India’s rapidly growing quick commerce sector is on the cusp of another major shift, as more platforms shift from pure groceries to private labels of fresh fruits and vegetables.
Both Zepto and Swiggy are planning to develop fresh produce into an important private label category, on account of the higher margins it could achieve, while the categories would offer increased sourcing control and better price and quality determination for the two platforms.
Fresh Produce – The Next Private Label Offering for Quick Commerce
Private label is already a major phenomenon in India’s quick commerce space, covering categories like staples, packaged foods, household consumables etc. The category constitutes of roughly 6-8% of the total business in India, depending on category-wise contribution, as per financial express industry estimations.
Fresh Produce category comes as the next logical leap for these businesses. Fresh produce would allow these entities to offer fresh, healthy products while ensuring higher margins on the category; and this also grants the entities control on sourcing of produce quality, price and other factors of fresh fruits and vegetables.
While fruits and vegetables have relatively high frequency purchase, and the gross profit on them are higher than compared to packaged goods, the fresh produces pose substantial operational complexities over the packaged goods-due to their inherently low shelf-life, and variability in quality, sources and supply.
Reasons Zepto and Swiggy are venturing into Fresh Produce for Private Labels
Beyond the aspect of widening customer offering, such private labels are anticipated to help quick commerce entities to control the entire journey of a customer. Such branded items are expected to offer not just better quality standards but better margins and improved customer retention along the value chain.
Zepto has previously experimented its private label approach beyond staples, with it launching new private labels into new categories, Swiggy has too ventured into having its own labeled products. With quick commerce companies keenly eyeing for differentiation, fruits and vegetables now stand out as a highly desirable category for developing such brand power.
Fresh fruits and vegetable is next key battlefield
India is home to a fast-paced quick-commerce ecosystem powered initially by ultra-fast deliveries at quick commerce’s doorsteps, but with rising number of companies vying for customer loyalty and higher values from average shopping cart, an aggressive competition would play over prices, quality and average basket value. While fresh produce would prove to be a highly probable solution. Fruit and vegetable are bought frequently from our kitchens, but it is quite challenging to have an operationally controlled supply of them.
Unlike packaged foods that could be stored for quite long, fresh produce requires an efficient process for acquiring from growers or wholesale market, stringent checks, appropriate storage facilities, and a smooth, fast supply chain mechanism towards customers.
The industry trend highlights it too; with amazon also directly trying to sources farms for its own quick commerce venture.
Bigbasket built the strength of fresh and private label, even before the race began
Bigbasket stands as an example here. The online grocery player which got acquired by Tata digitally announced that both its fresh produce and private label businesses form a majority share, which is beyond one third of its entire business. The company possesses a number of private brands in grocery as well as fresh food category that are sourced directly through sophisticated supply chains that are capable of direct-farm sourcing, proving that being in a position of control over supply-chain can be a winning strategy.
The challenge – the fresh component in fresh produce delivery:
The main challenge these organizations face today: standardisation of fresh produce, which is naturally different from packaged products. While customers have the expectation of having the exact product each time they purchase packaged food, the variety in the produce and the factors affecting it (including the timing of the harvest, climatic conditions, its transit etc.) are far too diverse. Quality control thus becomes paramount. Hence we see a move toward direct farming contracts with the farmers for sourcing, collecting points for sourcing across regions, robust logistics and quality control systems being set up, and a shorter supply chain that will eventually give it the much-required fresh feature for the produce delivered.
What’s in the store for the customers:
In the longer run, the entry of private brands might mean an increased number of options that customers get while making fresh produce purchases on the quick-commerce platforms, enhanced quality control by their trusted brand and potentially better pricing for an improved service. All that said will stand as the actual measure of victory for these entities will be their capability of actually meeting fresh standards at scale.
The original 10-minute rule for groceries may shift to better controlled and higher quality products being delivered to your door-steps.
The way to 10-minutes was the beginning for quick commerce. Its next decade will be driven by better efficiency for higher margins, sourced through effective private-label approach towards high frequency goods that the customers are already demanding, a better supply chain and most importantly, improved product quality of all that a customer orders on their chosen quick-commerce platforms.
Conclusion:
quick commerce sector in india might just have realized that delivering quickly could also require more than 10 minutes to achieve if that meant offering customers better sourced, more controlled quality produce at enhanced values. Zepto, Swiggy, Amazon, bigbasket are a few names of a long list who are strategically investing in such private-label based fresh categories that will dictate the market dynamics of quick commerce over the next few years. The game is now changing beyond the speed of delivery, to the very quality of the products being delivered.
