Swiggy’s Instamart is a great success, but a grocery entry can become Zomato’s ‘poison pill’ says the report
Zomato is attempting to do something it has failed to do twice before: supermarket delivery. This time, the quick commerce delivery category it’s entering is crowded, with firms like Dunzo, which is supported by Reliance Industries, BigBasket, which Tata backs, and, of course, Zomato’s old rival Swiggy, which offers Instamart.
And brokerages aren’t happy that it’s happening for the third time.
“We claim that creating a supermarket business will act as a ‘poison pill’ for Zomato. It would require a considerable amount of investment and thus capital burn, as well as a huge logistical difficulty to accomplish. Still, Zomato can not afford not to do it,” according to an HSBC report.
What’s a poison pill, and how does it work?
A poison pill is an action that can reduce an organization’s intrinsic worth — a method used by businesses to protect themselves from hostile takeovers. Analysts predict, however, that the new venture will have the same unexpected consequences for Zomato.
Both of Zomato’s failed attempts occurred after the Covid-19 outbreak in April 2020, and logistical difficulties plagued them. In July 2021, it plummeted still again, resulting in the loss of millions.
This time, it is more than likely to do so by acquiring Blinkit, formerly known as Grofers. This time, the Zomato board of directors is anticipated to make a decision. Why are experts concerned about this foray, which has proven to be successful for Swiggy?
About Swiggy Instamart
Swiggy’s latest project, Instamart, was launched in recent years in response to the development of internet orders, particularly in the food and grocery industries, to deliver groceries and other requirements.
Instamart is a convenience store chain that operates online. These virtual convenience stores sell instant meals, snacks, fruits and vegetables, ice cream, and other items.
Swiggy offers these services through its “dark stores,” which are only available online, and through its hubs.
How Swiggy Instamart works?
As of June 2021, Swiggy has over 20 million monthly users and processes 1.5 million orders daily. From June 2020 to June 2021, orders increased 2.5 times, while revenue rose 2.8 times.
Swiggy Instamart claims to deliver your order within 45 minutes, from 7 a.m. to 1 a.m., based on the observation that households order a restricted group of products every day.
Swiggy’s marketplace company partnered with local Kirana stores to provide groceries, fresh produce, vital supplies, and food items via Swiggy’s delivery fleet.
Under its retail division, the company also offers a variety of speciality services such as meat and seafood, pet care, and so on.
What Can You Order at Instamart?
- All Kirana Items
- Fruits and Vegetables
- Chicken and Meat
- Sweets and Bakery items
- Dairy Products
- Personal & Babycare Products
- Health care Products
- Home & Cleaning Products
- Cooking Essentials
Instamart Grocery shopping Benefits:
- Nominal Delivery charges
- Grocery Delivery in 15-30 Mins
- Long Hours Home Delivery service
- Delivery from Swiggy’s own store
- Offer’s Coupon code on purchases above ₹199
How can you access the Swiggy Instamart?
By selecting the Instamart tile on the Swiggy app’s main page, you can access Instamart.
Instamart aspires to meet the unmet grocery demands of its metropolitan customers at all hours of the day and night.
Instamart’s delivery is done in less than an hour, so there is no need to wait.
One can Download the Swiggy app and try Instamart now.
Swiggy can do it, but can Zomato do it too?
Most of Swiggy’s grocery clients are also Swiggy’s restaurant consumers. Being on the same app provides much-needed convenience, and the loyalty programme perks and the benefits of combining restaurant and grocery delivery orders are seamless.
Swiggy can also attract pure grocery clients and target them for food products, putting Zomato’s main food business at risk.
“As a result, Zomato must quickly develop its grocery capabilities and, in our opinion, must properly merge the applications to use its consumer base for shopping.” Running it separately is unlikely to add much value because Blinkit’s client acquisition costs will be expensive, and user stickiness will be low,” according to HSBC.
Zomato must cross-sell to its existing customer base, integrate the software stack, and add infrastructure to ensure delivery to establish a profitable business – a cost and execution ability that its food business never required.
They would need to maintain and manage stock-keeping units to provide quick commerce delivery and full kitchen capabilities (SKUs). “The former is ‘gut’ purchases, whilst the latter is deliberate.
According to the HSBC analysis, “instinctive purchases are less discount-driven and more need-driven, whereas planned purchases are more discount- and assortment-driven.”
While there may be obstacles, Zomato cannot afford to ignore this fast-growing area, which can generate incremental returns if properly executed.
According to a JM Financial research, “we expect Zomato to follow global counterparts in terms of extending beyond food delivery and exploring adjacencies in the form of grocery delivery, alcohol delivery, pharmaceutical delivery, on-demand delivery, and insta shopping.”
According to Redseer estimates, the whole grocery market in 2020 will be worth roughly $573 billion in gross merchandise value (GMV). Furthermore, the online grocery delivery market is predicted to grow at a CAGR of roughly 49 per cent over the next five years, reaching $24 billion by 2025 because of Covid-19 tailwinds.
Article proofread & published by Gauri Malhotra.