India: digital innovation drives grocery retail

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A recent trip to Mumbai was an excellent opportunity to check in on the burgeoning Indian quick commerce market, through meetings with an independent dark store franchisee and visits to dark stores operated by both Swiggy and Zepto, the two main competitors to market leader Blinkit (Zomato). Dark stores are the logistics backbone of quick commerce – small, strategically located warehouses catering exclusively to online orders. Designed to enable ultra-fast deliveries – usually in under 10 minutes, often as quick as just three to four minutes – dark stores are typically within a two to three kilometre radius of key residential hubs, with optimised and localised inventory, ranging from fresh foods and hot coffees to consumer electronics, personal care and children's toys. When an order arrives, 'pickers' have as little as 90 seconds to collect items and hand them over to the waiting delivery driver. The progress of each order is tracked in real-time through handsets and QR codes, with the average times for store and individual pickers prominently displayed on monitor

Photos: Ewan Thompson

By necessity, the layout of the store is highly optimised for one-way traffic of fast-moving pickers (running, in fact) and the order frequency of individual items. With traffic snarled continually outside in the street, an army of pedal bikes and scooters weave between jammed cars to deliver their orders. Close central monitoring allows operators to respond rapidly to consumer trends and "not found" messages, with approximately 10% of store content localised. For example, several unfulfilled searches on Blinkit for goggles at an apartment complex with a newly opened swimming pool led to stock availability within 24 hours. And, of course, inventory is carefully calibrated ahead of upcoming events such as Valentine’s Day or religious festivals.

Given the huge growth in demand, the major quick commerce players are currently in a phase of rapid store roll-out. Typically, operators set up an initial dark store for an area, and once it hits 1,500 orders per day, it will be 'split' by opening another nearby to service the area. Stores generally break even within three to nine months at roughly 1,000 orders per day. Blinkit – Zomato's quick commerce arm – is currently at the forefront of this rapid expansion, adding 216 stores in the last quarter of 2024, more than it added in the year to March 2024. Furthermore, it lifted its store-count guidance to hit 2,000 by December 2025 compared with December 2026 previously – essentially front-loading its expansion plans. With Swiggy listing in November last year, and Zepto planning an IPO for August this year, the key debate in the market in recent months has centred on the issue of competition and whether such strong store additions from multiple players can be sustained.

Zooming out to the big picture, India's local small vendor network – known as Kiranas – control up to 95% of the grocery market, with online quick commerce penetration merely 1%. The key to India's rapid growth potential is the fact that quick commerce operators can combine economies of scale with extremely low labour costs to supply products within a matter of minutes for less than they cost at local stores. Given India's extremely high internet penetration relative to its stage of economic development, this removes key barriers to rapid penetration growth. Comparable models in developed markets see labour costs at 25-50% of cart value – this is 15% in China and considerably lower still in India at less than 5%.

Indian quick commerce GOV sat at about $4 billion in March 2024 and estimates range from $50 to $80 billion by the end of the decade – a more than 10-fold increase that would still leave online penetration at around 3.5% of the grocery market. Moreover, geographical expansion and the addition of new categories – for example: basic apparel, electronics and food services – has seen TAM increase from $650 billion to over $1 trillion in just six months. Present in over 80 cities across India, quick commerce is expected to be present in 125 within 12 months.

Quick commerce gross order value by player (Rs. bn)


Source: CLSA, 27.01.25

Given the scale of this opportunity, competition is an inevitable reality – the dark store visits underlined that differentiation is hard and execution is the key. First-mover advantage is therefore significant for Zomato, Swiggy and Zepto, which supports their decision to accelerate expansion ahead of potential additional entrants such as Amazon and Flipkart. The government has made it clear it will not tolerate aggressive price discounting and burning through balance sheets to take market share, and what has been encouraging is relative price stability among new entrants, with most discounting guided towards customer acquisition in new geographies. Unlike for food delivery or ride hailing – where companies needed very high discounting for category creation purposes – in quick commerce, it is merely a shift in channel. The unit economics already undercut organised retail, and with the convenience factor on top driving rapid adoption, discounting is less aggressive.

Adjusted EBITDA margin trend (%)


Source: CLSA, 27.01.25. Past performance is not a guide to future returns

Zomato to Expand Blinkit into Smaller Cities, Aims for 2,000 Dark Stores by 2026In its December quarter results, Zomato showed GOV growth of 27% quarter-on-quarter (120% year-on-year) in its quick commerce segment Blinkit. While adding a significant number of new stores, importantly GOV per store remained flat, indicating that rapid growth at mature stores is offsetting under-utilised new stores. With customer retention improving and store break-even time extremely low (as little as three months), Blinkit has been able to add significant new customers without diluting AOV (average order value). The faster roll-out schedule has pushed back earnings break-even by a couple of quarters but, given the primacy of early-mover advantage – especially into new cities, which will be much more expensive to break into in coming years – this is an understandable move. In a rapidly growing market, Blinkit remains the clear leader with nearly 50% market share and aggressive plans to establish itself as the dominant player in an increasing number of new geographies and, as such, Zomato remains the best way to benefit from the ongoing rise of Indian quick commerce.

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