When the quick commerce and the 10-minute delivery madness began in late 2020, many — including us — wondered whether there was indeed a need it is solving. But perhaps the critics underestimated the revenue outcome that has come about in the past couple of years for Swiggy Instamart, Zepto and Blinkit.
Cumulatively, these three biggest quick commerce platforms are on track to report revenue north of $1 Bn in FY24. And that’s actual revenue, with the gross order value being significantly higher.
Quick commerce is no longer a fancy proposition, but one that can actually be scaled up without losing sight of profitability, at least as far as Blinkit is concerned. The problem for Blinkit is that it is growing relatively slowly compared to its rivals, and its revenue even in FY24 is unlikely to match what Swiggy Instamart and Zepto did in FY23.
So this Sunday, we wanted to ask whether Blinkit’s profitability-first approach will actually unlock the large revenue promise that quick commerce offers in the next year? But after a look at the top stories from our newsroom in the past week:
Blinkit’s Many Phases
Before entering the quick commerce space, Blinkit (as Grofers) weathered two storms. The first occurred during 2015 and 2016 when the hyperlocal bubble burst which took down many similar models and forced the company to rethink its business. Next came the Covid-19 crisis, which was a big opportunity for Grofers to move into quick commerce, but it struggled to raise funds in 2020.
It managed to enter the coveted unicorn club with a $120 Mn infusion from Zomato in June 2021 and then was swiftly rebranded to Blinkit in December to become the app it is today.
Post the Zomato takeover, Blinkit has suffered from the typical challenges of quick commerce including slow unit economics growth at new dark stores, strikes from delivery partners, intense competition and a fight for the consumer eyeballs.
Somehow, the Zomato-owned app has secured a leading position in several critical areas, thus improving its brand image. According to a consumer sentiment analysis by Inc42 and Clootrack, Blinkit managed to outdo competitors in customer service and acquire more users, but Zepto and Instamart were not far behind.
The improvements in customer acquisition and retention are seeping through to the bottom line. Blinkit’s contribution margin, as a percentage of gross order value (GOV), in the overall business further improved to 2.4% in Q3 FY24 from 1.3% in Q2 FY24.
Blinkit clocked revenue of INR 644 Cr in Q3 FY24 as against INR 505 Cr in Q2 FY24. The adjusted EBITDA loss reduced to INR 89 Cr from INR 125 Cr in the last quarter. In FY24, it reported over INR 1,533 Cr in revenue till December.
The Zomato-owned company also stated that 70% of its dark stores were contribution positive and close to 20% of these were operating at over 5% contribution margin. Overall, Zomato reported its third consecutive profitable quarter, with consolidated net profit quadrupling QoQ to INR 138 Cr.
The Quick Commerce Promise
Given these numbers, it’s no wonder now that Zomato invested millions to acquire and grow quick commerce platform Blinkit and turn it around from its Grofers days.
But even though Blinkit may seem critical to Zomato’s business now, the fact is it is considerably smaller than Swiggy’s Instamart and Zepto on revenue scale.
Zomato is focussing on profitability and not pushing on the revenue growth accelerator just yet. One thing that could change this is the entry of Swiggy into the public markets, as well as Zepto’s laser-sharp focus on quick commerce.
While Swiggy and Zomato, the two long-time rivals, have food delivery as the primary business, Zepto’s singular focus may well be a major success factor for the Mumbai-based unicorn.
Swiggy and Zepto are both eyeing IPOs in the near future, with Swiggy being closer to the public markets than Zepto.
Zepto, which entered the unicorn club in 2023, saw its net loss balloon 3.35X to INR 1,272.4 Cr in FY23, but revenue from operations surged 14.3X to INR 2,024.3 Cr. The startup reported an improvement in net profit margin from -277% to -63% in FY23, and claimed to be on track to become EBITDA positive by next year or FY25.
