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Quick-commerce A $5 Bn Market by 2025

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Quick-commerce A $5 Bn Market by 2025

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With increasing prevalence of top-up and unplanned purchases in metro and Tier1, convenience and speed of delivery have become important; super-specialized platforms have emerged to offer convenience and instant deliveries.

With increasing prevalence of top-up and unplanned purchases in metro and Tier1, convenience and speed of delivery have become important; super-specialized platforms have emerged to offer convenience and instant deliveries.

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Quick-commerce A $5 Bn Market by 2025

  1. 1. Quick-commerce A $5 Bn Market by 2025
  2. 2. 2 Disclaimer Copyright © RedSeer Management Consulting Private Limited (“RedSeer”). All rights reserved. While we have made every attempt to ensure that the information contained in this report has been obtained from reliable sources, all data and information provided in this report is intended solely for information purposes and general guidance on matters of interest for the personal use of the reader, who shall accept full responsibility for its use. RedSeer does and seeks to do business with companies covered in its research reports. As a result, readers should be aware that RedSeer may have a conflict of interest that could affect the objectivity of the report. All information in this report is provided “as is”, with no guarantee of completeness, accuracy, of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws and the inherent hazards of electronic communication, there may be delays, omissions or inaccuracies in the information contained in this report. Accordingly, the information in this report is provided with the understanding that the authors herein are not engaged in rendering legal, accounting, tax, or other professional advice or services. As such, it should not be used as a substitute for consultation with professional advisers. This report cannot be sold for consideration, within or outside India, without the express written permission of RedSeer. In no event shall RedSeer or its partners, employees or agents, be liable to you or anyone else for any decision made or action taken in reliance on the information in this report or for any errors, omissions, or delays in the content of this report or any losses, injuries, or damages including any incidental or any consequential, special or similar loss or damages, arising out of, or in connection with the use of this report.
  3. 3. 3 Key Themes of the Report Top-up and Unplanned purchases account for two-third of India’s consumables spend 1. 2. 3. 4. 5. Online and Gen-Z customers have significantly higher affinity for Top-up and Unplanned purchases “Quick Commerce” model emerged to disrupt the Top-up and unplanned purchases 13% of the online transacting households are “Quick Commerce” addressable and they spend USD 50 Bn on Top-up and unplanned purchases “Quick Commerce” penetration within online consumables market is ~7% and is expected to grow to 12-13% by 2025 Note (s): Quick commerce penetration to online consumables in 2025 is the base case forecast
  4. 4. Top-up and Unplanned purchases account for two-third of India’s consumables spend 1.
  5. 5. 5 Consumables market in India is expected to become $~ 1 Tn by 2025 Indian Consumables Market Size & Growth(A) USD Bn, CY 2016 – 2025 F Increasing willingness & ability to pay premium for superior quality products Growing market for easy-to-cook foods and at- home delivery, driven by increasing requirement of convenient & hassle-free experience Demand for healthy and nutritional food & beverages, led by stronger focus on healthy lifestyles & fitness Rising consumption of newer items through global experiences (e.g. meat, cereals with breakfast, beverages with meal etc.) +x% Indicates CAGR 578 753 725 985 2019 2016 2020 2025F +9% -4% +6% The consumables market saw a dip in 2020, led by the reduction in overall spending due to COVID Consumables Spend Per Capita (USD)B 437 557 531 670 As % of GDPB 25% 25% 27% 26% As % of retailA 78% 75% 83% 62% 1. 2. 3. 4. Growth Driver Sources(s): A RedSeer IP; B. World Bank data
