saying that adding new categories help drive up the average order value. For instance, Blinket leads the trio and offers the most diverse range of categories on its app.

Its average order value is also higher than Zepto and Swiggy Instamart. It's just over 600 rupees. The average order value for Instamart and Zepto are around 500 to 550 rupees. It also helps that there's a significantly higher commission for non-grossity categories like beauty and personal care. We're talking 50% more than FMCG goods. So these companies are constantly switching up their product mix. For instance, if it's summertime, sunscreens are likely to figure prominently in dark stores as opposed to moisturizers. Or around Diwali, these stores are likely to stock up on things like poker sets or playing cards.

But whether you're delivering a carton of milk or a 27-liter water cooler, QuickCommerce apps have to make sure that they are sticking to the promised delivery time. A former VP at Blinket told Akrity that there are two ways to do it. One option is to designate specific stores for certain areas, focusing on non-grocery categories like beauty or electronics. The other model is where each dark store offers a wide range of categories and stockkeeping units based on demand. Quick Commerce leans towards the latter to trim delivery costs. Okay, so let's quickly look at what we've learned so far.

Number one, we know that a lot of people are buying non-grocery items from quick commerce platforms. And number two, we also know that these platforms are still figuring out how best to deliver these products without throwing their existing businesses out of that. With all of this, the very nature of quick commerce is changing. But the one thing that cannot change is delivery convenience. So charging a premium for luxury is one thing. cracking the economics of it is a whole other. And that, it seems, still is a work in progress.

But the thing that remains the same is that people are still using these apps more for groceries than non-groceries. Which means that bread and butter is still the bread and butter of these quick commerce platforms. 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 Filippo's, produced by me Snigda Sharma and edited by Rajiv Sien.