Hello, dear readers! It's been more than a month since my last post, and I feel immensely guilty about it - more for my conscience about being lazy than anything else. Apart from the usual things in life like work and benne dosas, I was away for nearly a week eating kachoris in Udaipur, singing para-para paradise at the Narendra Modi stadium on 26th of January in Ahmedabad (during the daytime there, we often got asked something on the lines of "bhaiya aap Coldplay waale ho kya?") and dropping by the Kala Ghoda festival in a short stop in Mumbai.

I've had at least 3-4 topics that are worth writing on that have been brewing in my head and I aim to write at least 3 such posts in Feb - a promise I'm making to myself to make amends for a wasteful January. The sheer act of writing these 2 paragraphs feels so liberating and therapeutic!

There is enough content out there in the area of Quick Commerce (aka Q-Com) which is all the rage in India so why am I writing yet another piece on this topic? I am not only a user of these Q-Com apps but also an employee in a company that sells a lot of goods through these platforms. I try to explain -

• How it is to be a seller on these platforms and it differs from the standard e-commerce model

• How it is a consumer using Q-Com apps

• Most importantly, how I feel about it as a citizen of India

Quick Commerce vs E-Commerce

The key differences between Q-Com and E-Com is the assortment size and the supply chain.

• E-commerce can manage to have lakhs of SKUs in their listing pages since they are not limited by the size of the dark store and often, don't even store the seller's goods in their warehouse. Q-Com, on the other hand, is restricted in the number of SKUs they can store and it's usually <10k at a time.

  

• E-Commerce supply chains can broadly be a marketplace model (where the platform doesn't buy the goods in bulk from the seller but only fulfills it for a commission%) and a b2b alpha model (where the platform has various related entities that purchase goods outright from sellers and then re-sells it to consumers). All my pointers here are relevant to a b2b model because most Q-com platforms operate on a b2b model where they buy outright from sellers and brands. E-com platforms also offer this b2b model only to select brands where they believe they have a good enough scale.

  
  The following 2 flowcharts are broad illustrations of how a supply chain works.

  From the perspective of a seller, they usually only need to send their goods to one mother warehouse when it comes to E-Commerce, which in turn "cross docks" these goods (it charges a flat fee of course) 's other regional warehouses which are then sent to hubs and to the final customer, as an order is placed. On the other hand, sellers who are national brands or have a pan-India presence, usually need to send their goods to multiple regional warehouses in smaller consignments. It's obvious that the supply chain costs to Q-Com platforms are more than the same for E-com platforms.

  PS - the concept of cross-docking was pioneered and scaled to a great extent by the American giant Costco, a favourite business model of Charlie Munger. I will bring up Costco 1-2 more times in this article

  

This supply chain also illustrates why it takes at least 1-4 days for a general E-Com order to be fulfilled but it takes 15 mins for a Q-Com order to be fulfilled

Others aspects of Q-Com as a seller -

• Given the limited assortment size that can be accommodated in a dark store, Q-Com platforms are generally tough to crack as a seller unless you are a reasonably known brand already OR if you have a unique product that is suited for the Q-Com ecosystem.

• Q-Com is a boon for brands and categories that have a low ASP (average selling prices), especially for categories such as home and kitchen and many types of groceries. It has given a platform for niche brands to explode that could never do so through the usual E-Com and offline route, at least not as much. Some examples of the same are GoZero (an ice cream brand) and Bakers Dozen (a baked goods brand)

• However, Q-Com platforms, who are desperately looking for more avenues of growth, have now started selling everything from electronics (iPhones, PS5 etc) to clothes and even offering ambulance services. A lot of these are publicity gimmicks to remain in the limelight but some of these have also become huge business drivers - you'll be surprised by how many people are now ordering iPhones via Q-Com. Sellers can tap into this desperation for growth via the right products suitable for Q-Com. For example, if you want to sell clothing on Q-Com, it's ideal to have a standardized product that will minimize the returns% which is a bane in the world of fashion E-com

• Ads were generally the domain of e-commerce players where Amazon India alone generated over $1 billion in ad revenues but Q-Com players have fast caught on. Zepto and Blinkit are both confident that they will generate over Rs 1000 Cr in ads revenue in the coming year. Unlike the world of offline retail, there are rarely upfront listing fees charged by a Q-Com platform which reduces your entry barrier significantly.

• B2B margins charged from sellers are generally higher in Q-com platforms as compared to E-Com platforms. To put it succintly, suppose a product has an MRP of Rs 100. E-Com platforms, with their slightly lower supply chain costs, may charge about Rs 20-30 from sellers and purchase the product from them at Rs 70-80. But Q-Com players, with their higher logistics/WH costs, may charge Rs 30-40 from sellers and purchase the product at Rs 60-70

  

• Q-Com sellers are "co-funding" more and more discounts (vs MRP) alongside the sellers in their quest for growth. Zepto, in particular, has been extremely aggressive at this end (thereby giving headaches to sellers who want to maintain price parity across platforms)

  Even large FMCG companies, now tied to Q-Com as a key channel of sales are victims of this extra discounting and can't afford to pull out in a market where growth is difficult to come by.

