Quick commerce D2C: D2C companies cough up 30-45% cut for a spot on quick-commerce sites

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As the demand for space on quick-commerce platforms skyrockets, niche direct-to-commerce (D2C) firms in segments like fast moving consumer goods, beauty and personal care, and health and fitness are agreeing to pay a 30-45% commission on sales, besides shelling out on advertising and discounting on the apps.

This is in stark contrast to the 10-20% commission that large, more established, FMCG companies pay quick-commerce companies like Blinkit, Zepto and Swiggy Instamart, reflecting the intense competition for visibility on these platforms.

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The listing process itself is months long for most small brands and often results in failures, while personal referrals are becoming increasingly essential to break through the crowd, more than half a dozen D2C startup founders across segments told ET. They acknowledged the rush to get listed on these platforms due to the traffic they were driving, leading to the discovery of new brands.

These people requested anonymity as they are in commercial agreements with the platforms. Blinkit, Zepto and Swiggy Instamart did not reply to requests for comment.

Also read | On ‘quick’ path to profitability: Challenges for quick commerce companies

A brand’s scale and comparison with competitors are crucial considerations when it comes to new listings, senior executives at quick-commerce firms told ET. “Even for legacy brands, terms are revised semi-annually or yearly,” said one of the executives. “Factors such as what people are searching for, sales on other platforms, buzz around the brand, and the depth of that category on the platform are also important when evaluating a new brand. Brands are important stakeholders and if at any point, there’s anything happening that is not a win-win for both, they will stop selling on the platform,” this executive said.

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On top of the commissions, brands are also regularly spending around 20% of their total sales on ads on the platforms, and discounting their products by about 20-25%. “We get emails and calls every week (from the category and account managers at the platforms) pushing us to advertise more — sometimes it’s for a festival, sometimes it’s for a major IPL match,” one of the brand founders said.While an entrepreneur in the beauty and personal care segment said they agreed to a 45% commission on Blinkit, another in the FMCG segment said he reluctantly accepted a 30% commission on Zepto, besides spending another 27% on marketing and discounts.

“Diwali came and went. The cost of not being listed was higher, so we agreed to their terms,” the second entrepreneur said. Although the total cost of selling on ecommerce platforms comes out to be 5-8 percentage points lower, the volume of sales on quick commerce reached 70% of the firm’s total sales within a year, compared to less than 10% contributed by major ecommerce platforms over four years, this person added.

Major challenges for brands_Apr 2024_Graphic_ETTECHETtech

Also read | Zepto in talks for $300 million raise at $2.5-3 billion valuation

Shooting in the dark

“It took us 53 weeks to get listed on Blinkit, and every single week we sent them an email about it,” a D2C founder in the FMCG space told ET.

It is, however, not all brute force. Quick-commerce firms, as they expand into new categories, are heavily relying on search metadata to spot demand for certain brands and products, people aware of the matter said. This is similar to category expansion on ecommerce over half a decade ago.

Once listed, the fight shifts to staying on.

“There are demands around discounting and ad spends, and if your product does not do well, the fear of replacement looms,” the founder cited above said.

This uncertainty is exacerbated by the nature of the business — such D2C brands often have short notice periods on their contracts and sell to the platforms based on weekly or bi-weekly purchase orders. Dark-store space is precious and constantly being experimented with, increasing the pressure to perform.

Moreover, brands often don’t have access to data. While both Instamart and Blinkit have seller dashboards, they don’t provide much information around which products sell the best and in which geography, multiple founders said.

Demand sets terms

Still, D2C firms listed on quick-commerce platforms say they have seen oversized benefits in very short amounts of time, and that their success is also leading to increasing reliance on these platforms.

While one brand in the beauty and personal care segment has seen sales grow threefold month-on-month after listing on Zepto, another in the FMCG space grew sales over fourfold across platforms in 2023. A third FMCG brand also posted fourfold growth between listing itself in December 2023 and now on Swiggy Instamart.

This surge in sales is changing the very nature of the firms, their founders said. The second firm mentioned above now gets over 60% of its sales come from quick commerce. For the third firm, more than 70% of sales for the SKUs listed on quick commerce come from these platforms and this segment is expected to become the largest contributor to its total sales in a few months.

ET reported on April 12 on how non-grocery categories were seeing three- to four-fold sales growth on quick-commerce platforms.

Rise of non grocery products on quick commerce Apr 2024 Graphic ETTECHETtech

Founders said the payment settlement process is also smoother on these platforms.

“They changed the game for us and our earnings improve gradually as volumes grow even with the high spends on commissions and ads … but it is still an incredible amount of power where they can increasingly make or break entire businesses,” one of the founders said.

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