Quick-comm's ad fee toll: Are Zepto, Blinkit, Instamart squeezing out small D2C brands?
Despite arbitrary and mandatory platform fees, including ads and visibility payments, sellers said they would continue to turn to quick commerce players due to a shift in consumer preferences towards instant delivery.
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Amid the hype behind the booming quick commerce industry, D2C brand sellers have alleged that the platforms are engaged in exploitative practices by charging exorbitant advertisement fees that generate substandard returns, thereby stifling their growth. A slew of bootstrapped D2C sellers highlighted the issue of mandatory ad fees and delay in the payment cycle, which are making it difficult for them to thrive.
According to several Direct-to-Consumer, or D2C, sellers, Eternal-owned Blinkit charges a mandatory listing fee of Rs 25,000 per SKU per state, which is credited to their ad wallet and is non-refundable with an expiry date of 12 months. At Swiggy Instamart, the company has introduced fixed product orders (POs) of Rs 2,000-Rs 5,000 every week without ensuring sales of the product.
When it comes to only ad fees, a budding entrepreneur told Storyboard18, "Instamart quoted listing-cum-ad wallet fee between Rs 8- Rs 10 lakh for a quarter. On Blinkit, minimum monthly marketing spend hovers between Rs 2 lakh and Rs 3 lakh for a month, while homepage banner placements are auctioned off. Zepto, on the other hand, employs a bundled strategy, offering influencer marketing, ad slots, and onboarding at a starting price of Rs5-Rs6 lakh."
Calling quick commerce an illusion of fast growth for small brands, a seller, who wishes not to be quoted, said, "It's like we are charging ourselves only to cover their expenses". "We have spent over a million capital on these platforms within a span of three months, but have not even clocked 10% of sales".
Sonalika Sabharwal, founder of SouLilly Toys, agreed that the platforms' ad fees have continued to escalate, along with opacity on consumer behaviour data. "Sellers are unaware whether a spike in orders was caused by paid advertising, organic traction, or something else entirely".
However, a platform executive told Storyboard18 about the self-served portal they have launched for sellers, where they can decide how they want to spend their ad credit fee. "We share strength market data, day-level data, peak days data, and keyword suggestions to the sellers who sign up for our free portal," the spokesperson added.
Blinkit, Instamart and Zepto did not respond to Storyboard18's query.
'Variation in ad fees'
Saurabh Goel, founder of D2C FMCG brand Agro Mantra, shared his experience of launching products on a host of platforms, such as Amazon, JioMart, ONDC, and quick commerce players - Blinkit and Instamart.
According to Goel, while Blinkit has higher CPMs and does not offer insights on customer behaviours, the platform has recently improved seller dashboards and partial support.
On Instamart, Goel alleged the platform has zero accountability for sellers' stock. "They return the stock if it does not get sold".
As per the Storyboard18 analysis, the product launch fee or the ad fee structure is common across all three platforms, as is the return of unsold products to sellers after a specific period.
"There's a difference between the size of a quick commerce firm's dark stores and a warehouse of a quick commerce firm. The quick commerce model relies on quick delivery; hence, the dark stores are opened in close proximity to our customers. As a result, the area of the stores is 1% of the size of a warehouse", an industry executive added, "We can't accommodate all the products for a lifetime in our stores. SO, we believe if a product is not getting sold, then before it expires, we send it back to the seller so that they can try selling it through other ways at least".
In contrast, a couple of Zepto sellers told Storyboard about their 'exit grievances' from the platform. "It's a big pain point to get back our unsold inventory from the platform when we want to exit, citing system issues, etc".
Goel, who also tried selling his product via government-backed Open Network for Digital Commerce (ONDC), said the intentions are noble, but there's a long road to execution. He said, "After being on the platform for 7-8 months, we have not received a single order," and added, "ONDC lacks consumer visibility, operational support, and self-awareness".
Among all e-commerce and quick commerce players, Goel expressed satisfaction with JioMart. "There was zero ad spend and all sales were organic," he added, "JioMart has been the only platform for which I felt like my team has built something without draining the resources from Day 1".
'Why D2C choosing quick comm?'
Despite arbitrary and mandatory platform fees, including ads and visibility payments, sellers said they would continue to turn to quick commerce players due to a shift in consumer preferences towards instant delivery.
However, Sabharwal underscored that there's no room left for brand differentiation when D2C sellers are looking for quick commerce players to improve their visibility "because everything is centered on convenience, speed, and discounts".
On the lower returns on ad spend, the businesswoman pointed out, "The ROAS rarely goes beyond 1.2x to 1.5x for small brands, and sometimes even lower, making it difficult for a self-funded company to grow further".
Notably, a seller said that getting listed on a quick commerce platform is in itself a gruelling process, but the situation is no better offline.
"If we want to list our products in modern trade, such as supermarkets, they charge huge listing fees," the seller asserted.
The sellers acknowledged that the growth potential and visibility offered by quick commerce platforms is appealing, but the financial and operational implications are important to consider, especially for bootstrapped companies.
'The road ahead'
According to sellers, building a D2C engine requires massive investment in marketing, team, and technology--often out of reach for bootstrapped brands. Several bootstrapped founders expressed their apprehension about entering the quick commerce platforms due to a lack of data support and Return on Investment (RoI) metrics. Instead, they suggested that sellers should get performance-linked ad models, access to insights for customer retention, and platform accountability on forecasting.
"India can become a D2C powerhouse, but not without policy, platforms, and ecosystem reforms," Goel added.
