Flipkart Minutes To Zepto: Shorter Delivery, Aggressive Pricing Raise Stake As Grocery Stores Lag

The quick commerce market in India is witnessing an aggressive transformation, redefining value and convenience for consumers. Once considered a niche, quick commerce has now emerged as a competitive force in the grocery value chain. The latest entrant, Flipkart Minutes, has intensified competition, surpassing DMart Ready in price competitiveness for the first time, as per an analysis by Jefferies.

Flipkart Minutes has adopted an aggressive pricing strategy, offering a steep 22% average discount on MRP. For orders exceeding Rs 999, consumers can avail an additional 10% discount, making it the most value-driven platform. This is particularly evident in beverages, where FKM leads with a 20% discount, and staples and packaged foods, where it ranks among the top contenders.

Zepto has also upped the ante with its new 'Super Saver' feature, aimed at encouraging higher average order values. This initiative positions Zepto as the second most affordable platform after FKM for orders exceeding Rs 799, surpassing even DMart Ready, a traditional price leader.

Jefferies highlights that personal care products see the highest discounts at 26%, followed by staples (19%) and packaged foods (10%). Interestingly, dairy discounts have increased significantly, compared to previous surveys, while fresh fruits and vegetables remain excluded from comparison due to variability in quality.

Quick commerce platforms are increasingly diversifying their offerings. Blinkit, Zepto, and FKM now feature a broader range of SKUs, with some markets exceeding 20,000 items. These platforms are also venturing into non-grocery categories, such as electronics and mobile phones, further encroaching on mainstream e-commerce territory.

The aggressive discounting and promotional tactics could force existing quick commerce players to respond, potentially impacting profitability across the sector. Traditional retailers, including modern trade and mom-and-pop stores, may also feel the heat, especially in urban areas where online grocery shopping is gaining momentum. DMart’s recent statement acknowledged that e-grocery formats are beginning to dent its urban market share.

According to SensorTower data, monthly active users for quick commerce platforms continue to rise sharply, outpacing slotted delivery services. While Zepto leads in app downloads, it has experienced a decline in monthly metrics. JioMart and BigBasket, meanwhile, are witnessing a dip in user traction, signalling shifting consumer preferences.

Avenue Supermarts Ltd.

Jefferies' price target for DMart operator Avenue Supermarts is set at Rs 4,400, based on a Sum-of-the-Parts valuation. The standalone business is assigned a 65 times two-year forward EPS, while the DMart Ready segment is valued at 6 times Price-to-Sales (P/S). These valuations align with the company's historical trends, excluding the Covid-19 period.

Key downside risks include slower-than-expected store additions and a de-rating of valuation multiples, while accelerated store expansions and a strong recovery in the non-FMCG segment present upside risks.

Zomato Ltd.

Zomato's valuation is similarly derived using an SoTP approach. The food delivery business is valued at 50 times two-year forward Ebitda, while the quick commerce segment is assigned a 12 times two-year forward sales multiple, leading to a price target of Rs 335. Potential risks to this target include heightened competition, slower-than-anticipated market growth, and unfavourable regulatory developments.