By Swastika Sahu
Quick commerce is growing swiftly, yet increasing cost pressures are impacting profitability. It is decreasing mainly because of a sharp rise in spending on advertisements on the platforms. Profit margins of major fast-moving consumer goods (FMCG) firms in rapid commerce have declined to levels similar to those seen in kirana shops and structured retail chains.
According to industry executives, they are compelled to invest extensively in advertising since consumers on these platforms make snap decisions, typically in less than a minute. By putting premium listings and time slots up for auction, platforms have been raising advertising fees. Brands are also spending more fees to appear in top search results, as advertising spends have increased, especially during peak shopping hours.
According to Angshu Mallick, executive deputy chairman of AWL Agri Business Ltd., the biggest edible oil marketer in the nation, “The cost of conducting business on rapid commerce has gone higher, whereby the profit margin has become virtually equivalent to the general trade.”
It will lose out on sales in categories like basics and necessities where there is price rivalry. Because customers take 30 to 40 seconds to make a decision, businesses must invest more to make their brands noticeable.
Rapid commerce has profited from premium sales, but kirana stores often offer superior profits due to scale, according to the news source.
Zydus Wellness Chief Executive Tarun Arora, claimed that as rapid commerce platforms concentrate on increasing their own profitability and engage in more aggressive brand negotiations, the advantage has diminished.
Industry leaders reported that profit margins have significantly declined in recent months. Advertising expenses in peak time slots, 7:30–9:30 am and 5:30–7:30 pm, have almost increased by 100%. In snacks, profit margins now hover around 13–15 percent, akin to contemporary trade. Certain high-end products generate profits of 20–22 percent, but even they have experienced pressure
Advertising is how quick commerce businesses make money.
The margins are now equivalent to modern trade due to the increased investment in rapid commerce, according to Mayank Shah, vice president of Parle Products, the top biscuit manufacturer in India. Quick commerce initially hurt general trade sales in India as customers chose the ease of rapid delivery over going to local kirana businesses.
Nonetheless, it has progressively supplanted purchases from contemporary retail stores and online grocery delivery services.