  6. 6. 6 Metro and Tier-1 cities would drive the market on the back of increasing spend by mid to high income households; These households are convenience seeking and spend across consumables categories 44% 2020 5% 51% 5% 2019 52% 6% 43% 51% 44% ~$ 77 Bn 5% 2021F 53% 42% ~$ 81 Bn 2025F ~$ 72 Bn ~$ 113 Bn -6% +12% +9% Tier-1 (Next 40 cities) 7.0% Metro (Top 8 cities) 27.8% 7.7% 1.5% 39.0% 30.9% 19.9% $ 48 Bn $ 75 Bn $ 602 Bn 47.2% 8.6% 29.3% 31.4% 30.6% 13.4% Tier 1 (Tier-2+) ~$ 72 Bn ~$ 113 Bn $ 7500 -$ 15000 $ 15000 - $ 300000 $0 - $2500 $ 2500 - $ 7500 CAGR%, 21-25 $ 300000 + X% 10% 7% 12% Consumables market in Metro and Tier 1 – Mid to High Income Cohort ( CY 2020) Consumables market in Metro and Tier 1 – Mid to High Income Cohort (CY 2025) High growth in 2021 due to shift in consumer spends to in-house cooking as dine-out was a limited option in cities due to COVID. Growth driving cohort - High income cohorts of Metro & Tier 1 3.2% 2.6% 44% 2020 5% 51% 5% 2019 52% 6% 43% 51% 44% ~$ 77 Bn 5% 2021F 53% 42% ~$ 81 Bn 2025F ~$ 72 Bn ~$ 113 Bn -6% +12% +9% Tier-1 (Next 40 cities) 7.0% Metro (Top 8 cities) 27.8% 7.7% 1.5% 39.0% 30.9% 19.9% $ 48 Bn $ 75 Bn $ 602 Bn 47.2% 8.6% 29.3% 31.4% 30.6% 13.4% Tier 1 (Tier-2+) ~$ 72 Bn ~$ 113 Bn $ 7500 -$ 15000 $ 15000 - $ 300000 $0 - $2500 $ 2500 - $ 7500 CAGR%, 21-25 $ 300000 + X% 10% 7% 12% Consumables market in Metro and Tier 1 – Mid to High Income Cohort ( CY 2020) Consumables market in Metro and Tier 1 – Mid to High Income Cohort (CY 2025) High growth in 2021 due to shift in consumer spends to in-house cooking as dine-out was a limited option in cities due to COVID. Growth driving cohort - High income cohorts of Metro & Tier 1 3.2% 2.6% Indian Consumables GMV – Split by City and Income In $ Bn, by %, CY 2020 Growth of Consumables in Metro & Tier 1 cities (Top 48 cities) – split by income cohorts; In $ Bn, by %, CY 2020, 2021 F, 2025 F Mid to high income households of Metro and Tier 1 (Top 48) cities occupy >50% of the market in Top 48 cities This segment is expected to grow at a CAGR of 9% from 2021- 2025 reaching ~$ 110 Bn by 2025 Note:1. Exchange rate: 1 USD = 70 INR Source(s): Primary Research, RedSeer Analysis
  7. 7. 7 Mid to high income cohort in Metro and Tier 1 cities show 3 main purchase patterns Indian Consumables Market - Typical Customer Use Cases Mid-to higher income cohorts 75% Once a month 15% Once in 2-12 months Buy as per need Everyday Once/Twice in a week Once in 2 weeks Everyday Once/Twice in a week Once in 2 weeks 10% 15% 55% 30% 70% 20% 10% 5 -10k ~10k 2-10k 50-300 ~450 ~800 < 500 ~700 ~700 Fruits (1.5-3 kg) Vegetables (1 kg) Daily Dairy (500 ml) Eggs (1 dozen) Bread (1-2 loafs) Fruits (500 g) Packaged Food (150 g) Alcohol (350ml –1 L) Tobacco (1 pack) Meat (350-500 g) Vegetables (5 kg) Daily Dairy (0.5-2.5 L) Beverages (1.5 L) Home Care (850 ml + misc.) Packaged Food (400 g) Personal Care (200-500 ml) Staples (5 kg) 75% Once a month 15% Once in 2-12 months Buy as per need Everyday Once/Twice in a week Once in 2 weeks Everyday Once/Twice in a week Once in 2 weeks 10% 15% 55% 30% 70% 20% 10% 5 -10k ~10k 2-10k 50-300 ~450 ~800 < 500 ~700 ~700 Fruits (1.5-3 kg) Vegetables (1 kg) Daily Dairy (500 ml) Eggs (1 dozen) Bread (1-2 loafs) Fruits (500 g) Packaged Food (150 g) Alcohol (350ml –1 L) Tobacco (1 pack) Meat (350-500 g) Vegetables (5 kg) Daily Dairy (0.5-2.5 L) Beverages (1.5 L) Home Care (850 ml + misc.) Packaged Food (400 g) Personal Care (200-500 ml) Staples (5 kg) 75% Once a month 15% Once in 2-12 months Buy as per need Everyday Once/Twice in a week Once in 2 weeks Everyday Once/Twice in a week Once in 2 weeks 10% 15% 55% 30% 70% 20% 10% 5 -10k ~10k 2-10k 50-300 ~450 ~800 < 500 ~700 ~700 Fruits (1.5-3 kg) Vegetables (1 kg) Daily Dairy (500 ml) Eggs (1 dozen) Bread (1-2 loafs) Fruits (500 g) Packaged Food (150 g) Alcohol (350ml –1 L) Tobacco (1 pack) Meat (350-500 g) Vegetables (5 kg) Daily Dairy (0.5-2.5 L) Beverages (1.5 L) Home Care (850 ml + misc.) Packaged Food (400 g) Personal Care (200-500 ml) Staples (5 kg) Characteristics Stock-up Top-up Unplanned Purchase Frequency / Household (Average Transaction value) • Recurring bulk purchases for long term consumption • Dominated by Hypermarkets, Supermarkets, Online platforms • Everyday consumable items • Day to day utility driven purchases (e.g. cooking) • Mostly dominated by Kirana and online platforms • Recurring bulk purchases for long term consumption • Dominated by Hypermarkets, Supermarkets, Online platforms Key Categories (SKU size / transaction) Sources(s): RedSeer IP and Analysis, Primary Research (IDI); N = 50
