In-depth: Just how quick is the rise of quick commerce advertising in India?

If you have used a quick-commerce or food-delivery app recently, you might have noticed something like a can of beverage mixer or a pack of cookies replacing the delivery partner's icon on the order tracking page.

Advertising is becoming increasingly crucial for platforms such as Zomato, Swiggy, Blinkit and Zepto to increase their total revenue, revealed industry leaders, in a conversation with BestMediaInfo.com, while adding that the variety of brands advertising on these platforms is also growing.

In February, Blinkit, a quick-commerce platform owned by Zomato, announced a more than threefold increase in its advertising revenue for the December quarter compared to the same period last year. This demonstrates the rapid growth of commerce advertising and its promising future potential.

Moreover, Valentine's week began with Blinkit setting new records in rose and chocolate sales this year. The company reported higher sales of roses and chocolates on Rose Day and Chocolate Day compared to last year. Not just Blinkit, but also platforms such as Zepto and Swiggy experienced a significant increase in sales on Valentine's Day.

Therefore, on such occasions, brands have a great chance to utilise advertising opportunities on quick commerce platforms.

Understanding the potential and future trajectory of quick commerce advertising in India

As per reports, food-delivery companies make about 10-12% of their revenues from advertising. Additionally, both food-delivery and quick-commerce companies find advertising to be the most profitable, with margins typically ranging between 90% and 95%.

Shashank Rathore

According to Shashank Rathore, Vice President, E-commerce, Interactive Avenues (the digital arm of IPG Mediabrands India), the current market size of quick commerce is valued at $700 million and is anticipated to experience a remarkable increase, reaching nearly $5.5 billion by 2025, according to a recent report by Redseer.

“Given that food and daily essentials constitute around one-third of India's annual retail expenditure of $1 trillion, the potential is substantial. Consequently, it holds the potential to become the most favoured platform for advertisers due to access to a transacting audience with in-market buying mindset, an evolving advertising platform with a unique audience cohort based on behavioural data, a clean mobile-first UI/UX, facilitating brand visibility and hyperlocal targeting which allows even smaller advertiser focus specific territory based on availability, acceptance and competition,” Rathore added.

"Also, as an ecommerce agency we are noticing much better ad spend efficiencies on platforms like Zepto, Blinkit and Swiggy," he added.

Aditya Mehendale

Aditya Mehendale, National Creative Director, Schbang, said that quick commerce has emerged as a phenomenal narrative in recent times, characterised by its disruptive nature and emphasis on time as the new currency.

“Competitors in the quick commerce space are engaged in a fierce battle within an incredibly narrow time window of eight to 18 minutes, revolutionising the traditional approach to consumer behaviour in various subcategories of commerce,” Mehendale said.

“Currently, the quick commerce sector is witnessing remarkable success in categories such as cooking essentials, home care, personal care, fresh produce, breakfast supplies, and snacks, encompassing fast-moving consumer goods and beverages,” he added.

Furthermore, he highlighted that what's intriguing is the shift in consumer purchasing habits. Previously, purchases were typically scheduled, often aligned with monthly or paycheck cycles, whether through brick-and-mortar stores or online platforms like BigBasket or Amazon Fresh.

“Quick commerce disrupts this paradigm by focusing on impulse purchases, traditionally associated with categories like snacks and beverages. However, even products that were once considered planned purchases, such as personal care items and cooking essentials, are now being bought on impulse, driven by last-minute needs,” Mehendale said.

Shradha Agarwal

Similarly, Shradha Agarwal, founder and CEO - Grapes, underscored that some of the major players in India's quick commerce industry- Swiggy, Instamart, Zepto, Blinkit, and Dunzo - collectively make up nearly 80% of the entire market share. Moreover, around 20-30 million people in India are into shopping from quick commerce. A good number of user base to capitalise on.

“This tells us that more and more people are changing the way they buy everyday things. Instead of going to a store, they're turning to their phones for quick and convenient shopping. It's like having a grocery store right in their hands,” she added.

