What the Blinkit-Zomato deal says about 10-minute grocery delivery in India

India’s 10-minute grocery delivery firms are struggling. On March 16, food aggregator and delivery platform Zomato extended a $150 million loan to quick commerce firm Blinkit, formerly Grofers.

The two have reached an all-stock deal for a merger, TechCrunch reported around then. In effect, Zomato would acquire the latter for around $700 million.

Since pivoting to instant deliveries last August, Blinkit had scaled-down and was struggling for funds. Losing its unicorn status with this deal, it has now brought up questions about the efficacy of such a business model.

Quick commerce in India

Across India, kirana or mom-and-pop stores are not only within walking distance, but also offer conveniences like home delivery and credit. Getting groceries within a time limit “is not something that needs emergency attention,” Yugal Joshi, partner at consultancy Everest Group, told Quartz.

While some people in metros want to shop from the comfort of their homes, most can plan ahead for next day delivery at least. Instant delivery is largely viewed as a marketing gimmick — an expensive one that makes riders drive dangerously to avoid being penalised.

Nevertheless, India’s 10-minute grocery delivery market is set to grow 15 times to $5.5 billion, according to consultancy firm RedSeer.

The Blinkit-Zomato partnership

For Blinkit, however, scaling up won’t come easy.

‘The costs will significantly increase. (This model) needs larger team,” Vidhyashankar Sathyamurthi, CEO of Network of Indian Cultural Enterprises (NICE), had told Quartz when Grofers initially began quick deliveries.

To realize the full potential of quick commerce, moreover, companies need to look beyond metros and grow private labels to boost unit economics and margin, according to RedSeer.

Zomato, on its part, has reason to back Blinkit: ammo to fight Swiggy’s Instamart. Unfortunately, its history of acquisitions isn’t promising.

“Zomato has had its share of troubles where it expanded globally with limited success, acquired Uber Eats which didn’t go anywhere. And now this,” says Joshi. “Whether this acquisition succeeds or not, time will tell. However, the probability appears low.”

Especially as a listed company now, “the challenges it has faced along with other poster-children like Paytm may not allow enough headroom to keep investing in Blinkit.”

Tough competition in quick deliveries

A whole new terrain for Zomato, quick commerce is already teeming with competitors.

Dunzo, which has over the past many years built up its business, even if largely in Bengaluru, is looking to expand by partnering with Reliance Retail. It will increase its dark store or warehouse count from 75 to 200 by the end of this year and aims to be in 20 cities.

After taking baby steps with its 90-minute delivery promise, e-commerce behemoth Flipkart is accelerating to a 45-minute routine in parts of Bengaluru.

Besides, smaller, nascent firms aren’t out of the race either.

For instance, Y Combinator-backed Mumbai-based Zepto — a half-a-billion dollar worth startup launched by two teenage Stanford dropouts shortly after the Covid-19 outbreak — has expanded to all metros and even tier 2 cities like Ghaziabad. It has over 100 dark stores equipped to handle 2,500 deliveries daily.

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