  8. 8. 8 Consumables GMV in Metro & Tier 1 (Top 48 cities) –By Customer use case In % and $ Bn, CY 2020 Shift in consumer behaviour from value seeking to convenience seeking has led to weekly, small sized purchases compared to larger, monthly purchases Big players like Big Basket, Grofers have reduced delivery times, and helped in consumer education / awareness about instant needs Rise of instant delivery platforms like Dunzo, Swiggy Instamart has allowed consumers to complete top-up / unplanned (on-demand) purchases within an hour of ordering 1. 2. 3. These consumers make top-up / unplanned purchases much more than the rest of the country. The trend is fuelled by the shift in consumer preference for bite-sized offerings & improved supply side facilities of Quick deliveries (few hours to ~2 days) $ 72 Bn ~35-40% ~60-65% ~30% Overall ~70% Metro & Tier 1 (Top 48 cities) $ 725 Bn CAGR %, ’20-’25 6.5% 9% X% 6% 7% Stock-up Top-up & Unplanned purchase Growth Driver Sources(s): Census Data, RedSeer IP, Consumer surveys (Feb’20 – pre-COVID, Jun’20 – post COVID)
  9. 9. 9 3% 0.3% 94% 2019 0.5% 3% 8% 89% 2025F 2020 97% $ 724 Bn $ 985 Bn 0.1% $ 578 Bn 2016 $ 753 Bn 5% 5% 95% +9% -4% +6% Online Unorganized (Kirana led) Organized B&M 5% 16% 52% 1% Metro 0% 5% ∑ = $ 3.8 Bn 82% 3% 75% 16% Tier 1 20% 99% Tier 2+ $33 Bn ∑ = $ 21.3 Bn ∑ = $ 700 Bn $51 Bn $641 Bn CAGR %, ’20-’25 India Consumables Market – by retail channel USD Bn, CY 2016, 2019 & 2020 India Consumables Market – by retail channel and city tiers USD Bn, CY 2020 In market currently dominated by unorganized channel, Organized retail has been systematically gaining share in the market 3% 0.3% 94% 2019 0.5% 3% 8% 89% 2025F 2020 97% $ 724 Bn $ 985 Bn 0.1% $ 578 Bn 2016 $ 753 Bn 5% 5% 95% +9% -4% +6% Online Unorganized (Kirana led) Organized B&M 5% 16% 52% 1% Metro 0% 5% ∑ = $ 3.8 Bn 82% 3% 75% 16% Tier 1 20% 99% Tier 2+ $33 Bn ∑ = $ 21.3 Bn ∑ = $ 700 Bn $51 Bn $641 Bn CAGR %, ’20-’25 Sources(s): RedSeer IP
  10. 10. 10 India Online Consumables GMV & Penetration USD Bn, CY 2017 – 2020, 2025 F Covid driven adoption towards convenience has created a big surge in online consumables purchase Inconvenient offline transaction due to poor transport, unavailability of selection will lead to fast online GMV growth Leading online grocery platforms have been investing and optimising their supply chain Rise of instant delivery (TAT <45 Min) platforms allowed consumers to get unplanned consumables within an hour of ordering creating a disruptive alternative to Kiranas 1. 2. 3. 4. Online Consumables market penetration to grow exponentially in next 5 years to become $30+ Bn by 2025, ~50% of online market is expected to come from Metro and Tier-1 cities Country Overall Tier-1 Metro % share of online deliveries 0.5% 4% 6% 1.8% 2.8% 8% ~$ 0.7 Bn ~$ 1.2 Bn ~$ 2.0 Bn ~$ 3.8 Bn 2% 0 5 30 3% 35 0% 1% 2025 0.1% 3.0% 0.0% 2017 2018 0.5% 0.3% 2019 2020 ~$ 30.5 Bn Online Consumables market penetration High Low Online Consumables Delivery Market CY 2020 Share of metro & Tier 1 cities % online penetration – metro & Tier 1 cities 75% 50% Consumables Online GMV Consumables Online penetration % ~2% ~7% Growth Driver Note (s): Consumables includes non-grocery categories like OTC medicines, tobacco etc. Sources(s): RedSeer IP
  11. 11. 11 Major Presence Target Audience Customer Speaks Stock-up Top-up Unplanned Purchase Major Value Proposition Main Use Case Metro, Tier 1 & Bharat (tier 2+) Metro & Tier 1 • Speed & Convenience • Trust & familiarity • Local relevant product range • Free home delivery: Credit Purchase • Convenience of ordering • Doorstep delivery • Discounts and offers • Assortments across category and fill-rates • Convenience seekers • Young generation new households • Local neighbourhood • Mainly housewives and old loyal customers “I can order anytime via phone call and my Kirana delivers, also my husband can just go and buy grocery anytime required” “As a working mother I like to spend my weekends with my daughter, online ordering grocery helps me save