The overall IPL ad spend from the sector could be in the range of INR 700-750 Cr
Dunzo claims to have seen a 2x growth in daily user activations since the beginning of this IPL season
The profit window for these quick commerce startups is limited, the viability of the model relies on the efficiency of supply chain
The ongoing Indian Premier League (IPL) has intensified the battle of gaining maximum visibility-a factor that brands/startups swear by. Add to that, the Tata IPL 2022 has 29 startups as its sponsors and here quick commerce as a segment has contributed an impressive 20-25% of all IPL ad spend; which could be in the range of INR 700-750 Cr. How’s that!
Due to its colossal viewership record, huge reach, the cricket tournament has always been an attractive platform for advertisers, especially for new-age brands. For IPL 2022, the year is also special as this year audiences can enjoy the tournament in stadiums after a break of years.
It is no wonder that even before the second leg of IPL 2021 ended, the tournament garnered 380 Mn viewers until match 35.
Coming back to the participation from different segments, of all the categories, quick commerce has emerged as a prominent one to have its presence on the IPL map. As revealed by advertising and media industry experts, the segment is contributing 20-25% to overall IPL ad spend.
The ecommerce segment in India has seen rapid growth in the last few years, fast-tracked by the pandemic. While the convenience of one-two day delivery has charmed consumers for some years, a new emerging vertical of ecommerce is now trying to delight them with the promise of a faster world.
The Coming Of Quick Commerce
When consumers’ buying habits found a new momentum with the advent of pandemic-induced lockdown, quick commerce or q-commerce looked like the new kid on the block. At that time many consumers placed their first orders online and hence the coming of quick commerce just made the ecommerce growth saga stronger.
After Bengaluru-headquarterd Dunzo brought the new concept of hyperlocal quick commerce in 2015, the industry which started with the pick-up drop service has come a long way. Indian urban consumers have been gradually introduced to convenience shopping, in terms of groceries, now even food. Valued at $700 Mn currently, the quick commerce industry has become the talk of the e-town.
New Players, More Money
From existing food delivery apps to cab-aggregators, deep-pocket ecommerce players, to pure-play quick commerce platforms, the segment has seen a number of new players entering the segment in the last few months. Moreover, investors have also pumped in money into the sector.
While online food delivery platform Swiggy earmarked $700 Mn for its Swiggy Instamart, its archrival Zoamto set aside $400 Mn to invest in quick commerce. And then, there are startups like Dunzo that raised $240 Mn in funding, Mumbai-based Zepto secured $100 Mn in its Series C round.
The list does not end here as BigBasket is testing the waters with BB Now and Ola is also aggressively pushing its quick delivery vertical, Ola Dash.
The Game Of Convenience
It is not a tough riddle to be solved to answer why these players are making a foray into quick commerce with new zest. As Lloyd Mathias, investor, and strategist, puts it, the convenience and speed of this service are likely to draw customers to this format. According to Mathias, the digitisation of daily purchase behavior is also here to stay.
“We have witnessed a drastic rise in online shoppers, as consumers are willing to experiment and pay a premium for convenience. Also, this is a means for new startups to differentiate themselves. The anxious consumer today is demanding rapid deliveries, thus q-commerce is gaining clout,” Harsha Razdan, national leader- consumer markets, lifesciences and internet business, KPMG India, said.
Although the pandemic impacted the Indian economy, consumer spending, the country has been on the path of recovery since last year, largely after the deadly second wave of the pandemic tapered off. According to a McKinsey & Company survey report published in December 2021, nearly three-quarters of Indian consumers were optimistic about an economic recovery.
Intrusively, 93% consumers reported trying new shopping behaviours. Consumer spending across India amounted to over INR 23 Tn by the end of January 2022, surpassing the INR 21 Tn spending in January 2020, as per a Statistia report.
Gunning For Customer Acquisition During IPL Season
As the IPL has always been one of the biggest platforms for startups or new categories to promote their products or services, quick commerce platforms are also following the same route. For instance, BCCI has announced Swiggy Instamart as official partner for IPL 2022.
The food-delivery platform launched four television commercials earlier this month as part of its brand new campaign for this TATA Indian Premier League (IPL) 2022.
“This IPL season, we aim to highlight how Swiggy, with both Instamart and food delivery, will make the match-viewing ritual for fans who are watching with family, friends or just by themselves more enjoyable. The ads bring alive the convenience users turn to Swiggy for, while also underlining the brand’s benefits in a likable and engaging manner,” Ashish Lingamneni, head of brand, Swiggy, said at the time of campaign launch.
According to Rammohan Sundaram, country head and managing partner, Integrated Media, DDB Mudra Group, players in all categories whether it is fintech, insuretech, quickcommerce, ecommerce or gaming, everyone advertising in the IPL are looking for new customer acquisition.
The startups in the quick commerce space are contributing 20-25% of the overall IPL ad spends, which could be in the range of INR 700-750 Cr, as shared by Sundaram.
“While the spend might increase by about 7-10% in the next IPL season, the category will plateau out in the next two years on advertising spends because by then there will be some blood bath to the model,” he noted.
The quick commerce setup that is known for its quirky campaigns, Dunzo, released ‘Fridge No More’ on social media and outdoor on the first day of IPL. The campaign videos launched in both Tamil and Hindi have garnered more than 2 Mn views on YouTube, Kabeer Biswas, cofounder and CEO, Dunzo, said.
“We hope to ride on this momentum as we launch Dunzo Daily in Mumbai, Delhi, Hyderabad, Gurugram, and Noida, all within the first half of April. Phase 2 of the marketing campaign will be rolled out in the coming weeks as well,” Biswas said.
Dunzo has seen a 2x growth in daily user activations since the beginning of this IPL season, Biswas noted. Sales of certain categories such as cold beverages including soft drinks, juices and dairy-based drinks like milkshakes have surged more than 100% since the tournament started.
He also added that beverages, snacks, chocolates and desserts are contributing to a bulk of the orders placed during match hours.
Not An Easy Game To Win
Despite having a total addressable market of $45 Bn in India, there have been questions about the sustainability of the quick commerce model. The model is typically built on setting up small format dark stores/fulfilment centres to facilitate rapid delivery and is capex driven, KPMG India’s Razdan noted. By owning inventory, these players also have greater visibility of product quality, inventory supply and pricing, he added.
“However, the profit window for these q-commerce companies is limited, as not all online shoppers would like to pay a premium for deliveries. Further, since q-commerce players also need to invest in procuring their own inventory, scaling up can pose a challenge, unlike a delivery platform, which is asset-light,” Razdan stated.
DDB Mudra Group’s Sundaram is also of the view that the model is not viable unless the players have their supply chain stitched out extremely well. The model in itself will not be sustainable in the long run except for two or three players who would have mastered the art of supply chain, he opined.
Among the operational challenges, higher-order volumes can be a stress-test for the internal systems, Dunzo’s Biswas acknowledged. “We have been planning very rigorously for the past few weeks to ensure that we show a highly relevant range of daily consumption items to consumers, that those items are carried through a state of the art supply chain to maintain the highest quality standards and that we work with our delivery partners to ensure that the orders reach the consumers within the promised delivery times,” Biswas commented.
No doubt, IPL will be a big booster for the quick commerce sector but the competition will only keep going up for the players. From Tata backed BigBasket to Reliance Retail backed Dunzo, to VC-backed startups, the q-commerce segment will see a huge inflow of money, they will spend more money on marketing. Time will only speak of how many of them will sustain in the battle.
