A quick-commerce correction on the radar for consumer brands
Brands like Wellbeing Nutrition and Arata are looking to diversify their distribution channels through their own websites and offline stores to shield themselves from over-exposure to quick commerce.
“The question is not whether the quick commerce sheen will fade. It most certainly will not. But brands cannot cling on to these platforms because it is ultimately just another marketplace, which means high commission rates and lots of competition,” an early-stage consumer sector-focused venture capital investor told Mint, on the condition of anonymity.
Quick-commerce platforms charge commissions ranging from 5% to 30%, depending on the category, much like e-commerce marketplaces such as Amazon and Flipkart, limiting the brand’s earnings. Sales through websites let brands control pricing and bag higher margins.
Moreover, brands also need to spend money to advertise on these platforms to maintain a competitive advantage, further straining margins.
That said, moving away from quick commerce won’t be easy.
India’s D2C brands had a fruitful time in 2024, with the growing popularity of quick commerce and renewed seed funding interest from early-stage venture capital investors.
New-age D2C brands have already pocketed over $400 million from investors so far in 2024, showed data sourced from market research firm Tracxn.
Quick-commerce boom
Quick-commerce platforms such as Zepto, Blinkit, and Swiggy Instamart offer consumers an easy and convenient way to shop for groceries and other daily essentials, making them the fastest-growing sales channel for many consumer brands.
MyMuse, a Mumbai-based sexual wellness startup founded in 2021, saw demand for its massagers grow tenfold on Blinkit in 2024 year over year, Anushka Gupta, co-founder of the brand, told Mint.
Hindustan Unilever Ltd (HUL)-backed health supplements brand Wellbeing Nutrition now earns as much as ₹10.5 crore a month from quick commerce, with marketplaces (including Amazon and Flipkart) accounting for 41% of all sales, said its founder Avnish Chhabria.
Beauty-and-personal-care firm Honasa Consumer, parent to Mamaearth, Aqualogica, BBlunt, among others, witnessed quick commerce emerge as its fastest-growing sales channel, which grew nearly 4-5 times faster than other online commerce channels, co-founder and chief executive Varun Alagh said during the FY24 financial results announcement.
Quick-commerce channels gained immense momentum in 2024 thanks to heightened interest from consumers and private investors. Mumbai-based Zepto bagged more than $1 billion in capital in six months alone, while Zomato and Swiggy bulked up their cash reserves during the year to keep up with rising competition.
In fact, quick commerce contributed approximately 8% to overall e-commerce growth in 2024’s festive season sales, up from 5% in 2023, according to Kushal Bhatnagar, associate partner at Redseer Strategy Consultants.
Initially focused on grocery deliveries, quick commerce has expanded into beauty and small electronics, driven by consumers’ increasing demand for fast, on-demand delivery.
Nevertheless, there’s only so much a channel can offer D2C brands.
Brands may cut dependence
“Distribution channels change as the business matures. When we started, we started only with a D2C website because we wanted to be close to the consumer. Later, we expanded to e-commerce, and then this wave of quick commerce came by. Maybe once quick-commerce plateaus in the next, say, 5-10 years, maybe the next wave could be offline retail,” Dhruv Madhok, co-founder of haircare brand Arata, told Mint.
Arata recently received a $4 million investment from Unilever Ventures and Loreal’s corporate venture capital fund Bold, aiming to strengthen its distribution and research functions.
Most brands are aware of the limitations of quick-commerce marketplaces and are making efforts to cut dependence.
Arata’s Madhok said he sees the business generating about ₹200-250 crore comfortably on the back of its website, e-commerce marketplaces and quick-commerce channels in the foreseeable future. It will also consider expanding into offline retail in the future if it sees the need, he added.
Moreover, the current price wars targeted at building brand loyalty are expected to level out over time, making it easier for brands to join platforms like Zepto and Blinkit.
Mint reported in October how consumer brands are jazzing up their pitches to get listed. Quick-commerce platforms get at least half a dozen new enquiries every day, according to a category manager working with one of them, tightening the competition for limited shelf space in the rapidly growing sector. In April, Swiggy said the volume of products it stores had grown four times over 12 months.
“Consumers and brands will evolve. We will not make discretionary moves based on a platform. Holistically, prices have to stabilize. Brands can’t get on this progressive ad war right now because it’s the last one standing for the number of orders they turn. Even brands are getting a lot smarter. Today, everyone is just fighting to get the user,” Wellbeing Nutrition’s Chhabria added.
