The segment has become the fastest-growing sales channel for groceries, daily essentials and fast-moving consumer goods (FMCG) products, accounting for up to 75% of online sales at several leading manufacturers.
Companies said spending on the channel has increased about 20% year-on-year and surges by as much as 40% during peak demand periods, including weekends and festivals. The channel has been more profitable for consumer goods companies as it drives a higher mix of premium products.
“Quick commerce is becoming a dominant channel, trying to dictate and negotiate terms just as large modern retail chains do,” said Mayank Shah, vice president at Parle Products. “The money required to sell through the channel has gone up by up to 40% as platforms look to monetise. There is now almost a bidding process for certain marketing activities.”
The chief executive of a leading FMCG company wasn’t too happy about the development. “Some increase in charges is understandable, but the hikes are becoming too steep,” he complained. He didn’t want to be identified.
Auction-style bidding
Industry executives said brands now pay platforms not only for premium placement in category listings and search results but also for ‘surrogate’ searches. That’s when a search for one brand also displays rival products. Earlier, such placements were sold at fixed rates, but platforms are increasingly adopting informal auction-style bidding, they said.
India’s largest packaged edible oil company, AWL Agri Business, said quick commerce platforms, which were once focused on burning cash to gain market share, are now under pressure to improve profitability.
“They ask how much we are willing to invest, and the ask has gone up with almost open bidding for several marketing activities,” said executive deputy chairman Angshu Mallick. “Rates rise sharply during high-consumption periods such as Holi, Navratri, Eid and even weekends, and also for seasonal categories such as besan during Janmashtami.”
For many companies, quick commerce is now almost as large as modern trade and is a preferred channel to push premium products and new launches. Companies are also rolling out quick commerce-specific products and packs.
Only large modern retail chains such as D’Mart, Reliance Retail and the erstwhile Future Group had enough scale to negotiate higher margins and tougher trade terms. Ecommerce didn’t become large enough to command similar terms.
As platforms scale up, they are seeking better financials, said Tarun Arora, chief executive of Zydus Wellness, which sells Complan and Glucon-D. “Discussions on margins and other partnership opportunities with brands are common, just as in organised retail,” he said. “True partnerships happen when both sides create a win-win situation.”
Reliance Retail is among chains renegotiating margins and trade terms by pitching its grocery stores as well as its quick commerce platform JioMart as a combined offering to brands.
The company didn’t respond to queries. Its chief financial officer Dinesh Taluja told analysts on Friday that Reliance Retail is leveraging supplier relationships and scale to improve margins in quick commerce.
“Our terms of trade are significantly better than those of peers,” he had said. “That gives us a competitive advantage to offer attractive prices to customers while still maintaining our margins.”
However, executives said the future of auction-style keyword bidding could depend on the outcome of the Google-Hindware case. The Delhi High Court ruled that Google cannot use a brand’s trademark in keyword advertising, thus preventing rival products coming up in search. Google has appealed the decision.