Shantanu Bhattacharyya

Shantanu Bhattacharyya, Senior VP - Digital Strategy Planning and Client Success, LS Digital, underscored that India's quick commerce market is on a fast track, projected to reach $5.5 billion by 2025 .

"Currently, Zomato has a monthly transacting user base of 3.9 million. This presents a massive potential for advertising within this space. Q-commerce is expected to grab a significant chunk of the online grocery market, rising from 10% to a potential 40-50% in the coming years . This translates to a larger advertising pie for q-commerce platforms," he added.

Furthermore, he mentioned, "Currently ad revenue contributes to 10-12% of the total revenue of quick commerce platforms and for Zomato and Swiggy advertisement revenues are close to 3-3.5% of their GMV. Swiggy is currently at an annualised run rate of Rs 1,000 crore in advertising revenue, and is likely to bump that target up to Rs 2,000 crore next year, an executive stated that we can expect similar figures for Zomato."

Ankit Banga

According to Ankit Banga, CBO, FCB/SIX, the return on advertising spend (ROAS) on quick commerce platforms is typically higher (2X) due to their lower scale. As these platforms become more adaptable over time, advertising on quick commerce will become increasingly lucrative.

“Apart from FMCG, the BFSI sector also stands to benefit significantly, with co-branded cards offering higher savings on online shopping, as demonstrated by partnerships like Swiggy and HDFC,” Banga said.

Furthermore, he mentioned that while advertising on quick commerce platforms is yet to see a massive surge, both users and platforms are evolving, presenting opportunities for brands to leverage the current setup. Additionally, data modelling and AI play a crucial role in enhancing advertising effectiveness on these platforms.

“Strategic product recommendations based on purchase behaviour data can lead to increased cart value, similar to models seen in offline supermarkets. With ample data available, quick commerce platforms can develop predictive models to make advertising even more lucrative for brands in the future,” Banga added.

Karan Taurani

Karan Taurani, SVP- Research Analyst (Media, Consumer Discretionary and Internet), Elara Capital, said that quick commerce’s Gross Merchandise Value (GMV) growth is expected to sustain at more than 50% for Zepto, Swiggy Instamart, and Blinkit in the near to medium term.

“The risks include: Increased competition from larger giants (Flipkart may foray into quick commerce) that can drive more discounts and spoil unit economics and growing acceptance and expansion of the business model into non-metro cities,” Taurani said.

“Quick commerce companies will continue to experiment via: Loyalty program pass, and additional product categories. Further, ad revenue would continue to be a big lever driving profitability, as larger e-commerce firms, such as Amazon and Flipkart, reported ad revenue of Rs 33 billion and Rs 54 billion in India in FY23, respectively. Better user experience coupled with product assortment and relationship with brands will be key differentiators,” he added.

Rathore pointed out that given the limited number of serviceable pincodes, the current scale of quick commerce cannot be compared to that of large mass e-tailers like Amazon and Flipkart.

“However, F&B, FMCG and grocery brands operating in the mid-premium and premium categories are achieving significantly better scale, with some even experiencing a 50%-60% contribution to e-commerce from quick commerce. Overall, the efficiency of advertising spending is higher but mass brands are only seeing a 20%-25% revenue contribution from quick commerce,” Rathore said.

“Nonetheless, quick commerce will unlikely replace mass retailers due to the fact that first-time transacting or new-to-commerce audiences, which are crucial for growth, will continue to be accessed through mass e-tailers to bolster acquisition strategies, while order frequency will be impacted by quick commerce,” he added.

Furthermore, he explained that in the realm of quick commerce, the top categories garnering the most traction include F&B, FMCG, personal care and beauty, dairy and vegetables and home and kitchen. However, in terms of advertising, FMCG and F&B lead the pack.

“Interestingly, quick commerce is also venturing into unconventional categories such as electronics, mobile, and large appliances. If all goes according to plan, we can anticipate a significant shift in advertising contribution, given that these categories boast higher average selling prices (ASPs), prompting advertisers to adopt a slightly more aggressive stance,” he stated.

“We expect to allocate 15%-20% of our advertising budget to quick commerce platforms compared to the total spending on e-commerce advertising this year,” Rathore added.