time” • Discounts and offers (Limited) • Wider assortments across categories and fill-rates • Enables on-demand consumption • Instant & doorstep delivery • Discounts and offers • Assortment across categories and fill rate • Convenience seekers • Young generation new households • Mid to high income cohorts • Variety seekers • Discount seekers • Shopping experience “I like the whole experience of shopping grocery as I see in the mart, lot of options and brands are available there” “”One morning milk didn’t come on the scheduled time so I ordered on Dunzo. Since then, most of my top-up groceries are ordered here.” Metro & Tier 1 Metro Offline Channels Online Channels Channels available for shopping consumables CY 2020 Online Quick Commerce targets top-up and unplanned purchases by solving Kirana inefficiencies through instant delivery (TAT < 45 mins), convenience and reliability Source(s): Primary Research, RedSeer Analysis Local Kirana Traditional e-Grocers Modern Retail Quick Commerce
  12. 12. Online and Gen-Z customers have significantly higher affinity for Top-up and Unplanned purchases 2.
  13. 13. 13 Key Archetypes Description Consumables Purchase Behaviour Demo graphics Age Income Profession of HH members Gen Z – Impulse purchasers Ambitious Millennials Gen X – Active Buyers Gen X – Passive Buyers • Youngsters living alone or with friends • Social media and experiment driven purchase decisions. Focus more on convenience • Active online shopper with a convenience first shopping attitude • Key factors considered while shopping for consumables: 1. Speed of fulfilment 2. Convenience 3. Price / Discounts • Early Stage Professionals in Banking, Consulting, IT etc. • Students (with a lower pocket money) < 25 years INR 5 Lakh - 10 Lakh 35 years + INR 10 Lakh - 2 Crore 25 - 35 years INR 10 Lakh - 25 Lakh 45 years + INR 10 Lakh - 2 Crore • Matured professional living alone or with spouse / friends • Purchase decision driven by product utility, quick and convenient experience • There is a rising shift towards online channels for fresh and staples on-demand and top-up. • Key factors considered while shopping for consumables: 1. Speed of fulfilment 2. Convenience 3. Product quality • Young Professionals in Banking, Consulting, IT Services, etc. • Startup founders • Typically, lives with spouse and children • Purchase decisions driven by family aspirations and convenience • Has a mixed purchase pattern between Kirana stores, Super mart and online platforms. • Key factors considered while shopping for consumables: 1. Convenience 2. Product quality 3. Assortments • VP / Director / Senior Management in Banking, Consulting, IT Services, Medicine, etc., • Typically, a joint family / traditional nuclear family • Purchase decisions driven by family aspirations and value (discounts) • Shop from supermarkets and Kiranas due to low tech adoption & high trust on kirana. • Key factors considered while shopping for consumables: 1. Price / Discounts 2. Product quality 3. Assortments • Family business owners • Director / GM / Senior Management in SMBs Key Archetype – Overall Consumables Purchase Behaviour (mid to high income HH) We identified 4 customer archetypes for consumables purchases in mid to high income households within Metro & Tier 1 cities. Sources(s): RedSeer IP and Analysis, Primary Research (IDI); N = 50 1 2 3 4
  14. 14. 14 Key Archetypes Wallet Analysis (Overall) Expected increase in unplanned purchases (2020 – 2025) Gen Z – Impulse purchasers Ambitious Millennials Gen X – Active Buyers Gen X – Passive Buyers High shift expected with the improvement in on-demand online consumables penetration (Delivery speed and order convenience being the key criteria for benchmarking performance) Moderate shift expected with the shift in customer mindset Key Archetype – Wallet Analysis (mid to high income HH) Gen Z- Impulse Purchasers & Ambitious Millennials dominate in unplanned purchases and their fulfilment methods are based on speed and convenience Note(s): Numbers are indicative Sources(s): RedSeer IP and Analysis, Primary Research (IDI); N = 50 1 2 3 4 ~30% ~65% ~5% ~40% ~40% ~20% ~30% ~40% ~30% ~72% ~15% ~13% Female Female Female Female Male Male Male Male Females enable HH purchase. Grocery stock-ups / Planned top-ups are relatively higher in such HH. Higher unplanned spends on snacks, alcohol and cigarettes. Higher share of staples and fresh purchase in females. Snacks, Beverages are key items with little spend on fresh / staples Males enable HH purchases of unplanned grocery. Stock-ups are done by the house help / males order it online. Unplanned purchase Top-up Stock-up
