Mumbai/Bengaluru: The rapid expansion of quick commerce companies into consumer households across the country is bringing with it not just sales revenues, but also the emergence of advertising as a feasible source of steady, growing income.
Attracted by the lure of the fast-delivery companies' increasing penetration, consumer goods companies across major categories such as food, beauty, bags, petcare, confectionery, among others, are beginning to ride this gravy train to reach their target audiences.
Thanks to advertisements by companies in these industries, quick commerce platforms like Zepto and Blinkit (owned by Zomato) and Swiggy Instamart have seen a surge in advertising volumes and revenue.
According to Karan Taurani, senior VP at Elara Capital, FMCG companies could be spending, broadly, anywhere between ₹700 crore and ₹800 crore in ads on quick commerce platforms, making this an important income stream for the platforms as they move into newer categories like electronics.
“There is a strong potential for quick commerce companies to grow their ad revenue by over 50-60% and also outperform overall e-commerce ad revenue growth rates,” Taurani said.
Last week, Zepto said it expects advertising revenue to touch ₹1,000 crore in the next 12 months. The figure has already hit ₹400 crore in May 2024.
“The advertising business is scaling rapidly and is growing at the rate of 150% year-on-year, driving up margins steadily," Zepto co-founder and chief executive officer Aadit Palicha had said in an interview with Mint last week.
Then, Blinkit's ad revenue grew 220% year-on-year in the third quarter of the previous fiscal, according to the company's earnings release. It said companies advertise with the intent of building visibility for their products for a highly engaged and fast-growing customer base with spending power.
“The quick-commerce advertising opportunity is turning out to be promising so far,” Albinder Dhindsa, CEO of Blinkit, said in Zomato's shareholders letter in Q3 FY24. The number of advertisers on the platform grew to 557 from 242 during the quarter.
Blinkit declined to comment on its advertising business when contacted.
A spokesperson of Swiggy, which operates the Instamart quick commerce platform, said that over the past six months, there has been a consistent month-on-month increase in the number of brands partnering with the platform to enhance consumer engagement, increase visibility, and drive growth.
“Swiggy's in-depth understanding of users, gained from its extensive presence in food delivery, further strengthens its ability to support brands effectively,” the spokesperson said. “Different brands utilize quick commerce platforms according to their unique needs. For instance, established market leaders may focus on increasing category penetration through targeted promotions, while newer brands can drive trials among a select group of potential customers.”
“This approach enhances transparency, flexibility, and visibility among the target audience, ultimately leading to improved ROI,”the spokesperson added.
Typically, consumer goods companies promote new products or push offers at large retailers as well as online platforms. They advertise on e-commerce platforms in the form of banner ads and run promotions or offer discounts across platforms like Amazon, Flipkart, Big Basket, Nykaa or Zepto.
While it is not a flood yet, consumer goods companies are beginning to get a feel of the new advertising opportunity. Companies across consumer categories are setting aside a part of their digital ad budgets for these quick commerce platforms.
For packaged foods company Parle Products, e-commerce (excluding quick commerce) contributes 4.5-5% of the company’s sales. The company has been investing in quick commerce in line with the sales growth on such platforms.
“Quick commerce is shaping up quite well for us. From less than 1% of our business two years ago, it is now contributing to close to 2% of our overall sales. Because revenues are going up, our spends and investments are also improving,” said Krishnarao Buddha, senior category head at Parle Products.
Salil Murthy, managing director, Mars Petcare India, another big advertising category in quick commerce, said, “Quick commerce now constitutes a significant share of Mars Petcare India's overall e-commerce sales, reflecting the growing consumer preference for fast delivery. We are seeing an uptick in demand from q-commerce platforms, with investments yielding a strong ROI and significantly impacting sales and consumer engagement.”
Beauty products company Plum said its marketing expenses across e-commerce platforms, including quick commerce, are proportional to the size of the channels. The company gets 20% of its e-commerce sales via quick commerce.
“The overall economics with regard to how much we invest on any platform is pretty much the same. Since the primary motivation for shopping on quick commerce is not price, discounts are lower, so whatever money is saved on discounting tends to be ploughed back into marketing on the platform,” said Shankar Prasad, founder and CEO of Plum.
Accessories company Baggit spends 8-10% of its sales towards advertising on e-commerce on business-as-usual days, and 12-13% during the festive season and other sales. It will "wait and watch" before allocating significant budgets to quick-commerce platforms.
“Consumer brands tend to spend a lot more money on e-commerce platforms since they host a range of brands and it's important to stand out,” said Nina Lekhi, founder and MD of Baggit.
"For quick commerce, we will wait to see how demand picks up. When the competition in the category picks up and we see these platforms becoming lucrative channels, we will decide the marketing budget."
Nikhil Rao, chief marketing officer of Mars Wrigley India, said the company actively invests in the growing e-commerce channel, especially in paid search and on banner advertising.
“This helps drive shopper conversion as well as brand building when done well. We are also looking at unconventional ways of driving search via organic and other marketing activations like sampling and bespoke activation with our partners,” Rao said.
“While we anticipate continued investment on e-commerce platforms to meet the sustained momentum in online shopping trends, we are careful to not overspend and make it unsustainable for us.”
Quick commerce platforms are gaining scale, at least in India’s top cities. India’s quick-commerce market grew 77% in 2023 to $2.8 billion in gross merchandise value, accounting for 5% of India’s overall e-commerce market, according to consulting firm Redseer.
GMV, a key metric in e-commerce, tracks the total value of all goods sold on a platform, excluding discounts and other expenses.
