Indian Grocery Migration From Unorganised Retail To Quick Commerce

India is likely to graduate directly from unorganised retail (kirana stores) to QC (quick commerce), while modern retail penetration may remain lower than most comparable countries, HSBC analysts believe.

From a new note:

And at this stage there is no competition between QC and MR in India as the majority of value migration is coming from unorganised retail to QC, in our view.

Importantly, this is driven by the fact that QC imitates most attributes of unorganised retail in India, unlike MR. For instance, according to a study from Zepto, the majority of the grocery spend by Indian consumers is through small tickets, high frequency purchases, which is suitable for QC format rather than MR. In general, the number of SKUs in an Indian kitchen is far higher than in the West and hence there is always a need for top-up items, which is better serviced from local stores than MR.

Moreover, most Indian kitchens don’t have the space to store monthly groceries, unlike in developed markets. There is less propensity to spend on monthly groceries in one shot and also customers prefer to buy higher share of fresh food, which is all better suited to QC compared to MR.

QC also offers the unique proposition of a large number of SKUs, as high as MR, with proximity that is as good as unorganised retail. The number of SKUs has gone up from 2K to 6K in each QC dark store now and Zepto is looking to increase it further to 10-12K. Expansion of QC in typical e-com categories such as fashion, electricals, and house-hold consumables will likely continue to expand the QC TAM as well.