  15. 15. 15 Key Archetypes Gen Z – Impulse purchasers Ambitious Millennials Gen X – Active Buyers Gen X – Passive Buyers Key Archetype – Online Consumables Purchase Behaviour Consumer behavior is shifting towards a higher share of top-up/unplanned purchases Sources(s): RedSeer IP and Analysis, Primary Research (IDI); N = 50 1 2 3 4 Arrows signify future change of use-case Archetype Attractiveness High Low Quick Commerce Value Prop Customer Speaks Online grocery purchase use case Willingness to try online deliveries Top up spends online Stock-up Top-up Unplanned Purchases Tier 1 Metro Tier 1 Metro ~ INR 4k / month ~ INR 7k / month ~ INR 3.5 k / month < INR 1.5k / month ~ INR 5k / month ~ INR 8k / month ~ INR 6k / month < INR 2.5k / month Moderate – high Moderate – high Moderate Low High Very High Moderate – high Low Attractive cohort Attractive cohort .I don’t have to plan on what I want; everything is instant. I get to explore new instant noodles which otherwise I wouldn’t have heard of, that too without stepping out.. We are quite satisfied with the online services. I like the scheduled option very much and its so punctual. My wife was worried about the quality of veggies, but she was happy when they got it. We have been purchasing almost everything online especially after the pandemic. What we really like is the convenience of getting everything on our door step. We have started using online apps for most purchases Because I know the shopkeepers, I have trust. They give me offers and best quality materials. I also like walking to nearby kiranas, meeting people. I think I won’t get same trust feel, personal connection, and quality with online. Also, I am not tech savvy. Attractive cohort Low attractiveness Online purchases are mostly top-up/unplanned with increasing unplanned purchases Online purchases are mostly top- up with a trend towards unplanned purchase Online purchases are rare and mostly unplanned with future potential for top-up purchases. Online purchases are a mix of stock-up and top-up purchases at present with fast growth of unplanned / emergency purchase behaviour
  16. 16. 16 Purchase trend of Unplanned Consumables – Past 12 months N = 706 Q. Have your unplanned consumables purchases increased in COVID lockdown (last 12 months) ? Q. How would your unplanned consumables purchases change in next 12 months? Purchase trend of Unplanned Consumables – Next 12 months N = 706 Customers increased their unplanned consumables purchases in last 12 months and are inclined to further increase their unplanned purchases in future Sources(s): Consumer surveys (June ’21) 28% 26% 29% 33% 28% 35% 30% 39% 27% 6% 7% 6% N= 706 Age < 25 years 2% Overall Overall 2% 1% Age > 25 years N= 152 N= 554 33% 30% 34% 40% 37% 41% 27% 33% 25% N= 152 N= 706 N= 554 Age > 25 years Age < 25 years Significantly increase Decrease Increase Remain same Significantly decrease • 73% customers suggest that their unplanned consumables purchase has increased in the past 12 months. • 61% customers suggest that their unplanned consumables purchase would increase in the next 12 months. • This shift of trend is realized due to: - Shift in consumer habits due to lockdown (orders for cravings / snacks & beverages have increased) - The rising speed and convenience brought by on-demand platforms. 28% 26% 29% 33% 28% 35% 30% 39% 27% 6% 7% 6% N= 706 Age < 25 years 2% Overall Overall 2% 1% Age > 25 years N= 152 N= 554 33% 30% 34% 40% 37% 41% 27% 33% 25% N= 152 N= 706 N= 554 Age > 25 years Age < 25 years Significantly increase Decrease Increase Remain same Significantly decrease • 73% customers suggest that their unplanned consumables purchase has increased in the past 12 months. • 61% customers suggest that their unplanned consumables purchase would increase in the next 12 months. • This shift of trend is realized due to: - Shift in consumer habits due to lockdown (orders for cravings / snacks & beverages have increased) - The rising speed and convenience brought by on-demand platforms.
