Surge in quick grocery delivery segment to benefit large FMCG players – The Hindu BusinessLine

lipped from: https://www.thehindubusinessline.com/economy/surge-in-quick-grocery-delivery-segment-to-benefit-large-fmcg-players/article37849538.ece?homepage=true

According to RedSeer, the quick commerce space is expected to grow to $5 billion by 2025

The surge of quick grocery delivery players is expected to benefit the large players in the FMCG sector and further drive consolidation and formalisation.

According to analysts at ICICI Securities, due to the lack of shelf space at the neighbourhood kirana stores and mini-warehouses, these players are able to stock up only top brands of each category. Hence, most of the large listed FMCG players are beneficiaries as they are market leaders.

“The HerfindahlHirschman Index (HHI), a commonly accepted measure of market concentration, shows – HHI of 13 out of 20 categories is above 2,500 which is considered as a highly concentrated market. Also, each category has a clear market leader with over 40 percent market share. This makes us believe that the scales are in favour of large staples companies – a retailer/quick grocery delivery player cannot really sell toothpaste without stocking Colgate or a premium detergent without Surf,” Manoj Menon, Aniket Sethi and Karan Bhuwania, analysts with ICICI Securities said in an investors note.

They added that the quick service players are most likely to stock the top brands (having high market shares) to drive higher inventory turns as margins are low for retailing grocery and lower lead times. Analysts expect this trend to drive consolidation and lead to higher market concentration.

Quick commerce space

According to RedSeer’s July report titled ‘Quick Commerce: A $5 billion market by 2025’ has estimated the market penetration of quick commerce at $0.3 billion in CY2021 and is expected to grow 10-15x in the next five years, which is $5 billion by 2025.

Earlier this month, players like Tata’s BigBasket and Ola have entered the 15 minute grocery delivery space. While the existing players such as Dunzo and Swiggy Instamart have doubled down their investment to reduce delivery times. Swiggy is investing $700 million in its quick grocery delivery arm Instamart and plans to start 15 minute delivery from January. On the other hand, Dunzo is adding over 300 micro-fulfilment centres across 700 localities.

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