Quick Commerce & it’s Second Order Effects

In the bustling metro cities of India, quick commerce is more than just a trend; it's a revolution. As quick commerce gains traction, it's influencing consumer behavior in unexpected ways, particularly in the premium household appliance sector. Let's delve into how this growing demand for instant deliveries is reshaping the household of the premium consumer in our metros.

The Rise of Quick Commerce

Quick commerce, characterized by ultra-fast deliveries of groceries and essentials, is booming in metro cities like Delhi, Mumbai, Bangalore, and Hyderabad. According to a report by RedSeer, the quick commerce market in India is projected to grow tenfold to reach $5 billion by 2025. This growth is fueled by urban consumers who prioritize time and convenience over cost, making quick commerce an integral part of their lifestyle.

Potential Shift in Consumer Preferences? For sure, but what else!

As quick commerce becomes more embedded in daily life, at least in premium segments in metro cities, one is intrigued to think of the second order effects of this seismic shift. And we are not talking about an increase in delivery riders or lower footfall in large grocery chains or a simple increase in affordable e-scooters.

We want to go deeper.

So in our research of what quick commerce entails we explored multiple researches. 

Two stood out:

1. One by The Ken, where they did a study with 1500+ of their readers to understand q-commerce behavior between the top 4 apps - Blinkit, Zepto, BB Now, and Swiggy Instamart. A must read for all strategy professionals.

2. The second is a detailed case study by Think School where they break down quick-commerce by the numbers and why suddenly has it started making sense from a unit economics point of view.

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Why should $100 billion conglomerates be scared of 10-min delivery apps in India?

There's no doubt that if Q-commerce becomes the de facto delivery option for Indian consumers many industries will be impacted. 

But we wanted to go further away from the immediate impact and think a bit long term. 

So we looked at a typical Q-commerce consumer’s behavior. 

1. The average order value is going up steadily
2. Majority of users order from multiple Q-commerce apps (I have three apps - Blinkit, Zepto and BB Now)

Next we went through possible causations of these two factors:

• More deliveries → More visits from delivery boys: Impact on traffic, bike sales, driver safety
• More orders → More delivery bags: Impact on wastage, more use of plastics
• More orders and higher AOV → Less planning, more spontaneous shopping: Impact on large grocery chains
• Less planning → Less storage!!?

Aha!

Now the last one took us by surprise.

But it makes sense, if i can get almost anything within 10-minutes of thinking about it, why would I need to have storage space for it. Particularly cold storage - refrigerators!

Now before we get ahead of ourselves, a few points to highlight.

1. Q-commerce is mostly limited to metro cities and little to no presence beyond that.

2. Moreover, with increasing AOV (by design) these apps cater to users who value time and convenience over cost - i.e. premium segment of India.

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Hence, to say quick commerce will lead to zero sales of refrigerators in India would be too much of a stretch.

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But…

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We expect two noticeable shifts in consumer preferences:, 

1. Large consumer refrigerators (400 liters and above) to store bulk purchases and manage infrequent shopping trips will be impacted. Especially, premium products from the likes of LG, Samsung and Bosch will find fewer takers.
2. The Move Towards Smart, Medium-Sized Refrigerators: Premium consumers will increasingly lean towards medium-sized refrigerators (300-500 liters) equipped with smart technology. These smart refrigerators offer advanced features such as internet connectivity and voice control can also integrate with quick commerce apps. The ability to automate grocery replenishment directly from the refrigerator is a game-changer for time-conscious consumers and q-commerce apps.

According to Mordor Intelligence, the smart refrigerator market in India is expected to grow at a CAGR of over 15% during 2021-2026. This trend underscores the increasing preference for appliances that offer both convenience and advanced functionalities.

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Despite the promising trend, several factors need to be addressed:

1. Continued Demand for Large Refrigerators: Larger families and those who frequently host gatherings may still prefer large-capacity refrigerators. A survey by Consumer Reports indicates that families with more than four members often find larger refrigerators more practical. Given that most of the metros have an avg family size of 3.4-3.8, the impact we expect might not be immediate.

2. Regional Penetration: Quick commerce is predominantly available in metro cities. Its reach in tier-2 and tier-3 cities remains limited, where traditional large refrigerators continue to be essential. However, refrigerators are still a necessity there with single door refrigerators still constituting the bulk of the purchases.

3. Cost and Adoption Rates: The high cost of smart refrigerators could limit their adoption among price-sensitive consumers. A report by McKinsey highlights that while smart home devices are gaining popularity, the high cost remains a significant barrier for widespread adoption.

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Conclusion

The rise of quick commerce is undoubtedly influencing the premium refrigerator market in metro India. While there's a growing preference for smart, medium-sized refrigerators among premium consumers, large-capacity models will continue to hold significant market value, particularly in non-metro regions and larger households. By staying ahead of these trends, startup founders can innovate effectively and capture the evolving needs of the modern consumer.

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_{**Keywords**: Quick commerce, smart refrigerators, premium appliances, metro cities, India market trends, startup innovation, consumer behavior, high-end refrigerators, market analysis, grocery delivery apps.}

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