Zomato, BigBasket, and Swiggy rush for scale: An influence of Chinese capital?
Chinese entrepreneurs and investors inherently believe that scale can heal any pain. They are not bothered about burning capital and figuring out unit economics as long as the scale is on an upward trajectory. For an instance, Pinduoduo is a loss-making third largest China’s e-commerce company that had gone IPO last week.
Despite the company’s losses, its principal backers – Tencent and Sequoia Capital are poised to buy $250 million worth of fresh shares each in PDD.
Since Chinese heavyweight investors such as Alibaba and Meituan have had led rounds in Zomato, Bigbasket, and Swiggy, these local companies seem to be in rush to accelerate their scale.
While Zomato had announced a foray into supplying raw materials to restaurants and Bigbasket is all set to enter micro-delivery space, Swiggy is soon to start concierge-like service (similar to Dunzo) as well as micro-delivery service.
Alibaba’s Ele.Me and Tencent-funded Meituan are rivals in China. Both started as food delivery company but later entered into other verticals including grocery. To operate on a greater scale, Meituan offers a slew of other services such as travel (flight tickets), personal grooming services (massages, haircuts, and manicures).
By giving financial backing to their portfolio, Alibaba and Meituan want them to mirror strategies that have been working well for them in China.
While Meituan does 25 million delivers a day, Ele.Me processes 15 to 17 million orders everyday. In contrast, Zomato claims 430K deliveries a day and Swiggy manages to process approx 550K orders in a single day.
Actually, the Indian counterparts have to go a long way but Chinese backers are confident that Indian consumer internet would pan out like China.
Soon after securing $300 million from Alibaba, Bigbasket announced its aspirations to get into micro-delivery (aka milktech) segment. Besides the company’s management, the decision to expand beyond grocery is likely to have emphasised by Alibaba.
Meanwhile, Swiggy appears to be following Meituan footsteps explicitly. With services similar to Dunzo, it would virtually deliver anything for consumers. The prime reason for getting into concierge services is to achieve greater scale.
Presently, there are many Chinese companies such as NewsDog, SHAREit, Bigo Live that are operating in Indian content space. And, all of them are eyeing greater scale through betting on vernacular languages. Since the next billion Internet users will come from smaller towns, Chinese entrepreneurs want to fathom non-English audience base.
After receiving backings of strategic Chinese investors, consumer-facing Internet companies are expanding into other verticals in search of the scale. However, it would be interesting to watch whether scale would solve all pain of Indian companies or not in a long haul.
Source: Entrackr
