India quick commerce market to reach $5 bln by 2025: RedSeer report

Quick commerce refers to delivery of consumables within 45 minutes with a nominal delivery charge; Dunzo and Swiggy Instamart are some of the players

India's quick commerce sector is expected to grow 10-15 times in the next five years to become a $5 billion market by 2025, according to a new report by consulting firm RedSeer.

Quick commerce is defined as delivery of consumables within a span of 45 minutes with a nominal delivery charge. Dunzo and Swiggy Instamart are some of the players in this segment.

The top growth drivers for this expected rise in the quick commerce market are shifting consumer behaviour from value seeking to convenience seeking leading to weekly, small-sized purchases compared to larger, monthly purchases; rising adoption among convenience seeking customers with unplanned ordering behaviour; increasing affinity of online and gen-Z customers towards top-up and indulgence purchases; and Covid-led change in consumer behaviour towards using online as replacement for kirana.

The report, titled "Quick Commerce: A $5 billion market by 2025" found that the market penetration of quick commerce is estimated at around $0.3 billion in calendar year 2021 and is expected to grow to $5 billion by 2025.

“Quick Commerce is emerging as one of the fastest growing e- commerce models serving the need for faster delivery among convenience seeking customers. With high fill-rates and 30-45 mins delivery service for unplanned orders, mid-to high income households in Metros are increasingly replacing traditional kiranas with Quick Commerce Platforms like Swiggy’s Instamart and Dunzo,” said Mukesh Kumar, engagement manager at RedSeer.

The study found that 20 million households are addressable by quick commerce in India.

The Indian quick commerce (Q-Commerce) market offers two main opportunities including consumables (fresh, staples, packaged foods, beverages, home care and personal care, over the counter medicines, alcohol, tobacco, pet supplies) and adjacent or long-tail categories (flowers, gifts, books, small electronics, etc.).

The consumables market in India is projected to grow sustainably for the next five years at  around 6 per cent compound annual growth rate to hit around $1 trillion by 2025 from $725 billion in CY20.

Further, Q-commerce penetration within the online consumables market is  around 7 per cent, and expected to grow to 12-13 per cent by 2025. Currently at $3.8 billion, the online consumables market is expected to grow exponentially and is expected to reach over $30 billion by 2025, of which around 50 per cent will come from Metro and Tier-1 cities.

Mid to high income households within these cities will drive growth, as they are convenience seeking and spend across consumables sub-categories. These consumers include Gen Z, ambitious millennials, Gen X-active buyers and Gen X- Passive buyers. Gen Z- impulse purchasers and ambitious millennials dominate in unplanned purchases and their fulfilment methods are based on speed and convenience.

The major drivers for this market are willingness to pay for premium products, growing market for easy-to-cook products at home delivery, demand for healthy and nutritional products, rising consumption of newer products through global experiences.