On the other hand, sources told us that Swiggy Instamart’s revenue grew over 80% in FY24 as of September 2023, with take rates improving by close to 5%. In FY23, Swiggy generated revenue of INR 3,221.4 Cr by selling FMCG products via Instamart, an increase of 39.7% from INR 2,035.6 Cr in FY22.
The Maturity Moment
This is not a flash in the pan moment. Convenience is a habit, and the demand for instant home delivery will continue to drive the quick commerce market, say retail experts. In addition, India’s demographic shift and the subsequent rise in income may help remove the cost constraints hindering quick commerce’s momentum outside the metros.
The blaring social media promos for Valentine’s Day this past week or the Ayodhya temple consecration last month shows that quick commerce platforms have massive marketing enthusiasm that closely mirrors festive season sales on larger ecommerce marketplaces. There’s some major buzz being created pretty much every month to drive traffic and repeat usage.
The revenue growth shows that this strategy is working. In particular, the momentum on high consumption and high intent categories like grocery have come as a boon for quick commerce players. Now, they are looking to grow into other areas like electronics and larger products that formerly relied on marketplaces such as Amazon India and Flipkart.
As one top executive at Zepto told us last month, “People are starting to realise that quick commerce is not only a much more concrete guarantee than people thought a year-and-a-half ago, but it’s also gonna be a much bigger category. I think there is a realisation that quick commerce has the potential to disrupt ecommerce.”
What Next For Blinkit, Zepto, Instamart?
But reaching profitability on an EBITDA level and showing a path to net profits would be the key for Swiggy and Zepto in their bid for public listings. The onus on Blinkit, on the other hand, is to prove that slow revenue will be a temporary phase as the focus is on profitability.
There are other ways of making quick commerce more viable and attractive. Platforms are now looking at extensive ad monetisation, promoting thousands of brands to their captive audiences for the best possible outcomes.
Of course, ONDC could change the game for Blinkit, Zepto or Instamart, but the fact is that building up the operational infrastructure needed for quick commerce is no joke and certainly doesn’t come cheap.
It won’t be easy for new players to come into this space, unless there is a major push by the likes of Tata or Reliance. Both have the arsenal to fight off the current quick commerce troika, but plans are afoot at Blinkit and other platforms.
Blinkit CEO Albinder Dhindsa has claimed that the company will enter into areas where it thinks it can solve large problems using its operational expertise and logistics prowess. Blinkit has plans to venture into Urban Company-like at-home repair services.
To improve its unit economics and procurement costs, Zomato is looking to expand into processing value-added food supplies through Hyperpure. The idea is to supply sauces, spreads and semi-finished perishable products to restaurant partners and dark stores.
Is this a backdoor entry into the private label space by Blinkit, and could this be the trump card that could push Blinkit’s revenue past its quick commerce rivals in the next year?
Keeping Up With Paytm
The Reserve Bank of India (RBI) clamped down on Paytm Payments Bank on January 31, 2023, barring it from taking any deposits or transactions from customers. Paytm Payments Bank has been barred from providing any other banking services after February 29, 2024.
Given the massive impact of this action, Paytm is fighting many fires and we are recapping all the developments in our live article here, so you can keep up with the crisis unfolding for the fintech giant.
Sunday Roundup: Startup Funding, Tech Stocks And More
- Funding Picks Up: After a slight dip at the end of January, investment activity shot back up this past week — startups raised $168 Mn in funding across 25 deals, marking a 250% week-on-week uptick
- A Year Of M&As? Even though 2023 saw half the number of M&As as 2022, as many as 55% of the investors surveyed by Inc42 believe that 2024 will bring in the good times for acquisitions and exits
- Mamaearth’s Q3: D2C unicorn Mamaearth’s parent company reported a 264% increase in net profits to INR 25.9 Cr in the December quarter on the back of growing offline retail footprint
- State Of SoftBank: SoftBank India’s portfolio across its two Vision Funds stands at nearly $14 Bn, up by 9% as of December 2023, with the VC giant eyeing more exits in 2024
