This content relates to : EMERGING ECONOMY – INDIA
Atanu Adhikari
Indian Institute of Management Kozhikode
Grofers, an online supermarket in India, rebranded to Blinkit in order to launch its quick-commerce service, with the goal of becoming the first e-commerce company to deliver groceries and other necessities within 10 minutes of a customer’s order—in the blink of an eye, as the company put it! Grofers was founded in 2013 by two engineers, Albinder Dhindsa and Saurabh Kumar, to distribute groceries through an internet platform. Via Blinkit, customers could shop on the go and have groceries, fresh fruits and vegetables, cakes and bakery items, meats and seafood, cosmetics, mobiles and accessories, electronics, baby care products, and much more delivered to their door quickly and safely. The company operates in 30 cities, with 10-minute delivery service offered in 12 cities and standard same-day delivery offered in the remaining 18 cities.
In FY2021, quick-commerce (also known as q-commerce) in India was valued at $0.3 billion, with projected growth to $5 billion by 2025. According to a market report, quick-commerce could reach approximately 20 million Indian households. Industry experts opined that quick-commerce is emerging as one of the fastest growing e-commerce platforms, meeting customers’ desire for faster delivery. Mid-to-high-income Metro households were increasingly replacing traditional kiranas with q-commerce platforms such as Blinkit, Bigbasket, Amazon, Swiggy’s Instamart, and Dunzo, which had high fill rates and 30-45 minute delivery service for unplanned purchases.
Blinkit’s Business Model
Blinkit’s business model was based on an online marketplace. They accepted orders via their app or website. To deliver the product in less than 10 minutes, Blinkit follows a partnership model in all its operations, i.e., it works with local businesses and brands, logistics, warehouse, and payment partners, as well as payment providers. Partner stores received more orders as a result of the increased visibility, Blinkit profited by charging a percentage-based commission for these transactions. It currently provides 10-minute delivery through more than 250 partner retailers, with plans to expand to 1000 partner stores by June 2022.
Express Partners: Blinkit works with large retailers to store and deliver items to customers. These retailers are responsible for material inbound processes such as receiving, inward processing, and storing as part of the overall store operations, as well as outbound processes such as picking, packing, billing, and handing over the products to delivery partners within a predetermined time frame, 3-4 minutes. Express partners receive a commission of approximately 30% on monthly turnover. These partners are not permitted to fulfil any online orders other than those from Blinkit.
Spotlight Partners: Blinkit provided a platform for young brands to attract and connect with customers from a wide range of demographics. Blinkit also provided targeted placement on marketing materials as well as logistics support, which could assist young brands in moving to the next level. Blinkit provided the advantage of reaching a large geographic area, data-backed recommendations on how to improve product quality and packaging, and the opportunity to co-create products with Blinkit. Blinkit charged a commission of 8-15% of sales for providing all these services.
Local shops: Blinkit collaborated with local mom-and-pop shops to display and sell items from their stores via Blinkit’s online portal. The mom-and-pop stores did not need to invest in logistics or packaging to sell via Blinkit. Last-mile delivery services (within an 8–10 km radius) were also provided by Blinkit to these stores, resulting in increased sales and earnings for the store from nearby neighbourhoods. In return, Blinkit charged a commission of 12–15 percent.
Warehouse partners: Blinkit refers to its warehouse employees as warehouse partners. These warehouse partners would be in charge of picking, packing, and sorting Blinkit customers’ orders. In addition to a monthly salary of Rs. 25,000 (roughly $350), these partners received benefits such as meals, transportation, retirement contributions, and health insurance.
Delivery partners: These are independent contractors who work with Blinkit to pick up grocery items requested by customers via the Blinkit app and deliver them to the customer’s residence. They make these deliveries using their own vehicles and at their own convenience. Blinkit used the “per packet model,” which meant that a delivery partner’s earnings were based on each delivery made. With incentives and other benefits, a delivery partner could earn up to Rs 30,000 (roughly $400) per month. A delivery partner would be guaranteed a minimum daily wage of 500 rupees (roughly $7). They were expected to deliver 8-10 minimum orders depending upon distance of delivery and weight of the ordered items.
Blinkit’s business model is similar to the commission-based income model. It collaborated with local business owners and merchants to provide groceries and daily necessities in the surrounding communities and charged merchants a commission on these orders. When orders are below Rs 700 (roughly $10), the commission ranges from 8% to 15% to the merchant and when orders are less than Rs 1000 (roughly $15), the fee ranges from 12% to 15%. If the order is less than Rs 250 (roughly $5), Blinkit will also charge a delivery fee to the customer.
The Way Forward
Blinkit has received approximately $800 million in funding from notable investors such as Zomato, Tiger Global, and Softbank. It recently achieved unicorn status, or a valuation of $1 billion (roughly Rs. 75.88 billion) after raising more than $120 million (roughly Rs. 9.10 billion) as part of an ongoing fundraising effort led by online meal delivery platform Zomato and current investor Tiger Global Management. However, q-commerce business models not only operate with razor-thin profit margins, but also address a relatively small segment of addressable customer demand. While the company’s current focus is on attracting customers and changing behaviour, they may require substantial finance in the long run, which raises concerns about their long-term viability. Profitability is a challenge due to aggressive pricing, huge discounts, free shipping, and big commissions to affiliates and vendors.
According to experts, the reason businesses are focusing on quick commerce was a shift in customer purchasing habits and preferences. The primary growth drivers for this anticipated increase in the quick commerce market were a shift in consumer behaviour from value-seeking to convenience-seeking, resulting in weekly, small-sized purchases rather than larger, monthly purchases. This was due to rising adoption among convenience-seeking customers with unplanned ordering behaviour, as well as an increase in online and Gen-Z customers’ affinity for indulgence purchases. It remains to be seen if this business model is sustainable in an emerging economy like India where un-organized retail accounts for more than 80% of sales.
Author:
Atanu Adhikari
Professor of Marketing, Indian Institute of Management Kozhikode