Quick Commerce TAM larger than ever before

Quick commerce in India is evolving even faster than we previously expected. It has developed from a grocery centered, urban phenomenon to one that encompasses >100 towns and multiple new categories. Detailed TAM analysis means we raise FY30 QC GMV forecasts, but there is also a margin offset of 250-300bps vs our earlier steady state estimates, due to this rapid growth and new competition. However, our many channel checks suggest early signs of stabilizing discounts / marketing spend; we, therefore, expect contribution margins to improve from Q2FY26. Valuations are attractive, with both companies trading at a significant discount to Indian consumer names on a growth adjusted basis.

Our analysis suggests that QC has expanded from 15-20 towns to over 100 now and has added multiple new categories, slowly blurring the lines between QC and ecomm. We revisit our TAM framework; and focus more on QC's increasing share of the overall online retail market. We believe QC should take c50% of incremental online retail expansion between FY25-30e (vs 3% in FY2019-22 and 19% in FY2022-25), resulting in market size of USD 59bn by FY30e (vs our estimate only last year of USD 34bn ).

A larger, fast growing market has - not surprisingly - invited competition from traditional ecomm platforms and retail chains. Coupled with rapid category and geography expansion (not necessarily margin accretive), we see slower margin improvement vs our previous estimates.