Amazon's entry into quick commerce market poses competition for Swiggy, Eternal, Jefferies says

Shares of food delivery aggregator Swiggy Ltd. and Zomato's parent company Eternal Ltd. were trading lower on Tuesday, June 17, after Amazon officially launched its quick commerce (QC) service, Amazon Now, in select parts of Bengaluru, following a six-month pilot phase.

Although the service is currently available in only three pincodes in Bengaluru, the launch marks the start of a more competitive quick commerce market, with at least seven major players now vying for market share.

Global brokerage firm Jefferies wrote in its note that Amazon’s entry into the QC market extends beyond groceries, though it still lags behind incumbent players. The brokerage also said that Amazon’s pricing strategy is attractive, especially for Prime members, who benefit from even steeper discounts than those offered by existing QC platforms.

Jefferies continues to monitor the competitive landscape, saying that competition remains a key concern for Eternal and Swiggy. However, the brokerage believes Amazon faces a tough battle, given its late entry into the market.

Further, the brokerage said that QC has now become a mainstream category, and the entry of large horizontal platforms like Amazon and Flipkart is driven by the shift in consumer spending toward QC platforms. This has resulted in a crowded market, with some areas featuring as many as six different QC platforms, all competing for users with aggressive discounting strategies.

Regarding Amazon, Jefferies believes it’s still early days, and Amazon Now will need scale to become a meaningful player in the QC market. Achieving this will likely require substantial investment and burn, especially since Amazon lacks the brand recognition that incumbent QC platforms like Blinkit and Swiggy enjoy. Notably, QC is currently part of Amazon’s main app, whereas Blinkit (and Swiggy’s Instamart) have separate apps dedicated to QC.

While the expanding competition poses a challenge for early adopters like Blinkit (owned by Eternal) and Instamart (owned by Swiggy), JM Financial remains optimistic about their medium-term growth prospects.

The brokerage believes that the QC market will continue to expand due to shifting consumer spending patterns, opportunities for deeper category penetration, and growth in tier-2 cities. Additionally, the new entrants will likely face delays in building the necessary infrastructure, such as dark stores, mother warehouses, and logistics networks, which are essential for QC operations.

Furthermore, JM Financial strongly believes that Amazon and other new players will need to launch dedicated QC apps and invest heavily in brand-building, customer acquisition, and service quality in order to compete effectively. This will be essential if they want consumers to consider switching platforms.

Separately, JM Financial's recent checks indicate easing in competitive intensity, saying that discounting has reduced, while service fees charged to customers have increased.

The brokerage believes this shift signals that adjusted EBITDA losses for Blinkit and Instamart may have peaked in Q4FY25, which could lead to a re-rating of these businesses in anticipation of their Q1FY26 results. JM Financial maintains its 'Buy' rating on both Eternal and Swiggy.

Note To Readers

Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.