At Some Point, Customers Have to Pay For the High Cost of Quick Commerce: Flipkart's Dinkar Ayilavarapu

We are currently focused on consolidating our business and improving our economics. About 75-80% of this process is complete, and we aim to finish it within this year. Once that is done, we will shift our focus to growth, particularly network expansion. However, this is a medium-term plan, likely to take place beyond the next 24 months.

Expanding into new cities or opening new stores is a long process. It requires scouting locations, securing agreements with landlords, and other logistical steps that can take 18-20 months. Even if we start today, it would take about two years for the first store to open.

Right now, our priority is achieving financial stability. Like many businesses in this space, we have faced negative EBITDA, but over the past 24 months, we have worked on reducing losses and reaching breakeven. The goal is to finance growth from our own earnings rather than relying on external funding. We were profitable last year, partly driven by festive sales. The challenge now is to maintain consistent profitability, which remains our key focus.

The way we unlock growth is through assortment. We think we have what we need. Grocery is the largest category, and we are present in grocery. We will address all parts of grocery.

Our big focus area to drive growth is actually driving frequency among customers. And I think we are doing two things to drive frequency. The first is that we are going to invest massively in loyalty. We have, what I believe, is the largest B2B loyalty program in the country, with almost 90,000 members. That number is not precise, but it's in that range, making us twice as large as the next biggest player.

 I can't share exact numbers, but the loyalty program is our top priority, receiving a significant share of my investment.

Customers purchase prepaid coupons with specific terms, allowing them to access higher discounts. Since these are structural discounts, they buy in bundles—six, twelve, etc.—which encourages repeat purchases. We will continue enhancing the program, both independently and with partners, while introducing new variants to suit different customer needs. The goal is to make the program more valuable and accessible to a wider audience.

No, because we primarily serve small towns. Only one of our locations is in a top-10 city, and a third of our business comes from areas 100 km away from our stores. Our focus is on underserved markets.

India is a large and complex country with different types of customers. Some are willing to pay for high-quality service, while others prioritize value over speed. Quick commerce is a service-driven model, and maintaining that service comes at a cost. Ultimately, someone—customers or businesses—must bear that cost.

We've seen this in delivery services, where many customers are willing to pay for convenience, sustaining those businesses. However, a large segment of Indian consumers is value-driven and may not always want to pay for premium service. Our business is built around serving these value-conscious customers.

I think we will have a clear answer in time, but we have to see how things evolve. If we assume there's only one way to do quick commerce, we are probably mistaken. New models will emerge, just as we’ve seen in e-commerce. Two years ago, if we had thought there was only one way to do e-commerce, we would have been proven wrong. Today, there are different approaches—some companies deliver in 10 minutes, while others operate on a 7–10 day delivery model, and both are growing successfully. So, if we assume there’s only one way to do quick commerce, we will likely be proven wrong again in the next two years. There will be multiple innovations and variations.

Quick commerce is currently a $7–8 billion market, but compared to the broader $650 billion retail market, it still has a long way to go. If we believe that quick commerce, in its current form, has already solved the full potential of retail, we are probably mistaken. The industry will continue to evolve significantly, and all active players, including our group, are excited about the opportunities ahead.

We can fulfill 80–90% of orders on Day 1 without issue, but our priority is aligning our service with customer needs.

Kirana stores operate on their own payment cycles—when they receive stock, they must pay vendors, so our service must match their cash flow. Not all customers need immediate deliveries. Our business is primarily B2B, with two-thirds serving kirana stores and the rest catering to offices and institutions.

Business customers value predictability and service. While offices and institutions may require strict delivery timelines, kirana stores need capital management support. Their merchandise is working capital, and purchases depend on available funds. We focus on aligning deliveries with their financial cycles rather than just speed.

We regularly update our product selection based on seasonal demand. Currently, our stores feature juices, cold drinks, and summer essentials. By November, the focus shifts to cold creams and personal care products for winter. During Rakhi, Rakhis take center stage for a few days.

For Diwali, we stock festive essentials like diyas, dry fruits, and gifting items. While we don’t sell TVs or large electronics, we offer popular gift options such as microwaves, casseroles, pressure cookers, and electric cookers.

We primarily rely on third-party logistics rather than our own fleet. Our supply chain is straightforward—brands ship products to our 26 locations, and from there, we distribute them to customers. Some customers visit our stores with their own vehicles, while others request deliveries, which we fulfill mostly through third-party vendors. E-cart plays only a small role in our operations.

A key advantage of our logistics model is its simplicity. We do not operate fulfillment centers for aggregation or disaggregation, keeping costs low and efficiency high. While many players are building their own logistics platforms, we focus on network orchestration rather than asset ownership. We determine the number and type of vehicles needed, plan routes, and control delivery schedules, ensuring a high level of service. However, we do not own trucks or employ drivers directly—we rely on partners for that.

Owning a fleet is not part of our long-term strategy, as truck maintenance and operations are outside our expertise. Instead, we concentrate on optimizing logistics, managing routing, and ensuring timely deliveries, while third-party logistics providers handle execution.

What happens to FMCG players affects us as well. In a large and complex country like ours, market conditions are always shifting. At one point, there may be an urban slowdown, and two quarters later, urban markets could be booming while another segment slows down.

Two years ago, the focus was on premiumization and post-COVID recovery; now, the conversation has changed. The market is dynamic, and these shifts will continue. By this time next year, the last two rough quarters may not matter. Markets fluctuate, but our strategy remains long-term and structured.