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Indian quick grocery delivery firms bet big on online

shoppers

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Many local retailers say online apps hitting their

business

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Goldman says Indian quick commerce market could touch $40

bln

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India market grows as global startups struggle

By M. Sriram and Dhwani Pandya

MUMBAI, June 11 (Reuters) - In a middle-class suburb of

Mumbai, workers at SoftBank-backed Swiggy's grocery warehouse

race against time to deliver orders within 10 minutes. Their

speed is tracked by the seconds on a screen that flashes red

warnings for slowness.

Outside in sweltering heat, Swiggy's bikers, sporting the

firm's trademark bright orange T-shirt, frantically collect

packed grocery orders to deliver them nearby, while others

return to tackle another shipment assigned on their app and

waiting.

"Ideally, one needs to get done with the entire (pickup)

process in 1 minute 30 seconds," warehouse manager Prateek

Salunke said.

Swiggy warehouses are mushrooming across India to deliver

everything from milk and bananas to condoms and roses within

minutes - a business model that is reshaping how Indians shop.

It is also threatening millions of mom-and-pop stores

that for decades dominated the grocery trade in a country where

big supermarkets are relatively scarce and are located in more

affluent neighbourhoods or malls.

Indians long relied on visits to small neighbourhood outlets

for groceries or got free deliveries from them via phone orders,

before the rise of e-commerce triggered by Amazon ( AMZN ) and

Walmart's ( WMT ) Flipkart over the past decade.

But the U.S. giants, which offer location-dependent same-day

or next-day delivery, are not as fast with groceries as Swiggy

and its rivals Zepto and Zomato's Blinkit, which are

ushering a "quick commerce" boom.

Goldman Sachs said in April quick deliveries account for $5

billion, or 45% of India's $11 billion online grocery market

currently. As shoppers prioritise convenience and speed, quick

commerce will account for 70% of the online grocery market set

to touch $60 billion by 2030, it forecast.

IPO-bound Swiggy started as a restaurant food delivery

business in 2014 and is valued at $10 billion, but it is now

switching gears to bet more on the "last-minute" grocery

business in India, the world's third-largest retail market after

China and the United States.

"We are training our guns to focus on a market much larger

than food," a December 2023 confidential Swiggy strategy

document seen by Reuters said of its Instamart service.

Its target? "21-35 year old, time-starved urban consumers

who value convenience", the document said.

Swiggy did not respond to requests for comment on the

document or its broader strategy.

The company doubled its warehouse count to 500 in 25 cities

last year and has plans to increase it to 750 before April 2025,

said an executive at one of Swiggy's financial investors, which

also include Prosus, Qatar Investment Authority and

Singapore's GIC.

Globally, COVID-19 lockdowns spurred fast-delivery

startups, helping the likes of Turkey's Getir to expand, only to

see the interest dissipate as shoppers returned to physical

outlets after the pandemic. Luxembourg-based Jokr scaled back

from the U.S. market in 2022.

India is witnessing a different trend.

Sumat Chopra, a partner at consultancy Kearney, said quick

commerce firms were benefiting from availability of

cost-effective warehousing space and "pampered" Indian

consumers' long-time habit of ordering just a few items from

neighbourhood stores by phone.

Swiggy will even take an order for a single mango, though it

could cost about twice as much as walking to a nearby shop.

Many consumers are willing to pay up to save time.

Mumbai lawyer Natasha Kavalakkat, 27, who has a hectic daily

schedule, uses quick delivery apps like Swiggy and Zepto to

order apples and bread. She said getting juice packs delivered

within minutes just before a party was a game-changer.

"This is too convenient."

VICTIMS OF THE BOOM

The rise of quick commerce means many smaller retail stores

are reeling under pressure.

Suburban Mumbai grocer Prem Patel's business had thrived in

recent years, allowing him to refurbish his store and install

air conditioning. He's not happy anymore.

"No one buys milk from malls and supermarkets. That was our

uniqueness. But these apps have changed the game," said Patel,

whose daily sales have halved to about 25,000 rupees ($300).

Four retailer associations in four Indian states,

representing 90,000 grocery shops of the country's estimated 13

million, told Reuters monthly sales were dropping by 10% to 60%

for some due to rise of quick commerce apps.

Some traditional stores are responding by becoming more

tech-savvy.

Hiren Gandhi, who chairs a retail association in Gujarat

state, has asked members to create WhatsApp groups to take

orders and deliver goods quickly in a 6.4-km (4-mile) radius.

"Around 500 stores have taken steps to innovate and sustain

their business," he said.

HIGH REVENUE, NO PROFITS YET

Swiggy's financials for its Instamart quick commerce

division are not public, but the internal document showed its

annualised order value trebled from $340 million in December

2021 to $1 billion in September last year. The business is still

loss-making, the executive at Swiggy's investor said.

Swiggy's main rival, Zomato, is India's biggest food

delivery business but acquired quick commerce company Blinkit in

2022. Goldman Sachs said Blinkit is more valuable to Zomato than

food delivery and is forecast to post orders worth $2.7 billion

this year, nearly 60% higher than estimated last year.

Zomato, in a May regulatory disclosure, said Blinkit had

broken even for the first time, but it expected its operating

profit to "hover around zero for the next few quarters". It did

not respond to a request for further comment.

Analysts warn reliance only on big urban cities to lure

customers and high spending on promotional discounts and

marketing that keeps profits at bay could prove risky for quick

commerce firms in the low-margin groceries business.

But Swiggy and Blinkit are already diversifying beyond

groceries into higher-margin products.

On Swiggy's app, shoppers can order fitness products and

electronics such as a $132 Xiaomi ( XIACF ) air purifier, while

Blinkit said it sold a record number of roses, bouquets and

teddy bears in a single day on Valentine's Day in February.

Swiggy's Instamart was launched as an "Indian version of 7

Eleven (on the cloud)", its internal document said, but "we are

changing our positioning" to an "online Supermarket".