The recent performance of an Indian food delivery service illustrates the volatility and challenges within the quick commerce sector, as its stock has notably dipped below both its initial public offering (IPO) price and its last private valuation due to mounting losses and intense competition.
On Thursday, shares of the food delivery platform fell to as low as ₹374.80 ($4.29), marking a decrease below the $4.73 IPO price of ₹390, which resulted in a market capitalization drop to approximately $9.75 billion. Although there was a slight recovery to around the IPO price following the plunge, the downward trend was largely prompted by the company’s latest quarterly earnings report, which revealed a loss of market share in its quick commerce division.
Despite ongoing initiatives to enhance store expansion and increasing marketing investments, the company struggled to keep up with a rapidly growing field of competitors. This decline in market presence contrasts sharply with the previous momentum it experienced when it achieved the largest technology IPO in the world last year, along with a private valuation of $10.7 billion at the start of 2022. Additionally, the sharp decline in share price is particularly striking when compared to the company’s zenith of ₹617 in December.
In direct competition, a rival’s quick-commerce operation reported an impressive gross order value of ₹78 billion ($890 million) in the same period, which is nearly double the ₹39.1 billion ($446 million) reported by the beleaguered quick commerce unit. On an annualized basis, the unfortunate division’s gross order value of $1.8 billion lags significantly behind its competitors, which posted $3.7 billion and $3 billion, respectively.
Analysts anticipate that competition within the quick commerce industry will be fierce through mid-2025. Over the past quarter, the company added 96 dark stores, bringing its total to 705 across the country, yet it still fell behind a competitor that opened 216 new stores for a total of 1,007 locations. Another competitor has also quietly established a network of over 950 stores, according to a reliable source.
What complicates matters in the current landscape is the substantial financial resources available to leading players in the industry. All major quick-commerce services have considerable backing, allowing them to maintain prolonged marketing campaigns and high expansion costs without immediate pressure.
Despite this competitive disadvantage, the company’s cash reserves of ₹82 billion ($936 million) constitute less than half of a rival’s ₹190 billion ($2.2 billion). On a positive note, the struggling quick commerce unit successfully increased its average order value by 7% to ₹534 ($6.10) from the previous quarter. However, this increment does little to mitigate the challenges posed by its competitors, particularly one that secured $1.35 billion in funding last year and has still not utilized a significant portion of those resources, enhancing its competitive edge.
Prominent Keyword: Quick Commerce Challenges
