The Blinkit Saga

Lazy Indian Consumer

Interesting Read on the Weekend: Goldman Sachs Report on Zomato - They pegged the value of Blinkit more than Zomato’s food delivery business for the first time.

Let’s dive into what is happening in this space:

How do India Buy Groceries??

India offers a myriad of choices to shop. On one end of the spectrum is a largely unorganized sector, “The Kiranas or the Mom-and-Pop Stores”. On the other end is the organized sector burgeoning with different offerings like discounts, choice, convenience, home delivery, etc.

In the West, retail modernization took place after their markets were already middle-income, consuming markets. The advent of modern retail brought further efficiency, scale, and value to their markets.

However, the journey of modern retail in India will take a different path. India has a large and culturally inclined population that is just evolving into the middle class. This middle class will need a modern retail model that will not merely serve consumption efficiently, but redefine consumption itself.

Mukesh Ambani, Preface to the book Super Marketwala by Damodar Mall

Latest Innovation in Indian Retail Space: Quick Commerce

Are Quick Commerce companies like Blinkit, driving a fundamental change in Indian Retail? 

I am tilting towards a yes given the pace of and impact of this change.
If I have to define the trend in one word the answer would be “lightning-fast convenience”.

Advantage Blinkit from a customer viewpoint:

1. Options: Blinkit provides better options to consumers with over 6,000-7,000 SKUs while a typical Kirana store has 1,500-2,000 SKUs

2. Cheaper: While at Kirana stores especially in the urban setting, there is minimal or no discount, the goods are cheaper at Blinkit with the discounts offered. 10%+ discount on Blinkit and other organized retail formats, stemming from a better supply chain

3. Convenient: No need to go to the market, even if you are at a store the time taken for purchase including delivery is almost comparable. So buy at the convenience of your home delivered in 10-20 mins.

No Doubt the penetration of Online Grocery is increasing:

Especially in top cities

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Blinkit Economics Vs Kirana

I think it would be fair to compare Blinkit with Kirana because 
(1) Supermarkets have been for a long time and hence base rates show that Kiranas remained resilient to the advent of Supermarkets because of convenience.

(2) Quick Commerce is targeting the very moat of Kiranas. Proving to be a more convenient mode of shopping. 

Here is an interesting stack explaining the business of Blinkit from Saket Mehrotra of “Beta to Alpha”

Blinkit - Transforming General Trade to Modern Trade

Whereas a Kirana store earns mainly from the margin it makes (take rate), Quick commerce companies have other revenue streams as well i.e. Advertising and Ancillary.

However, quick commerce needs scale so that the huge fixed costs be distributed over a large number of orders. So far the trend is very encouraging.

No doubt, the Indian Kiranas are having a tough time.

Why Blinkit?? What’s their right to win?

💭Retail is such a big pie. Even the deep pocket conglomerates like Reliance and Aditya Birla Group are in retail. What wards off the competition??

Two of the three prominent Quick Commerce companies are also in the food delivery business as well. Maybe this is the playbook. Both businesses have many similarities so that gives an edge.

Part of the reason why Blinkit has been able to crack the market is access to huge analytical data. They know the accurate distances in terms of time taken for delivery, the population densities, and estimates for spending power from their food delivery business and hence are one step ahead in optimizing their network.

They are also giving a platform to D2C brands. Going back to to the book Super Marketwala by Damodar Mall

“Young Indian consumers are aspirational and celebrate choice. Modern marketplaces are no longer about giving access to great products and experiences; they also fire the imagination of customers”

Source: Blume Venture

Final Thoughts

IMHO Blinkit is a value migration play from Unorganized Retail to Organized Retail among which Quick commerce will grab a lion's share. 

I would not say that Kirana is dead. Given the size of our Country and the diversity of the consumers, all the grocery retail models are relevant for different customers and will find their respective mojo. 

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Disclaimer: I am not SEBI registered. The information provided here is for educational purposes only. This is not buy or sell advice. I will not be responsible for any of your profit/loss based on the above information. Consult your financial advisor before making any decisions.