India’s '10-minute' delivery craze
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Toyota, let's go places.

50% of our sales are affected because it's convenient for the customer to order online. And is it a business model that can last? Any startup today is being put on so much tremendous growth pressure that they are all playing catch up with each other. More than deep pockets, we have to have deeper patients and more patient capital. India's booming quick commerce industry. All coming up on today's program. Hi, how are you?

30-year-old Tripti Garg is expecting her first baby any day now. Tripti's staying home these days. But when a craving strikes, an instant delivery app is her go-to. I feel like having chips, so I can choose from many options that we have. It's like an online store, an online convenience store for me. And this one says it can deliver a bag of chips in just 10 minutes.

So should we choose this? The app is showing different brands and there are prices mentioned for each bag of chips at the bottom. Most of them are same. So once you click on the product, it takes you to a page where you have to put in your address and then choose between online payment or paying in cash. And it's done. We place the order and now we wait. 10 minutes later, her snack arrives. Hello.

Where are you? I am at the Patrasnatal area. Thank you. It's so convenient. Yeah, it is actually. I am addicted to these apps. But isn't it expensive, Tripti?

It is a bit, I agree. But you know, the ease and the convenience is actually far better. And what do you generally buy here? So I started with, you know, buying just the grocery items like chips or cola. But now I see that they have cosmetics as well. And even the baby stuff like diapers and other, it helps to have the same selection that...

And that's what's pulling people in. Variety, convenience and quick delivery, anytime, day or night. India's quick commerce sector is already worth an estimated $6 billion.

with at least seven big players in the space. But the current market leaders are food delivery platforms turned instant grocery delivery apps, Zomato and Swiggy. You name it, we'll get it.

Swiggy instant mat, picket, chawal and more in 10 minutes. And then Zepto. Get 400% longer lasting ever ready Ultima. Delivered in 10 minutes on Zepto. So how does it actually work? How do you go from placing an order on your phone to someone showing up at your doorstep with your items in 10 minutes? Let's talk about Zepto with its co-founder Adit Balicha. It really sort of germinated initially.

The app was launched in 2021 and is already valued at over $5 billion. Adit spoke to BBC's Nikhil Anandar. In the first lockdown, it was an absolute nightmare to get groceries. Most of your offline options were shut. Your online options were taking five, six, seven days at best, given the chaos. And then you had to go to the store and get groceries.

And, you know, for the two of us, it was a huge pain point just trying to figure that out. And when we spoke to our neighbors around us, the new...

neighbors that we had, it was a massive pain point for them. And they were a lot older than we were. And so we started with the idea of why don't we just deliver groceries for them. And that ended up sort of building up into Zepto, which was sort of a faster, more convenient, more reliable and fresher way of getting groceries. You know, why 10 minutes? I mean, is that a global benchmark for quick commerce? Or did you just sort of arrive at that 10 minute

number after talking to people? Basically we ran an experiment on 10 and 30 minute delivery and we found that you know although customers themselves retained on the platform at the same level the frequency of those customers were a lot higher if you were delivering in 10 minutes and so the amount of wallet share and the basket that you could capture the revenue from that customer was a lot higher if you gave them the ability to deliver in 10 minutes because fundamentally if you think about it first principles

There are a lot of use cases that are okay to be done in 30 minutes or 40 minutes, right? Tons of use cases where if you're delivering in 30, 40 minutes or 10 minutes, it doesn't really matter. But then there are some very urgent use cases. I need rice right now. I need shaving cream right now. Use cases that a 30, 40 minute delivery time just wouldn't be able to cover. So you just get more orders from that same customer with 10 and 30 minutes.

You know, explain to us the business model of Zepto and, you know, what a dark store really is, how it functions. The one-line summary of Zepto is essentially, you know, we're delivering groceries in 10 minutes through a network of highly optimized micro warehouses or dark stores that we partner with across the country. You know, fundamentally, you open the app, right, you see a list of 5,000 plus products, right, and it's, you know, well curated, it's a nice user interface, right?

But the way that that works is once you open the app, we actually match you to the nearest dark store facility that's in our network. That dark store is essentially...

Think of it as a store that's oriented only for deliveries, that's been designed only for deliveries. And effectively, it's sort of this micro warehouse that's peppered in dense neighborhoods that just delivers to you quickly, similar to how traditional e-commerce works, but more hyper-local and more quick to doorstep.