  17. 17. 17 Primary mode of unplanned purchase N = 706 Q. Where do you get most of your unplanned purchases from? Q. What are the top reasons for getting your unplanned purchases online? Parameters to prefer online mode for unplanned purchases Ranking, N = 166 Customers make unplanned purchases across retail channels. For customers making unplanned purchase online, convenience of ordering and speed of delivery are the most important criteria Note (s): Customer research was conducted in Mid-to-high income household in Bengaluru, Delhi and Mumbai Sources(s): Consumer surveys (June ’21) Top 2 parameters 53% 50% 54% 28% 29% 17% 19% 21% 30% Overall N= 152 Mom-n-pop stores Supermarkets N= 706 Online N= 554 59% 41% 23% 21% 15% 13% 12% 24% 36% 31% 37% 39% 42% 26% 17% 23% 46% 42% 46% 45% 62% Rank 3 Speed Rank 2 Convenience Reliability Rank 1 N= 13 N= 86 N= 31 N= 34 N= 59 N= 108 N= 103 Assortment and selection of products Doorstep delivery Price and discounts Age > 25 Years Age < 25 Years Multiple payment options >50% customers feel convenience, speed and price / discounts are the most important reasons to prefer online channel for purchase. Top 2 parameters 53% 50% 54% 28% 29% 17% 19% 21% 30% Overall N= 152 Mom-n-pop stores Supermarkets N= 706 Online N= 554 59% 41% 23% 21% 15% 13% 12% 24% 36% 31% 37% 39% 42% 26% 17% 23% 46% 42% 46% 45% 62% Rank 3 Speed Rank 2 Convenience Reliability Rank 1 N= 13 N= 86 N= 31 N= 34 N= 59 N= 108 N= 103 Assortment and selection of products Doorstep delivery Price and discounts Age > 25 Years Age < 25 Years Multiple payment options >50% customers feel convenience, speed and price / discounts are the most important reasons to prefer online channel for purchase.
  18. 18. 18 “Online Quick Commerce” model emerged to disrupt the Top-up and unplanned purchases 3.
  19. 19. 19 Customer Experience • Personalized deal offerings (two-way negotiation) • Standardized discounts • Website first approach • Simpler user journey • Smartphone first approach Product Selection • Manage ~3,000-20,000 SKUs • Manage ~100,000 + SKUs • Manage focused set of 1500-2500 SKUs Type of Fulfillment • Self owned stores (~2,500 Sq.ft.) • Large warehouses (~40,000 Sq.ft.) • Micro Fulfilment Centers (~1500-2,500 Sq.ft. each) Fulfilment Time Self paced pick-ups 2 hours to 3 days Instant (20-45 mins) Timeline Till 2016 2016 – 2020 ~2020 onwards Customer Behaviour Value / Discount seeking behaviour Convenience seeking behaviour Offline Commerce Till 2016, consumables retailing was mostly through Kirana stores, with supermarkets as a rising trend. Traditional e-Grocers Driven by internet penetration and eCommerce, consumables deliveries via online platforms saw fast adoption in Metro & Tier-1 Online Quick Commerce Shift in consumer preference for instant delivery of Top-up purchases and convenience created - Online Quick Commerce Evolution of Indian Consumables Market – By Fulfilment Channels Metro and Tier-1 With increasing prevalence of top-up and unplanned purchases in metro and Tier- 1, convenience and speed of delivery have become important; super-specialized platforms have emerged to offer convenience and instant deliveries Sources(s): Primary Research, RedSeer Analysis Key Players servicing the market Performance across key parameters Convenience stores Kiran Off-shops
  20. 20. 20 Customer Journey –Traditional e-Grocers vs Quick Commerce Quick Commerce provides more convenience to customers with its curated selection of products, instant and doorstep delivery,. - Unlike traditional e-Grocers, Quick Commerce platforms have Simple UI and Instant delivery Sources(s): Primary Research, RedSeer Analysis • Planned monthly / weekly stocking-up • Unplanned urgent consumption • Routine daily/ weekly needs • Additional purchase after stocking-up • Searches multiple websites and apps for deals • Directly opens preferred app to purchase • Multiple deal discovery and variety offerings • No additional deal discovery activity required for the goal-oriented customer Simpler user experience in Quick Commerce • Completes payment; • Searches coupons • AOV ~ $ 12 - 15 • Completes payment; • AOV ~ $ 6 • Orders flow from centralized warehouses to customers • Delivery Time: 6 hrs. – 2 days • Low reliability on timelines • Orders flow from mini-warehouse / MFCs in neighborhood or local Kirana to customers • Delivery Time: 20-45 mins • High reliability on timelines Faster product delivery in Quick Commerce owing to the Micro-Fulfilment Center based model Traditional e-Grocers Quick Commerce
