How are they achieving this?
These quick deliveries run on the concepts of the dark-store model. Dark stores are simply a godown or a micro-warehouse that contains all the products. These dark stores are located around 4 kilometers from the location of the consumers and maintain the inventory in such a way that it assists in the fastest delivery possible. These dark stores usually have an area of 2000 to 2500 square feet. Video Courtesy: Dhandha FoundersBut is the dark store model profitable? Well, today, these companies are losing thousands of crores every quarter. But they intend to be profitable by increasing the number of orders and the average value. Despite all of this, there are a number of challenges that this industry is facing.The desired gross margin for the company to become profitable is 20%. This margin is too idealistic, as even Walmart has a gross margin of 16%. The high delivery charges these companies incur might even take away all their gross margins due to inequities in the delivery. The number of orders per day should be 600. This is a very large number. Also, the average cost per order should be around Rs 500. But the customer uses quick commerce for unplanned shopping, which is usually low-cost.This business is a challenge in itself because their competitors’ other quick businesses are the local retail grocery shops. In India, the average distance between a grocery store and a house is 1 km, so if the delivery time increases from 30 minutes or the products are not of fresh quality, The customer will instead prefer the local grocery store again. What do you think will become profitable or be absorbed by the sharks? Comment below