• A very important metric that is critical as a seller is to maintain enough inventory days at the Q-Com WH network which is a challenge because Q-Com platforms keep only a limited volume of inventory at their WHs vs any E-Com platform. Furthermore, unlike E-Com, sellers also need to supply to multiple regional Q-Com warehouses.

  It becomes super key to continuously track inventory availability in the world of Q-Com as compared to E-com and ensure that there is a certain predictability in sales projections across all the SKUs in your assortment.

  I can go on and on with various aspects of how it is to be a seller on Q-Com platforms but I believe that you would have got a decent crash course by now.

I can go on and on with various aspects of how it is to be a seller on Q-Com platforms but I believe that you would have a got a decent crash course by now.

Q-Com as a Consumer

This is the shortest part of this article, because it doesn't need too much of elaboration given most of you reading this would know enough about this perspective.

• A huge value proposition offered by Costco is that is limits it's assortment considerably thereby making it much easier for consumers to make their decisions easier taking away the "Paradox of Choice". Consumers now trust Costco so much because Costco does the dirty work of evaluating brands and if they are good enough to get shelf space in the elusive aisles of their stores.
  
  Q-Com does the equivalent of the same but more because of the constrained space available at their dark stores. You do not have to go through the ratings and reviews (if you have not noticed this absence already) of dozens of products like you would do on Amazon because the Q-Com platform has already done that for you. However, I would not equate this selection done down to quality alone, it can often just boil down to the amount of ads revenue that the brand in question is willing to spend for their product to be made available on that platform.

• There are many reasons why Q-Com platforms have taken off like this such as the near-infinite availability of cheap manpower (more on that later) but a key reason cities by many is that it bypasses the need for someone to break their backs on our notoriously poor roads and footpaths and outsources that job to a poor chap zooming up and down on an e-scooty.

• One pain point I've personally felt is the need to spend 5-10 mins in a queue at a supermarket if you have only 2-3 products to buy. More than the walk to the supermarket itself, it's this waste of time that is a key reason why Q-Com has been a boon to consumers.

  Q-Com as a Citizen

Q-Com as a Citizen

This is the part that matters most to me and something I've thought about the most. Q-Com has been hailed as the biggest "innovation" in the start-up tech scene in India in the last 3 years. It's definitely admirable how it's evolved at such a rapid pace in such a short space of time and optimized massively for pain points that the avg consumer feels, some of which are cited above. Having said that, it makes me feel that a world without Q-Com would be a better place to be in, rather than the one right now where we've become so protected and lazy, where lakhs of noisy and reckless riders zoom across erstwhile peaceful neighborhoods trying to maximize the number of deliveries they can make in a day.

• India's roads are already choked to the brim and only a few interior roads in neighbourhoods offer sanity away from the noise and chaos. This has been partially dismantled by Q-Com delivery riders and I can visibly see this in a major way in my own neighborhood. How will more kids come out to play or cycle with even these roads bearing witness to a zooming rider every few minutes?

• It's not just the riders, the dark stores are in themselves a sore sight and source of noise and disturbance in these neighborhoods. You'll see dozens of delivery riders sitting in the footpath or hanging around in the vicinity of these dark stores. Riders who are completely preoccupied with trying to maximize the number of deliveries they can close in a day, care little about the cleanliness of the vicinity and throw garbage freely or perform their bathroom duties openly.
  

  A few months ago, the Zepto dark store very close to my apartment was caught in the act of recklessly burning garbage and the issue was raised to BBMP and also caught the attention of the founders on LinkedIn (who soon got it cleared and planted saplings in the vacant area)

  

  

• For all the glorification of the “number of jobs” being created by Q-Com platforms such as this except below, it’s also a fact that riders -

  • Live in squalor, often squished together in dorms

  • Are developing no skill that will help them in the long term, this is especially painful to see for young men in their early 20s

  • Don’t have any job security and always live in the edge (or an injury away from unemployment)

  • Don’t have any PF or medical insurance coverage

  

  

  I strongly recommend this interview to understand more about the terrible condition of the labour class in India which is the biggest national tragedy that we don’t really care about.

  While it’s not zero sum, jobs in the Q-Com sector will also have the 2nd order effect of taking away jobs elsewhere, be it people shunning highway/metro construction to deliver your grocery instead or fewer kirana stores.

  Jobs in Q-Com are positive addition to society, but not as glorious as it’s made out to be. It’s definitely far better than living in poverty in a village or being an exploited labourer but let’s please not pretend as if it’s a god given boon to society.

  We are light years behind China in terms of skilling the next generation of the youth - a sad and depressing reality. We need many more Hosurs/Tirupurs/Peenyas in India (with wide semi-skilled industrial employment) than Samastipurs (with abject rural poverty and zero industry)
  PS - If you are from Samastipur, I apologize in advance

  

• Finally, what does this say about us as citizens? We've become even more addicted to convenience, addicted to our phones, addicted to more doom scrolling, and addicted to technology. We're addicted to instant gratification. We're increasingly forgetting the physical world around us and our kids are even deeper into this rabbit hole than us.

I know that I've ended this piece on a dark note and I'd like to keep it that way. There is enough content on LinkedIn or the newspapers about the glories and oohs and aahs of Q-Com and there must be more out there on the darker side as well - this conclusion is one of them.

Link the JM Financial Deep Dive Report on Quick Commerce