These dark stores or retail outlets that aren't open to the public and are purely for online delivery have become a mainstay for quick commerce startups. Sandeep Anchatopadhyay is the CEO of Zelpmorg Design & Tech and has been involved in designing several online platforms. He tells me how they work. So it is basically nothing but a glorified warehouse. So every, if you go to any mall or any departmental store or supermarket, they have

the aisle space where the fast moving goods are stored. And they also have access to a storeroom or a centralized warehouse from things start getting replenished as they move out. Latching onto that is what the quick commerce is doing, but without the storefront kind of a thing.

And the delivery and choice being left to the mobile and technology means that is what I would say is the essence of quick commerce, right? So how are they making money? Okay, if you look at the P&L, they're not making money yet, but there probably is some unit economics which is there. So let's say any SKU, whatever is a unit of purchase, that's an SKU. So it could be a soap bar, it could be a shampoo bottle, it could be a cereal box, anything which is...

A unit of purchase, that's called an SKU. That if you do it and you are buying in small quantity, the manufacturer essentially doesn't give that much of a discount away. But if a consolidator, which most of these quick commerce people are, comes and asks for 10 trucks,

then the buying power is in their hand. And they probably will get, let's say, a 30% discount, 40% discount. So there is economies of scale there. Now, they may or may not choose to pass on that benefit to the consumer, but the margin spread is surely significantly more. But Sandeepan says regulations for these dark stores is murky.

The problem is we have 71 certificates a small shop and establishment place has to get and be sanctified and checked by the municipality. There is not too much laws about dark stores. Who is monitoring the monitorers? How are we knowing that they are being kept safe and conducive? In fact, earlier this month in the western Indian state of Maharashtra, Zepto's food licence was suspended. Controversy that has...

This after officials found expired items and signs of fungal growth in its dark store in Dharavi.

In response, the company said it's conducting an internal review and has promised to fix the lapses. But this incident has shaken some quick commerce users like Ashima Gupta in Delhi. So I use the delivery apps quite frequently, especially for the daily vegetables, fruits and milk products. But of late, I see that certain products, especially milk products, yogurt, etc., they've turned out to be spoiled.

So what I do nowadays is that I see the expiry dates before opening the product or consuming it or if it is spoiled then it is spoiled and there's no way out of it. We can't even return the product.

So I've started buying such kind of products directly from the marketplace instead of relying on these apps. The other area where critics say there's a lack of proper regulation is working conditions for delivery riders who have to meet these 10-minute delivery targets. I met a group of them in Delhi, waiting by their bikes in the summer heat. They didn't want to be named but wanted their voices to be heard.

There's a pressure on the rider to deliver fast. It takes five to seven minutes for a two kilometers delivery and the pressure to make it fast puts our lives at risk. This line of work is risky. Anything can happen on the road. My family doesn't agree with it but there's no other way to earn money so my family allowed me to do this.

Most of them earn between $4 to $5 in a day without health insurance or pensions. Siddharth Jain from global consultancy firm Kearney tells me that nearly 700,000 people are working in India's instant delivery industry. And most of them are riders. There is...

With seven large players, you know, trying to grow in this space, they are all competing for talent on this side. And there is a shortage of supply right now, especially in the top three metros. It's a massive constraint, right? And...

But does it require any kind of government intervention as well to protect these workers?

See, at the end of the day, India is very much a developing economy and employment is always a topmost priority for any government. And having the right norms and policies, government always plays a role. It has happened in manufacturing sector over the years and reforms have happened. I'm sure it will happen here. But I would expect and hope that the industry is ahead of what the government pushes and does things directly on their own.

You're listening to Business Daily on BBC World Service. I love ravioli. Since when do you speak Italian? Since we partnered with SAP Concur. Their integrated travel and expense platform and breakthrough solutions with AI gave me time back to dive into our financial future. We expand into Europe in 2027, so I'm getting

I don't have kids. You don't say.

Toyota is the best resale value brand for 2025, according to kellybluebookskbb.com. And with a wide range of dependable vehicles for any lifestyle, you can get everything you need in a vehicle today while investing in tomorrow. So choose Toyota and choose value. Shop buyatoyota.com for great deals and more. Vehicles projected resale value is specific to the 2025 model year. For more information, visit kellybluebookskbb.com. Kelly Blue Book is a registered trademark of Kelly Blue Book Co. Inc.

