Akash Agrawal, co-founder, Zoff Foods, an online spices and seasoning products brand, is chalking out business plans for the new financial year. He aims to expand Zoff’s presence on quick-commerce (q-comm) platforms like Zepto, Blinkit, Swiggy Instamart and others, maximise availability in their dark stores and step-up marketing. “We want to improve our Share of Voice on these platforms,” Agrawal says, implying that Zoff will up its advertising spends on q-comm sites that deliver goods in 10-30 minutes.
An online-first brand, Zoff gets 60% of its business from traditional e-commerce marketplaces like Amazon and Flipkart, but Agrawal spends more advertising money on q-comm which he says sparked a 400% jump in business. “Today, 60% of our total ad budget is for q-comm which brings 40% of our business,” he says.
Essentially, q-comm lists fast moving products which customers need in a hurry. Defending higher ad spends on q-comm, Agrawal says customers take speedy decisions on apps like Zepto, Blinkit, so the brand must be visible during their decision making. “On q-comm, you’re more inclined to buy the product you see first,” he says, justifying investments in bidding for key search words and display ads on these platforms.
Former Flipkart CXO Adarsh Menon, now partner at Fireside Ventures, is averse to spending ad money on q-comm but agrees they are the fastest growing channel for their portfolio of brands in the food, beauty and wellness space. “Ads on q-comm don’t work because the shopper has already made up his mind on what to buy,” he says. So Fireside Ventures pushed brands like Pilgrim, The Baker’s Dozen and Tuco Kids to create brand pull before getting on q-comm apps.
Menon’s contrarian view notwithstanding, hundreds of start-ups and traditional FMCG companies are shifting their budgets to q-comm. Sample some numbers. Digital advertising is the fastest growing among all media. Within digital, advertising on retail media – a term for e-comm and q-comm apps like Amazon, Myntra, Nykaa, Blinkit, Zepto, Flipkart Minutes – is growing the fastest. “And within retail media, advertising on q-comm apps is fastest growing,” says Siddharth Jhawar, country manager at ad-tech firm Moloco India. “Already platforms like Zepto make nearly ₹1,000 crore in ad revenue which is remarkable since they barely existed a few years ago,” he says.
Currently, retail media or e-comm advertising is pegged at ₹18,000 to 20,000 crore. “Quick commerce is cornering 20% of all e-comm ad revenue,” says Karan Taurani, senior VP at Elara Capital. This is hardly surprising given that advertising is increasingly moving from brand campaigns to conversion-led ads, he says.
With both big and small, new-age and traditional brands using q-comm to advertise, ad money has become a big lever for quick commerce platforms for profitability, Taurani says.
Sure, e-comm platforms like Amazon and Flipkart have a much larger user base and q-comm is smaller, “but advertisers are attracted to the kind of consumers present on the latter as they are transacting customers. Besides, you can charge more as the quality of users on the platform is good,” Jhawar says. Additionally, unlike in TV, you can track your ad spends as you know when a transaction is completed and the loop closes, he adds.
With brands seeing improved sales on q-comm, it is getting harder to list on these platforms, Agrawal says. Consumers love q-comm convenience. “It is a hyperlocal business. Any hyperlocal business succeeds when two things come together: density of demand, that is, high demand concentrated in a small geography, and abundant availability of cheap labour,” Fireside’s Menon says.
Q-comm has succeeded in 100 cities and it is likely to go to the next 100. Already a $10 billion business, it is expected to scale to $50-60 billion in the next 5 years, Menon says though he thinks the model may evolve as it goes down the smaller cities. “But given its current size, people are asking the right questions about profitability, operational efficiency, and how to build brands on this channel,” Menon says.
Little surprise then, Siddharth Jhawar thinks it is absolutely critical for Zepto, Blinkit, Flipkart Minutes and others to get their ad revenue in place. “Q-comm is a very expensive model to service. It is unlikely that they will break even on deliveries. To be profitable, they have to go down the advertising route.”