Amid quick commerce boom, footfalls to physical stores decline by 28%: PwC Survey

India’s quick commerce (Q-commerce) sector is expanding at an unprecedented pace, according to a report by global consulting and advisory services firm PwC. The report says that Q-commerce has seen widespread adoption in metro and tier-1 cities, where affluent Indian shoppers prioritise convenience over cost.

As per a survey conducted by PwC in partnership Kirana Club, India’s largest digital community for kirana stores, 42% of consumers in Tier 1 cities prefer quick deliveries for urgent needs, leading to a 28% decline in footfalls at physical retail stores.

The broader retail market in India is on an upward trajectory and it is expected to grow to $1.89 trillion by FY30 at a CAGR of 10.3%, the report says. Within this, e-commerce is emerging as the fastest-growing segment with a compounded annual growth rate (CAGR) of 22.5%. Meanwhile, Q-commerce has also cemented its place as a key sub-segment, redefining customer expectations and shopping behaviour.

The rise of hyper-fast delivery services is impacting brick-and-mortar stores, particularly in essential categories, the PwC survey showed. As per the survey, 508 traditional retailers reported a decline in footfalls, particularly in Tier-1 cities. Among them 52% reported sales decline in food, beverages, and confectionery; 47% saw a fall in personal care and hygiene sales; and 33% faced reduced sales in household cleaning and care products.

In contrast, niche categories like childcare, beauty, and wellness remained largely unaffected, highlighting that impulse and essential purchases are more influenced by Q-commerce, PwC noted.

Despite availability of lower-cost alternatives in retail and e-commerce space, Q-commerce platforms are selling products at a premium of 10% to 20%, often adding extra delivery fees, PwC said. However, the consulting firm added that the urban customers are willing to pay the premium for fast delivery, prioritising convenience over cost.

Challenges in Tier-2 and Tier-3 cities

While Q-commerce thrives in metro cities, expansion into smaller cities presents challenges. PwC’s research indicates that retailers in Tier-2 and Tier-3 cities remain largely unaffected by Q-commerce’s entry. Higher delivery costs over long distances and fragmented demand makes inventory management challenging, slowing the pace of adoption in these markets.

Market dynamics and challenges for Q-commerce players

Currently the Indian Q-commerce space is dominated by Zomato’s Blinkit, Swiggy’s Instamart and the unlisted Zepto.

However, the space faces threats from global giants like Amazon and Flipkart which have launched Amazon Fresh and Flipkart Minutes respectively. Both the companies are leveraging their vast supply chains and large customer base. Reliance Retail is also emerging as a big threat in this space with its deep penetration among kirana stores and supply-chain dominance.

Tata Group-backed BigBasket’s Q-commerce initiative BB Now is challenging the dominance by offering deliveries in 15-30 minutes in major metros. The company operates on the dark-store model being followed by Blinkit, Instamart and Zepto. BB Now is aggressively expanding, backed by investments from Tata.

Avenue Supermarts, the operator of DMart stores, has also responded to the threat of growing dominance of Q-commerce players by launching DMart Ready, its hyperlocal delivery model. Unlike Blinkit or Zepto, it does not promise instant 10-15 minutes deliveries but offers competitive pricing to attract price-sensitive customers. DMart’s core strength is its deep-discount pricing model, offering lower prices compared to quick commerce platforms, which often charge a 10-20% premium, analysts said.

Last-mile delivery costs and customer acquisition expenses make it difficult for Q-commerce companies to scale profitably. Further, to continuously fight discount wars to compete in this space also makes it tough for companies to gain market share in the fast evolving Q-commerce industry, analysts added.