Toyota, let's go places. I'm Divina Gupta. And today we are in India to talk about the multi-billion dollar quick commerce or Q-commerce industry, where food and groceries are delivered to your door in 10 to 30 minutes or even less. 37-year-old Himanshu Batra is packing groceries for a customer at his shop in South Delhi's Lajpat Nagar. My grandfather's

My great-grandfather started this shop seven decades ago, he says. It's a mom-and-pop store, commonly known as a kirana store, that sells groceries and household items. 50% of our sales are affected because it's convenient for the customer to order online because they have a vast reach of products. It's not possible for us to provide that range, so that's a disadvantage.

It's a big company, so they fill up their warehouses accordingly so they can negotiate with the company on prices. But we are small vendors. And he's not alone. A recent report from global consultancy firm PwC found that 52% of physical store retailers in India's urban centres have experienced a drop in sales of food and beverages.

a challenge that India's Finance Minister Nirmala Sitharaman talked about recently. Our gig economy start-ups, especially the quick commerce, are truly one of the kind of innovation that only India has.

But that's not to say the brick and mortar retail is not doing fine. They are being challenged by quick commerce and we need to handhold and support brick and mortar retail. But the cracks are showing in the quick commerce industry too. Unlike mom and pop shops that keep operational costs low, instant delivery apps depend on investor money.

So at a time of geopolitical uncertainty squeezing money out of the global financial system, how sustainable are these quick commerce ventures? Let's take a look at Dunzo. This was the first Indian company to get direct investment from Google. It started as a WhatsApp pick-up-and-drop service a decade ago, before pivoting to quick commerce in 2020.

This year, it shut down. Hundreds of employees were laid off, including Manmeet Kaur. That time was very frustrating. She worked as a brand safety officer in New Delhi. So I worked there for almost...

Six months without pay, I started noticing all the investors, they started leaving Danzo. So in escalation, generally, vendors were reaching out, riders were reaching out for the payout issues. We will not do the deliveries, we will keep the customer's order, we are not getting paid weekly.

So we were usually getting this order. The customers were very frustrated. The orders were getting delayed. Manmeet is still waiting for her final dues from the company. Let's go back to Sandeepan Chattopadhyay, the CEO of Zelpmorg Design & Tech. Sandeepan was an early stage investor in Danzo and says it's a difficult market.

Any startup today is being put on so much tremendous growth pressure that they are all doing playing catch up with each other in a hurry without really consolidating and having their own thesis. And that's a lot due to the amount of overvaluation they're seeking, the amount of substantiation they have to do to get the next round of funding.

So it is a vicious cycle. You have to have a differentiation. No one is focusing on that. Danzo did in the initial phases. That's why it grew. It developed something called customer trust. It did a great job, but it was not growing as fast as the other ones were because Danzo

They were fuelled and burning money. It's a mixture of a lot of things. We need a lot of fundamental investors. We have to have more than deep pockets. We have to have deeper patience and more patient capital. So where does the industry go from here? Siddharth Jain from global consultancy firm Kearney tells me that he's optimistic. The real next step, according to me, is cracking smaller towns because...

But

Could there also be a change in the value of these deliveries? So from low-ticket items to something like air conditioners. For example, get an air conditioner at your doorstep in 10 minutes. And some apps are already promising to offer that in the future. I would call air conditioner a very difficult category to crack.

I think some of that is marketing as well to create more buzz and more awareness. But in reality, if you look at the numbers, those are all very, very small, minuscule proportion. The real size and money is in mobile and related products because it's a very high ticket item. But beyond that, smaller appliances, things like a trimmer or an iron, and those are things which I expect to...

definitely move to this channel and become an important part of this channel. But, you know, more packaged items is what will continue to grow according to us.

So as we heard, India's quick commerce market is in a race to deliver faster and faster. But it's clear there still needs to be checks and balances for its workers, investors and consumers to get a fair deal. That's it for this edition of Business Daily with me, Divina Gupta in Delhi. Thank you for joining us on the BBC World Service. See you next time. Namaste.

Mmm, I love ravioli. Oh, tanta fame. Since when do you speak Italian? Since we partnered with SAP Concur. Their integrated travel and expense platform and breakthrough solutions with AI gave me time back to dive into our financial future. We expand into Europe in 2027, so I'm getting

I don't have kids. You don't say.