Quick Commerce Business funding and shit
I can never think of any practical scenario where zepto, blinkit and instamart can become a profitable business model. I am just unaware and figuring out the tactics of their investors. How do they believe in such businesses? Why do they invest?
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Original Price of Tomato - 50 /KG Zepto Price - 90 / KG Platform Fee - 10 Rs People Buying even after knowing this as they are paying for product+comfort Hope it will clear your doubt
I see people mostly buy grocery items from quick commerce. Not vegetables, fruits.
Platforme fee, delivery fee.
Selling price - 310 - includes 10 platform fee Delivery - free Cost - 240
Revenue - 60
Huge fixed costs of dark stores, salaries and driver’s incentive. Is 60 enough?
Lets include delivery fee - 30, is 90 enough to survive all sort of costs?
It’s like saying walmart, target can’t get profitable in US
Zepto stated that 70% of existing dark stores are EBITDA positive. Hence the trust of investors to pump more money and scale it. People ready to pay for comfort, they dont run any crazy discounts also. It will scale, and will be sizeable, no doubt.
So the main point here is the money earning categories (aka floating retail price) (mostly groceries since all packaged stuff has mrp)
The amount of price inflation in groceries is just insane in these apps. Companies are also religiously trying to nudge buyers to order not only a higher basket amount, but also primarily groceries. Think of the slightly discounted chips and chocolates as the magnet that ultimately attracts you to grocery purchases
(If government steps in this business will drop cause of the amount of exploitation that exists in Qc)
How do you think Big Bazaar works? Or the small Reliance Smart retail joints? Now replace the high real estate costs (multi floor rent in malls, or premium corner shops) with cheaper dark stores that don't need ACs and space for you to drag trolleys. Additional costs is delivery - partially recovered from customer with fees.
All retail industry has break even time for new stores - fashion, grocery etc. Look for same store growth related terms for DMart in the investor presentation. New stores take time to mature - mix of reaching the stable state number of customers and optimising the merchandise that best fit the hyper local demand
Dont try to understand costs from basics, using analogies helps at times. Obviously the PE and VC firms investing take a more thorough and holisitc view
Those are high volume low margin businesses! And India has a really really large customer base, we want to buy so many things
Same, watched this video explaining the economics of blinkit but I'm still skeptical
https://youtu.be/OGs2YsqvWDg?si=WMrB6xZ62D4vb4Xy