  21. 21. 21 Quick Commerce Landscape Online consumables have followed four different models, of which “standalone” and “Restaurant Aggregators” are well positioned to tap into the opportunity Sources(s): RedSeer Analysis Business Model Best positioned for “Quick Commerce Market” Key Players Indian Global Q-commerce Play and Synergy • Specialized commerce platforms with a core focus on faster delivery enabled by seller-operated micro fulfilment centers. • Strong last mile network leveraged for order fulfilment. Standalone Q -commerce players Restaurant Aggregators 1 2 • Slotted / scheduled grocery delivery players having order processing from centralised warehouse. • Total order to delivery time ranges from 2-6 hrs • Supply chain requires restructuring to be Quick commerce ready. eGrocery players 3 • eTailing players operating on slotted or express delivery model with multiple movements between first mile, line-haul and last mile capabilities. • The slotted grocery delivery takes 90-120 minutes eCommerce Horizontals 4 • Seller operated model that leverage restaurant delivery fleet to drive synergies in last mile • Marketplace led-model that leverage restaurant delivery fleet
  22. 22. 22 Case study of leading players in Quick Commerce Case study on leading Quick Commerce Players Note (s): Indicators for number of dark stores and size of is by the end of June’21 Sources(s): RedSeer Analysis Profile Key Players Value Prop and Advantages Pioneered on-demand delivery in India Dunzo Top Indian restaurant aggregator, focusing on on- demand consumables • Swiggy Instamart uses seller operated 34 dark stores across 6 cities in India • Typical dark store size is 1800-2500 Sq. ft. • Average order delivery time is 15-30 minutes • Restaurant aggregator serving millions of customers for food delivery • Providing on-demand consumables delivery to captive customers • Their capability in last-mile delivery and large fleet of riders to be on advantage for the platform • Dunzo operates in both seller-operated dark stores and marketplace model and is reducing their dependence on marketplace model • The platform has 18 dark stores in Bangalore. Typical dark store size is ~1500-2000 Sq.ft. • Average delivery time ~20 minutes • Started as a service platform for anything, delivered from anywhere to anywhere, it has high customer satisfaction and loyalty for the platform • Positioning around faster and reliable service is an advantage for the platform in on-demand consumables market
  23. 23. 23 13% of the online transacting households are “Quick Commerce” addressable and they spend USD 50 Bn on Top-up and unplanned purchases 4.
  24. 24. 24 Quick Commerce- Addressable Households CY 2020 and 2025, Number of Households, Mn, N=2752 (consumer survey) ~20 million households are addressable by quick commerce in India with an estimated addressable market size of USD~50 Bn in 2020 Note (s): Addressable market for Quick Commerce comprise of top-up and unplanned purchases of consumables by Mid-to high income households in Metro and Tier-1 cities Sources(s): RedSeer IP & Analysis, Consumer surveys (Feb’20 – pre-COVID, Jun’20 – post COVID) 123.0 11.0 20.0 154.0 31.0 USD 2450 / Year / HH USD 49 Bn Quick Commerce TAM 185.0 11.0 26.0 222.0 37.0 USD 2800 / Year / HH USD 77 Bn Quick Commerce TAM Online Quick Commerce Addressable HH Metro & T1 HH earning < $ 7500 p.a. Transacting HH in Metro & Tier 1 Transacting HH in Tier 2+ cities Online Transacting • Growing number of unplanned purchases in urban households • Shifting consumer preference towards convenience and instant deliveries • Generational habits shifting (Millennials to Gen Z) towards shorter purchases and need for quick, on-demand services • Increasing serviceability of quick-commerce in metro and tier-1 cities through multiple micro fulfilment centers • Growing selection and assortments by multiple brand partnerships Demand-side drivers Supply-side drivers
  25. 25. 25 “Quick Commerce” penetration within online consumables market is ~7% and is expected to grow to 12-13% by 2025 5.