Challenges associated with advertising within the quick-commerce ecosystem

Banga believes that quick commerce advertising undoubtedly holds immense potential in India. However, like any marketing medium, it presents its own set of opportunities and challenges.

“Firstly, there is the issue of scale. While platforms like Swiggy, Instamart, Zepto and Blinkit are gaining popularity not only in metros but also in tier 1 and tier 2 cities, they still have a long way to go. Currently, there are approximately 18-22 million regular customers ordering from these services, reaching around 14-15 million audiences in a given month. Despite this limitation, brands have the advantage of targeting specific audiences demonstrating the behaviour of purchasing daily essentials online,” Banga said.

He highlighted that the majority of orders in quick commerce revolve around food products, daily essentials, monthly rations and dairy, indicating that FMCG is the sector that stands to benefit the most from advertising on these platforms.

“However, the challenge lies in the platforms' inability to offer the scale required by FMCG brands. At FCB SIX/INDIA, we encountered this challenge firsthand when advertising for a leading body spray brand. Limited inventory capacity and delivery constraints posed significant obstacles to achieving scale compared to platforms like Amazon and Flipkart,” Banga said.

Meanwhile, Rathore said, “One significant challenge we have encountered is ensuring consistent product availability, which can sometimes disrupt campaign continuity. Another obstacle we face is related to data. As advertisers, we require comprehensive campaign reports from any biddable platform to grasp audience behaviour effectively. This insight enables us to plan better campaigns and optimise future strategies.”

“However, the current level of data granularity falls short when compared to the solutions offered by Amazon or Flipkart. Assessing whether quick-commerce platforms in sectors like food and beverage, grocery, and personal care are poised to rival the effectiveness of established e-commerce giants like Amazon and Flipkart,” he added.

Role of AI algorithms in optimising ad placements and predicting consumer behaviour

Rathore said that quick commerce operations are extensively supported by AI internally to handle the vast and intricate distribution network, ensuring deliveries within 10-15 minutes.

“However, for advertisers, it's premature to fully leverage AI. Any AI modelling necessitates a substantial amount of granular data, demanding a tech infrastructure where platforms can ingest data through APIs. Currently, this access is not available to advertisers,” he added.

Mehendale emphasised that while quick commerce platforms currently rely on media opportunities like banners and in-app promotions for brand communication, the potential for leveraging AI to optimise ad placements is immense.

By understanding consumer needs, purchase patterns and timing, AI algorithms can facilitate highly targeted and effective advertising, leading to increased conversions and growth opportunities for brands.

“In essence, quick commerce presents a compelling narrative not only in terms of consumer behaviour but also in the realm of advertising and brand engagement. As the sector continues to evolve, it offers exciting prospects for brands to leverage AI-driven strategies and capitalise on the changing dynamics of consumer purchasing habits,” Mehendale stated.

What's in store for brands and advertisers?

Agarwal said that q-commerce is a platform for quick and spontaneous buying and this presents an awesome spot for new brands to shine. People are more likely to try something new when they are in the mood for quick shopping. So, if a brand pops up on a Q-commerce platform, there is a good chance someone might just give it a go on the spot.

“For advertisers, it's a fantastic playground to showcase their brand and catch the eye of impulsive shoppers looking for their next favourite thing. Quick commerce platforms give brands a great return on investment (ROI), with returns three times the money they spend on advertising, proving to be a good deal for brands. Because of this, brands are now allocating 50% of their total advertising budget specifically to quick commerce platforms,” she added.

According to Redseer's latest report - 'Digital Advertising In India: Rise of challenger platforms in the digital advertising landscape', hyperlocal platforms in India are used by 85 million users who frequent them for quick grocery deliveries, restaurant suggestions, etc. Advertisements by brands on hyperlocal apps drive increased online conversions and encourage offline foot traffic. As they are strategically positioned within the purchase cycle of the customer, the advertisements by brands prompt direct conversions.

The high rate of conversion helps digital-first brands, breaking into the market. Advertising spend on hyperlocal platforms is projected to reach 240-260 million by FY24, the report stated.

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