Rapid commerce: Venture capitalists hunt for rapid commerce and D2C success

The rapid rise of fast trade and aggressive demand for new direct-to-consumer (D2C) brands with the help of Fast deliveries on platforms like BlinkZepto and Instamart are driving early and mid-stage dealmaking D2C Brandsseveral executives and investors told ET.

New brands have grown much faster than anticipated due to the fast-paced trade channel and that is attracting Investor interest.

Children’s gift brand Tuco Intelligent is in talks to raise fresh capital from Fireside Ventures, while Peak XV Partners is likely to take a stake in healthy bakery The Health Factory, sources said. Gourmet Garden, a brand specialising in organic fresh produce, has started talks to raise around $10 million from a combination of investors.

Healthy snacks firm The Whole Truth has also started talks for a fresh round, with sales doubling to Rs 13-15 crore a month, with a boost from its recently launched protein powder products, people briefed on the matter said. Venture fund Tanglin Venture Partners has made an investment in noodle brand Master Chow.

Several smaller brands in sectors including personal intimate care are also seeing investor interest as fast commerce becomes a mainstay at D2C brands, the people following the deals said, adding that the ultra-fast delivery segment has given a major boost to certain categories and SKUs (stock keeping units) on platforms such as Zepto and Isntamart.

Executives aware of the plans said new-age brands are in talks to come on board. Flipkart’s newly launched fast commerce service Minutesas well as offering two-hour grocery delivery on Amazon India.

Some of the brands are recording more than 50% of monthly sales through fast-trading platforms. Non-food segments such as underwear, pet care and home appliances are also in the process of closing down businesses, sources in the know said.

The investors mentioned above declined to comment on new deals. Tuco Intelligent declined to comment, while Gourmet Garden founder Arjun Balaji, a former McKinsey partner for over 12 years, confirmed funding talks. An email sent to The Health Factory founder Vinay Maheshwari did not elicit any response, while The Whole Truth CEO Shashank Mehta said the information about funding talks was incorrect. He declined to comment on monthly revenue figures.

Read also | D2C brands pay 30-45% commission for a spot on fast-trading platforms

Fast for trade

“There is a significant wave of fast commerce for several brands, especially in food and beverage, and it is spreading to other categories as well. Over the next two years, all brands will be riding this wave, although it remains to be seen how it will ultimately shape the overall market,” said one investor with several brands in the midst of new deals.

“While we expected fast commerce as a channel to perform well for brands in conducive categories like fresh produce and groceries within tier 1 markets, what has been an eye-opener for us has been the success achieved by brands in intuitively non-conducive categories like apparel, pet care and appliances. It is also interesting to see the momentum in tier 2 cities, which is causing brand founders to rewrite operational plans at some of our companies,” said Anshu Prasher, Partner at Whiteboard Capital, which specializes in backing early-stage consumer technology and fintech companies.

Gourmet Garden’s Balaji said the company used to have 80% of sales on its own platform and the rest on others, mostly flash commerce. “Now it’s the opposite. Flash commerce has become very relevant, especially for well-differentiated food and beverage brands. Despite high commissions, it is justifiable for the speed of sales as the commission can be seen as a combination of marketing and logistics expenses,” Balaji said.

From monthly sales of about Rs 3.5 crore, Gourmet Garden has grown to around Rs 10 crore now, helped by brisk trade, Balaji said.

Albinder Dhindsa, CEO of Blinkit, said in The company’s June quarter results that the fast-trade model is “capable of delivering products that would otherwise have been more difficult for customers to access.”

Read also | Blinkit to increase number of warehouses to 2,000 by 2026

“For example, we believe that of the sales we generate in ice cream, almost two-thirds are incremental. This is demand that would not have been met had we not built capabilities to deliver ice cream within minutes (by investing in one of the largest frozen supply chains in the country),” Dhindsa said. “Similarly, much of the demand in the festive and impulse categories is incremental demand, as the lack of a convenient solution to address them would have meant that such demand would not have been met. I can see this in my own personal consumption patterns.”

“Fast trade channels have been scaling rapidly and enabling… brand discovery“Differentiated product assortments and new price points have helped our brands tap into the potential of fast commerce,” said Kannan Sitaram, co-founder and partner at Fireside Ventures.