Amazon wades into India’s fast delivery battleground: ‘DoorDash on steroids’

Amazon has come late to India’s fast-delivery market — and is spending $3bn over the next few years in a bid to catch up in the intensely competitive race.

The online retail giant plans an outlay of $1bn next year and an additional $2bn by 2030 for its Amazon Now service, according to a person with direct knowledge of the matter.

Amazon had previously announced $300mn of spending this year to treble the number of localised warehouses, or “dark stores”, to more than 1,000 to make its quick-commerce arm available in about 300 Indian cities, up from 15 now.

“Customers are loving it,” said chief executive Andy Jassy on a visit to Mumbai earlier this year, adding that Amazon was applying lessons learnt in India to other markets.

Armies of scooter-riding gig workers have become a ubiquitous presence across India’s traffic-choked cities, ferrying groceries, snacks and an array of other products in 20 minutes or less, transforming middle-class shopping habits nationwide.

With delivery windows shrinking from hours to minutes, Indian household expectations have changed just as dramatically, underpinning the rise of an online instant fulfilment industry that Satish Meena, founder of consumer research firm Datum Intelligence, calls “DoorDash on steroids”.

According to a recent Deloitte and Google report, the market is now worth $8bn. It is projected to reach $50bn by 2030, serving about 70mn shoppers, as the next wave of growth is generated by smaller cities.

While only commanding a 10 per cent share of the online shopping market in India, quick commerce is increasingly winning business from traditional digital platforms and the millions of kiranas, small mom-and-pop stores that are a defining feature of India’s retail landscape.

“The customer is asking for it — if you are not ready someone else will give it and then they will take the market,” Meena said. But quick commerce has become “very crowded . . . everyone is trying to open in new cities so that they can acquire the early adopters in those and build on them”.

Domestic pioneers Blinkit, Swiggy and Zepto are now being challenged by Amazon and other laggards including Walmart-owned Flipkart and domestic conglomerates Reliance Industries and Tata Group.

All are looking to muscle in on a bruising and expensive battle for market leadership. Flipkart aims to bring its total of dark stores to about 1,500 in 180 cities by the end of the year, compared with about 1,000 now.

Some players were slow to recognise the popularity of quick commerce until they started to lose customers. A person familiar with Amazon’s strategy said executives initially debated “whether it was a fad” before concluding it was the right time to “spread their wings and scale up”.

“All the pundits said this does not have a future — all of them have been proven wrong,” said Ravi Kapoor, retail and consumer sector leader in India at PwC. “One of those holy cows which has been in a way questioned and banished is that there’s no market for this beyond the top [cities].”

Blinkit, Flipkart and Zepto declined to comment. Swiggy did not respond to a request for comment.

The boom has been fuelled by the vast pool of cheap labour in India, which is struggling to create more formal employment and where GDP per capita remains below $3,000.

Quick commerce has provided a lifeline of sorts to Ranjit Giri, a 34-year-old fabric salesman in Mumbai who earns about Rs4,000 ($42) each weekend as a courier to supplement his Rs40,000 monthly salary.

“I have four kids and a lot of expenses: their education, the rent — Rs40,000 was not enough,” he said. “I have to put in a lot of hard work.”

The treatment of the sector’s gig workers has come under government scrutiny. New Delhi has asked the big platforms to stop promising 10-minute deliveries, which have been criticised as hazardous and exploitative.

Deepinder Goyal, founder of Blinkit owner Eternal, told the FT earlier this year that questions about the industry’s business model were “generally the western media’s criticism”.

“If there are people who are willing to work for something without being forced to, that means it’s a better economic opportunity for them,” Goyal said in an interview. “We are truly in a free-market economy, people can leave any time. They are not contractually bound. If we make even a small mistake, they can say ‘screw you’ and leave us.”

Yet analysts have started questioning the sustainability of an industry that remains largely unprofitable and is burning cash to win market share — often through discounts and promotions.

Some operators have struggled to maintain quality controls amid rapid expansion. Zepto and Swiggy have been repeatedly chastised by food standards regulators for hygiene issues and cockroach infestations at dark stores, as well as selling expired products and rotten produce.

Some executives also question if the market faces a low ceiling in a country where consumer spending remains constrained and two-thirds live in India’s vast rural hinterland. One senior employee at a big ecommerce company said rapid delivery had been “overhyped”.

Hari Menon, co-founder of Tata-owned BigBasket, warned that the business remains “structurally tough” and difficult to turn a profit. “You need density, you need average order value, and you need gross margins — all three have to fire together,” he told a conference in Bengaluru.

Blinkit, which has a near-50 per cent market share and operates about 2,400 dark stores — more than double Swiggy’s total — is an outlier. Blinkit posted its first quarterly profit at the end of last year as it gained favour with customers thanks to a wide inventory and reliability.

Investors have looked more favourably on Blinkit’s dominance, with shares in parent company Eternal up 18 per cent this year, compared with a 32 per cent slide for Swiggy. Zepto, the other top operator, has shelved plans to list this year.

Analysts expect a number of casualties as investors begin to demand profits.

“Down the line, investors in these entities will ask for the returns — they cannot just run on promotional offers,” said Srikumar Krishnamurthy, senior vice-president at ICRA, an Indian rating agency owned by Moody’s. Eventually, the industry will see a “good amount of consolidation”.

Yet none of the combatants seem ready to retreat. “We also have deep pockets. If it comes to outspending Amazon, we can,” said Eternal founder Goyal. “We still think that we have got a better shot at winning.”