  26. 26. 26 Sources(s): A RedSeer IP; B. World Bank data Online Quick Commerce Market GMV and Forecast In CY, For CY2020-2025E, By Scenario Market growth will be driven by rising adoption of quick-commerce among convenience seeking and customers with unplanned ordering behavior COVID led change in purchase behavior will promote growth quick commerce as replacement of Kirana purchase Expansion to multiple cities in Metro and T-1 (top48 cities) from current level of 6 cities 1. 2. 3. Quick-commerce market penetration is estimated at USD ~0.3 Bn in CY2021 and is expected to grow to 10 to 17x in next 5 years CY2020 CY2021 ~ 3.1 Bn ~ 1.5 Bn ~ 0.8 Bn CY2025E ~ 0.1 Bn ~ 0.3 Bn ~ 5.3 Bn +133% Conservative Scenario Base Case Aggressive Case +..% 2.6% 6.7% 10 to 17.5% X% Quick Commerce (% penetration of online consumables) CAGR % (2021-25E) +80% +92% + 1 0 5 % Growth Driver
  27. 27. 27 Appendix
  28. 28. 28 Glossary of terms used in the document (1/2) Terms Used Definition Metro Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune Tier -1 Cities other than Metros and with population above 1Million Tier -2+ Cities, Towns, urban establishments with population less than 1 Million Consumables Includes core grocery categories (Fresh, Staples, Packaged Foods, Beverages, Home Care and Personal Care), and Other Consumables (OTC, Alcohol, Tobacco and Pet supplies) Online retail E-commerce or e-tail including buying or selling of products online mainly through websites or apps. Quick Commerce Online purchase of consumables that gets delivered within 50 minutes Organized Offline retail / B&M Larger branded stores selling a wide assortment of products ranging from Food & grocery to fashion and BPC Includes formats like discount stores, supermarkets, hypermarkets to specialty chains. Unorganized retail Products being sold through Kirana stores aka Mom & pop stores and pop-up stores like Paan, beedi (Indian cigarette) shops. Kirana Mom & pop stores & and pop-up stores – Category B, C & D retailers (< or = USD 30K monthly GMV) Stock-up Purchases for stocking up of consumables and typically done on monthly basis Top-up Consumable purchases typically made to replenish/ supplement stock-ups Unplanned Purchases Consumables purchase typically made at the last moment / emergencies situations GMV Gross merchandise value CY Calendar Year (Jan-Dec) FY From 1-April to 31-March the following year CAGR Compound annual growth rate INR Indian Rupee USD/ INR Indian rupee(I USD = INR 70 – Average conversion rate for CY 19)
  29. 29. 29 Boundary Conditions Approach for TAM: To estimate the total addressable market for Quick Commerce, we look at 4 key levers – Reach, Access, Affordability and Non Stock-up spend Note(s): 1. Households with annual disposable income less than USD 7500 have not been considered for Quick Commerce addressable market as their behaviour is more towards value/ discount seeking 2. HH refers to households Sources(s): RedSeer IP & Analysis, Expert Discussions Reach We look at households in the top 47 cities in India as serviceable cities for Quick Commerce Access We filter the households with internet access Affordability Households having average annual disposable household income more than US $75001 Non Stock-up spend Share of the consumables wallet spent on non-stock up purchases in a HH Total addressable market 2020 ~200 USD Monthly Consumables HH Spends City-Tier No. of cities #Mn HH2 Metro Tier 1 8 40 13 7 ~49 Bn USD 20 Mn + Households
  30. 30. 30 Authors ANIL KUMAR Founder and CEO Anil Kumar is the founder of Redseer Consulting. He has been part of engagements in Internet, Private Equity, Retail CPG and Healthcare among others. He specializes in growth and investment strategies. Anil is a believer of the data-driven approach in solving business problems. His consulting approach leverages Data IP, sector expertise and the client’s core hypotheses. He holds a B.Tech from IIT-Delhi. He can be reached at anil@redseer.com MUKESH KUMAR Engagement Manager Mukesh Kumar is the engagement manager at RedSeer and has 7 years of experience in growth strategy engagement across internet, education, healthcare, and consumer products clients across India, MENA, and North America. He holds a B.Tech from IIT Delhi. He can be reached at mukesh@redseer.com VIKRANT SHOME Associate Consultant Vikrant Shome is the associate consultant at RedSeer and has 2+ years of collective experience in brand management, entrepreneurship and consulting engagements on market & consumer assessment across internet, education, saas, d2c and logistics clients. He holds an MBA from IIM Indore. He can be reached at vikrant@redseer.com
  31. 31. Thank You Bangalore. Delhi. Mumbai. Dubai. Singapore. New York © 2021 RedSeer Consulting confidential and proprietary information facebook.com/redseerconsulting twitter.com/redseer linkedin.com/company/redseer-consulting Solve. New redseer.com Disclaimer and confidentiality notice: This document contains information that may be confidential and proprietary. Unless you are the intended recipient (or authorized to receive this document for the intended recipient), you may not use, copy, disseminate or disclose to anyone the message or any information contained in the document. query@redseer.com

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