One dimension I think deserves more attention is the capital intensity of the inventory-led model. The ₹4–5/order wholesale margin Swiggy expects to capture sounds attractive, but inventory ownership also transfers working-capital, shrinkage, expiry and markdown risk onto the platform. So the real test shouldn't just be incremental contribution margin per order, but incremental ROIC and cash conversion.
In quick commerce, a higher margin business isn't necessarily a better business if it requires disproportionately more capital to generate that margin.
Well said! In the end, ROIC is a function of both capital turnover and margin. Just focusing on margin actually takes attention away from the more important metric!
the consumer clearly wins from this competition, but I'm not sure the economics do. At some point someone has to pay for faster delivery, discounts and rising input costs. who has the weakest bargaining power in this chain????
The weakest to us seems to be delivery/gig workers because they always get the worst of both worlds. They are so important to whole system and yet get the worst bargain.
An other one can be really new D2C players. The commissions could eat up the whole margin because they are new players. On the other hand they could be placed at the right place. It could also be true that the D2C is already known to the crowd so when it comes to placing themselves on the platform or even the platform reaching them out the ball is their court. They can bargain and get product listed for a much lower margin.
One dimension I think deserves more attention is the capital intensity of the inventory-led model. The ₹4–5/order wholesale margin Swiggy expects to capture sounds attractive, but inventory ownership also transfers working-capital, shrinkage, expiry and markdown risk onto the platform. So the real test shouldn't just be incremental contribution margin per order, but incremental ROIC and cash conversion.
In quick commerce, a higher margin business isn't necessarily a better business if it requires disproportionately more capital to generate that margin.
Well said! In the end, ROIC is a function of both capital turnover and margin. Just focusing on margin actually takes attention away from the more important metric!
Would love to see a deep dive done on state level milk cooperations like Nandini / Aavin etc
the consumer clearly wins from this competition, but I'm not sure the economics do. At some point someone has to pay for faster delivery, discounts and rising input costs. who has the weakest bargaining power in this chain????
The weakest to us seems to be delivery/gig workers because they always get the worst of both worlds. They are so important to whole system and yet get the worst bargain.
An other one can be really new D2C players. The commissions could eat up the whole margin because they are new players. On the other hand they could be placed at the right place. It could also be true that the D2C is already known to the crowd so when it comes to placing themselves on the platform or even the platform reaching them out the ball is their court. They can bargain and get product listed for a much lower margin.
Again this is our reading, we could be wrong :)